While non-fungible tokens (NFTs) have risen to the mainstream recently, they actually date back to 2012. It’s taken many industries almost a decade to realize the massive potential that NFTs can have for their businesses.
Beyond the headline-grabbing sales of digital artwork in the millions of dollars and the widely publicized entrance of the traditional auction houses and fashion brands, there are myriad use cases for NFTs that are quickly changing the game. Let’s take a look at the top five.
The supply chain has long been dogged by a lack of transparency between multiple stakeholders and poor visibility over goods from their starting to endpoints. This opacity and lack of efficiency lead to high price markups and even damaged or falsified goods that are passed on to the end consumer.
NFTs in the supply chain is changing that by allowing supply chain participants to leverage their uniqueness and trace assets across the chain. NFTs can provide goods with a certificate of authenticity and prevent counterfeit products from entering the market.
Well-known luxury brands such as LVMH and Prada are leading the way in this area, harnessing blockchain technology to protect their brands and customers. By joining forces to launch their blockchain called Aura, consumers who buy high-end watches, jewelry, handbags, or other big-ticket fashion items can prove their origin through a “digital twin” NFT that displays the product’s history from manufacturer to store. NFTs are also being used in the tracking of diamonds, fine wine, and other areas where counterfeit products are rife.
Digital collectibles have gained much traction in recent times. Yet, digital collectibles can provide a wealth of additional utility beyond the face value of in-game characters or one-off digital art pieces. For example, many sporting teams and clubs are using them to enhance fan engagement by minting limited-edition NFTs of players that fans can collect and trade. One of the better-known examples is the NBA’s Top Shots which lets fans buy video clips of their favorite players and teams.
In the growing area of eSports, some companies are creating digital memorabilia, such as logos and trophy tokens, that are attracting considerable interest. Not only do NFTs open up new revenue streams for teams and clubs, but they increase fan engagement and offer a younger generation of fans a digital way to engage with their teams.
In the coming years, the gaming market is estimated to reach a value of more than $300 billion as the popularity of online games soars. Despite its growth, one area in gaming that remains contentious is that of asset ownership, as, for the most part, assets remain under the control of the game itself. If the game company ceases to operate, gamers’ assets are lost. Thanks to NFTs, gamers have complete ownership over their assets and can store them in their private wallets. They can even be ported between different games, creating secondary markets.
According to a recent statistic, the market for in-game assets is also growing steadily, with the play-to-earn NFT game market projected to reach over $3.6 billion by 2028, at a CAGR of 21.3%. With games like Axie Infinity giving gamers the chance to earn income from playing, demand for the play-to-earn model is surging. This has created a rise of “NFT factories” like BreederDAO spinning up to supply blockchain-based games with NFTs to ensure liquidity for their players.
While NFTs are being used in the buying and selling of virtual plots of land in the metaverse in games like Decentraland, they’re also being increasingly used in the purchase of physical real estate as well. Properties are notoriously illiquid, and owners often have to wait a long time until making a sale. By digitally representing real estate on the blockchain through NFTs, they can be sold instantly using smart contracts, increasing increase liquidity in real estate.
This type of transaction also eliminates the need for middlemen in the form of real state agents, notaries, and lawyers taking commission at every turn and enables peer-to-peer transactions. Thanks to NFTs, ownership can also be fractionalized, allowing people to own shares in a building and generate a more liquid income.
The music industry has multiple areas in which NFTs can change the game, from paying royalties to concert tickets and proof of ownership. Because NFTs cannot be replicated or forged, they are ideal for storing artwork such as songs and videos. Artists can create NFTs of their work and sell them, allowing the buyer to own the work forever and use it how they please. The rights to royalties can even be programmed into the NFT and be automatically directed to the rights holder through smart contracts on the blockchain.
Pop diva Mariah Carey recently launched her very first NFT, which she put up for competition. Designed like a boarding pass on “Butterfly Airways,” the winner and a guest were entitled to fly on the star’s private jet and dine with their idol.
Despite their decade-long history, use cases for NFTs are constantly growing. Beyond the supply chain, gaming, music, digital collectibles, and real estate, other industries also realize their value. Some of the hype surrounding NFTs last year may have cooled off, but their adoption continues. It will be interesting to see how many more use cases for NFTs we see in the coming years.
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