What are NFTs for, an overview of their applications
In our article 'What are NFTs', we explained that non-fungible tokens must be understood as tools to uniquely, securely and accurately identify a good. But what is the use of an NFT?
Created with blockchain technology, NFTs present themselves as a kind of digital certificate of authenticity and traceability. Collecting the words of Pilar Troncoso, a professor in the blockchain and digital innovation specialisation program at the Institute of Stock Market Studies, "any place where a digital element that certifies ownership is needed, will be a niche where NFTs will demonstrate their full potential".
It seems that so far, we have seen very sound projects, but with limited utility, or that have raised certain suspicions. There will be those who ask: What good are CryptoPunks or Bored Apes beyond having a digital work of art as a profile picture? And hence, in conclusion, questioning what NFTs are for.
The key is to consider non-fungible tokens for their ability to represent any digital asset. And for that ability, they are useful in any sector of the economy, as they are already being used in the art, gaming, fashion, film, music, real estate, or banking.
"While everyone is talking about the NFT bubble, something is cooking in other sectors like ticketing, university diplomas, second-hand market, luxury, finance and others" has said Troncoso.
In fact, the market capitalization of NFTs is estimated at over 35 billion dollars for 2022 and over 80 billion for 2025, according to a report from investment bank Jefferies. The data and predictions point to the fact that it is worth reflecting on their potential. That's why we delve into different cases of NFT use here.
NFTs and traceability in production and supply processes
Non-fungible tokens allow for an unequivocal tracking of each element and part within a chain. Tokenization with blockchain helps with traceability in a unique way.
The Argentine company Carnes Validadas has been using NFTs since 2019. With non-fungible tokens, it unambiguously identifies its animals and provides traceability to the meat production process, offering users a complete curriculum of the product they are going to consume, from the cow that gave birth to the calf to the place where it was vacuum-packed. All this information is accessible through a QR code.
In addition, when it provides its animals with this digital certificate, with this guaranteed traceability, the characteristics of each beef (weight, feeding, health status, etc.) are recorded in the NFT. And with this, another differential advantage is created in the transactions of these assets or when presenting them as collateral when applying for a loan.
Another case of tokenization for traceability is found in Maersk. With the TradeLens platform, it transforms each shipping container into a unique NFT, identifiable with a certain verifiable load. The development, which started to be known in 2019, has been expanding its reach to different ports around the world, demonstrating its capabilities.
Non-fungible tokens allow for an unequivocal tracking of each element within a chain
At Izertis, we currently have ongoing projects in the health sector based on blockchain that combine the use of NFTs, digital identity, and verifiable credentials for the traceability of biological samples.
NFTs in finance
The use of NFTs as collateral for obtaining a loan is one of the possible applications thanks to the development of decentralized finance (DeFi) platforms, a system based on equal peer-to-peer relationships. The DeFi ecosystem includes a wide network of integrated protocols and financial instruments, from loan and credit platforms to stablecoins (stable cryptocurrencies such as Tether or DAI) to tokenized bitcoins.
The attributes of certainty, transparency, security, and immutability thanks to blockchain technology make non-fungible tokens key in the financial sector. Decentralized finance (DeFi) has moved from the theoretical to the practical phase.
The possibility of tokenizing shares allows us to visualize crypto-stocks without centralized actors or market makers and even propose digital bonds issued directly on the Blockchain.
NFTs in art, culture, and entertainment
NFTs gained popularity due to their application in the world of art. The key to this is their ability to certify the authenticity of unique pieces.
Unlike money or cryptocurrencies, which are replaceable and interchangeable, each NFT is unique. A 10 euros bill has the same value in our wallet as in our neighborhood's. However, the painting of "The Sunflowers" that is displayed in many of our living rooms and the one exhibited at the painter's museum in Amsterdam are not interchangeable. That is the essence of the NFT concept.
With NFTs, a new way of understanding artistic ownership has arisen. Due to their nature, digital works can be copied and replicated. NFTs do not prevent reproductions or copies, but they do serve to authenticate the ownership and authorship of a specific work.
NFTs offer income opportunities for artists and investment opportunities for individuals and companies. In a similar way, NFTs have expanded in the music and content industries. They are forging new forms of interaction between creators and consumers or fans, which are visible in sales, communication, or promotion.
In the publishing world, authors can sell their works directly on the internet. Additionally, thanks to this technology, the use of the work is traced and a vast range of possibilities is opened up to retain readers. For example, think of the tokenization of a book signed by the author, which has extra value compared to the unsigned copy.
In the sports world, NFTs have become popular among teams and figures in soccer, basketball, and other sports. If before the fans dreamed of a ball or signed jersey of their favorite player, today NFTs provide access to content, exclusive events, and other forms of interaction.
The NBA has created a new business model by raffling off major plays from the history of American basketball in virtual trading card packs with prices ranging from $9 to $299. The League has opened up a new source of income for clubs by signing an agreement with Sorare, a company in which footballers such as Gerard Piqué, Antoine Griezmann, or Rio Ferdinand participate, to distribute NFTs of the players.
And of course, fans have another new way of relating for the exchange and sale of their NFTs.
Monetization opportunities in video games, sports, and gaming thanks to NFTs
Thanks to NFTs, virtual objects in video games are irreproducible and have an owner. How many times have we bought elements for our favourite video game and then got tired of it? What do we do with those assets? With NFTs, users can monetize their "investments" and the industry has another important source of income.
Sale of tickets or admissions and creation of collectible NFTs
The use of NFTs as tickets to access events of any kind (theater, shows, concerts ...) serves to counteract fraud, counterfeiting or abuse in resales. Beyond that, these non-fungible tokens can become collectibles.
Fundraising for charitable, humanitarian, and political purposes
Non-fungible tokens are used in philanthropy to obtain donations. At the end of 2021 and in the context of its 75th anniversary, UNICEF launched a collection of NFTs. It put more than 1,000 pieces up for sale through the Ethereum blockchain to finance various projects.
eGoGames, Global Gift Foundation, and Shokworks have created eGoClub, a philanthropic NFT community. Alejandro Sáez (founder of eGoGames), María Bravo (from Global Gift Foundation), and Alejandro Laplana (from Shokworks) presented the new community in New York, which aims to "help thousands of people around the world." EGoClub was born in March 2022 with a first collection of 10,000 NFTs, called eGos, and are built on the Ethereum blockchain and ERC-721 tokens.
On the same dates, Shrina Kurani, a Democratic candidate for Congress in California's 41st district, appeared on a panel to announce the launch of her non-fungible token collection. Known as "Kurani for Congress", she explained that it is a collection of 230 NFTs designed to raise awareness about her campaign, while highlighting climate-friendly solutions in the Web3 space.
For its part, the Ukrainian government also announces, in March 2022, its intention to launch a collection of NFTs with visual art works related to the war with Russia. Non-fungible tokens are also serving to help non-profit organizations such as Save the Children raise funds to help families affected by the war.
What can we do for you?
At Izertis, you will find a team of blockchain experts to help you boost your business and solve challenges related to digital identity, traceability, and financial transparency.
For example, we are now developing NFTs and Smart Contracts in a project that combines biotechnology, art, and identity in the metaverse.
Self-managed digital identity, verifiable credentials, NFT, smart contract, wallet... In us, you will have a dedicated and agile ally for the development of the blockchain-based digital products you need for your organization, from conceptualization to delivery.