Non-Fungible Tokens (NFTs) comprise the fastest-growing category in blockchain, with sales surging again in August to reach $1.9 billion. This is ten times the market’s value in March. The appetite for digital collectibles seems to be insatiable at this point.
However, despite their popularity, digital collectibles are only one NFT use case. They ultimately may not even be the most compelling ones.
For the broader population outside of the cryptocurrency community, understanding the various use cases for NFTs is critical. This is because many want to limit the potential of NFTs when all they see is ownership of a digital image.
However, examining their unrealized value allows us to shed our preconceived notions and apply creative thinking to how NFTs could be of use in any industry sector.
Collectibles – a valuable first use case
Before we get started, let’s establish why writing off NFT collectibles as frivolous is a mistake. Humans have an innate instinct to accrue things we believe are valuable for financial, sentimental, or scarcity reasons.
It’s why wealthy people collect art and why there are global marketplaces supporting collectibles of all kinds. These include trading cards, sports and movie memorabilia, and comic books.
Collectibles are a natural use case for NFTs. Moving collectibles into a digital form and creating an NFT on a public mainnet preserves and validates their uniqueness or scarcity. It also allows people to attach new functions and capabilities.
NFTs are also more visible and tradable, given their existence in a readily searchable decentralized ledger. As a result, it’s easier to maintain and prove provenance. These attributes all make blockchain-based card games extremely attractive.
Along with collections such as CryptoPunks and EtherRocks, which have gained widespread popularity as NFT collectibles, established artists such as Damien Hirst and Eminem have jumped into the space.
Hirst has The Currency project. This is a collection of 10,000 NFTs that correspond to 10,000 unique physical artworks. Eminem launched his Shady Con NFT, a set of Eminem-themed comic books, action figures, and original tracks.
Although relatively simple — tokens to digital art — they showcase a few fundamental properties of NFT-based collectibles. These are universal access, global liquidity, and perfection of ownership rights.
While these collectible forms will continue to grow, they will likely be joined or enhanced by innovative approaches to digital art. Including access to real-world events, additional token opportunities, evolving art or mutating art, or other adaptive uses of Web3 technology.
So, besides the burgeoning world of NFT collectibles, what else can we expect?
Fan engagement with NFTs
NFTs are an incredible tool to drive fan engagement as a continuing interactive experience. This is a far less known category in the NFT space, but it’s set to gain worldwide adoption.
Let’s dig deeper into the use case of a hypothetical professional sports team. Soon, your favorite sports team will be issuing an NFT-based membership card. The card itself is a high-value collectible art image with special features.
By owning this card, you will get to buy limited edition signed merchandise from the team. As a result, you’ll be able to purchase advance special access tickets. You’ll have special access to meet the team at insider events. Someday in the future, you may even be able to own part of the team by holding one of these limited edition membership cards.
Why blockchain and NFTs? Because the card is genuinely yours and is certifiably limited in supply by on-chain mechanics.
Smart contract logic can easily incorporate different levels or tiers. With transferable ownership, it can be integrated seamlessly into marketplaces where fans can trade up or down to different levels.
Music and art media rights
Music and other media copyrights are essentially a private and closed world. This dynamic may work for top music artists, but it quickly fails for all but the few.
Add in global rights and other media forms such as photos, videos, graphics. Include all the derivative works involved in these media forms, and the digital rights management issues are enough to throw up your hands and walk away.
Enter NFTs. With ownership rights assigned via NFTs, global rights management becomes far easier and far more exciting. Ownership can be quickly determined and validated. Universal marketplaces can be developed. Pooled ownership can be arranged. Royalty payments greatly simplified.
For example, a decentralized streaming service can track all the plays for the songs in their catalog. Rightsholders can receive payments far more quickly directly into their accounts. This will come with transparency over how royalties are distributed.
Tracking of plays and other app actions can be recorded on-chain. Therefore auditing becomes a matter of auditing chain records, making it more difficult to skew or game royalty payouts.
Gaming and NFTs
Gaming was the first industry to define the concept of a virtual good, making it an ideal fit for NFTs. Almost from the beginning, virtual goods became an integral part of gameplay. Meanwhile marketplaces for purchasing, trading, earning, or otherwise obtaining virtual goods became a valuable revenue-generating feature.
The concept of virtual goods in crypto is very similar, except that these goods can leverage the unique characteristics of NFTs. Virtual goods in current Web2 games have many valuable features. These include uniqueness and immutability.
Still, when you add in standardized protocols, the potential for interoperability, traceability, programmability, and a common digital monetary system, the possibilities expand tenfold.
A standard way to identify in-game assets, along with common marketplaces, will expand markets. Ultimately, if game makers choose to allow federation or programmability of assets, this will make the current virtual goods landscape all but redundant.
Allowing virtual goods or powers to be used across games within a universe or take advantage of the programmatic nature of NFTs adds new possibilities for gameplay. This can be done by adding or subtracting powers or by having NFT-based powers mutate based on any type of circumstance you could dream up.
Digital currencies as the first primitives in Web3 also allow for new economic models and revenue streams — play-to-earn being one of them.
Play-to-earn is a model for games where players can earn real money or other rewards in their games by playing. It accounts for the current popularity of games like Axie Infinity, where players have used the game as a revenue source during the pandemic.
The metaverse
The metaverse is one of the fastest-growing categories in crypto. NFTs are widely used to support everything within these worlds. From properties and buildings to billboards, vehicles, and other game elements.
Due to their active and innovative use of NFTs, the metaverse is becoming an important marker for how NFTs and Web3 will shape every facet of property rights. From registration to purchase, transfer, leasehold, dividend payout, and more.
The concepts and contracts put in place within NFT-based virtual worlds will improve on current, often outdated systems to the extent that they’ll invariably find their way into the real world, regulation permitting.
Using NFTs to manage property rights makes logical sense as it simplifies title management. This is thanks to having ownership and ownership history recorded on-chain. Standardization around common IDs (i.e., smart contracts) will unify and transform property rights and property management.
A quick look at VIN numbers in the automotive industry shows how common IDs unify data management and tracking from manufacturer to dealer to repair and more.
Combine standardization with automated processing, and new dimensions within virtual worlds begin to open up. NFTs and smart contract processing create opportunities for pooled purchases and built-in mechanisms for dividend payouts.
Payments, for example, can get sent directly into the account or accounts of the leaseholders. Just as with crypto-based games, virtual worlds that decide to expand and federate their activities with other worlds will gain in-cross-world interactions.
Event ticketing and experiences
Using NFTs for event tickets makes sense as a way to standardize and simplify the process of purchasing and redemption. This is because tickets are stored in your digital wallet, and you can signal ownership via your phone.
It also serves as an easy way to cut down on counterfeiting by providing proof of ownership and the legitimacy of the sale. So even on the face of it, there are obvious benefits and quick wins.
Expanding on the possibilities with NFTs offers greater potential for enhanced experiences and customization. The traceability of events lets event producers and sponsors maintain connections with attendees before, during, and after events.
Special offers for attendees? Not a problem, just show the event ticket. It is also easy to implement loyalty points or promotions for frequent attendees. Special benefits for early purchases, partial refunds, or commissions for referrals are also possibilities.
The traceability, programmable nature, and standardization of NFT-based tickets will quickly transform an event from a single occasion in space and time into a potential chapter in a number of new narratives.
For example, consider an event-based company building a protocol to allow for crowdsourcing of events. They ask attendees to provide funding in advance in return for potential proceeds based on the event’s success.
In the case of a profit from the sale of merchandise, food and drink, tickets, media rights, and other revenue sources, these early sponsors would receive payment based on an agreed schedule.
In this model, attendees have an incentive not only to attend the event but also to drive people to it and increase its success. This app uses NFT-based tickets and smart contracts to record the events that patrons are participating in, as well as payout participation rewards at the end of the event.
We’re only at the very beginning of NFTs
First-generation smart contracts like Ethereum have struggled to deliver on these use cases simply because the technology wasn’t ready. However, the new generation of high-speed, low latency and low-fee platforms are changing the game. Therefore, the future is extremely bright for NFTs and Web3.
As with Web 1.0 and Web2, the early use cases will replicate established ways of doing things. Early websites looked like printed magazines and newsletters, and early digital photo albums used imagery reminiscent of binders.
NFT-based applications, though, will quickly evolve to use new and novel metaphors. These take advantage of the innate capabilities of NFTs.
The digitization of virtual and physical goods as unique and identifiable assets — making use of standard protocols and native programmability — will transform all sectors of society. From art, entertainment, and media to business and commerce and everywhere in between.
It’s fun to chuckle at the rudimentary nature of CyptoPunks, EtherRocks, and NFT-based metaverses, but in their simple existence lies the makings of a revolution that will transform the world.
Disclaimer
In compliance with the Trust Project guidelines, this opinion article presents the author’s perspective and may not necessarily reflect the views of BeInCrypto. BeInCrypto remains committed to transparent reporting and upholding the highest standards of journalism. Readers are advised to verify information independently and consult with a professional before making decisions based on this content. Please note that our Terms and Conditions, Privacy Policy, and Disclaimers have been updated.
