A brief history:
In the year 2014, the first NFT, “Quantum,” was minted on to the Namecoin Blockchain by Kevin Mccoy and sold to Anil Dash for the sum of only $4. Sprouting from the theory and experimentation of Colored Coins on Bitcoin from 2012-2013, this new technology, referred to by Mccoy and Dash as “monetized graphics,” became the basis for the NFTs we understand today.
Non-fungible means that the tokens issued or “minted” are unique and cannot be replaced due to its unique identification code or “digital signature,” differing NFTS from other ‘digital tokens’ like bitcoin which are uniform across all coins of the same name, making them interchangeable. Over the last decade, these NFTs have been increasingly used to represent different goods like art, gaming tokens, digital real estate and many different metaverse projects and products. In 2021, NFT trading volumes reached nearly $13 billion driven by the popularity of NFT-backed digital artwork and collectibles. However, NFTs have the potential to contribute to the digital economy beyond the vehicles that led to their nascent popularity:
Here are several applications of NFT technology that may impact society from business to healthcare to even replacing your passport and birth certificate:
Represent ownership of physical art
An NFT could represent ownership of a physical piece of art. Moreover, NFTs allow split ownership of a physical piece of art between multiple individuals. This is called fractionalizing ownership and it’s something that brokerage firms have being doing in recent years when selling stocks.
Tokenizing a piece of art into multiple NFTs allows individuals who may not have the same financial resources as others to purchase and invest in fine art as well, leveling the playing field in investing and art collecting.
Home-buying
Creating NFTs to represent the ownership of a home, for sellers and buyers, can improve the home buying process and make home-selling transactions more efficient, secure, and transparent. NFTs have the capacity to store all the necessary information a buying party would need including who has owned or sold the home, legal actions and disputes involving the home, payments, and more. NFTs can also significantly reduce the time and costs it takes to buy a house due to the elimination of the middleman intermediary and the back-and-forth of reviewing and signing contracts.
Fractional Investment in Real Assets
While modern investment tools can allow us to buy fractional shares in chosen publicly traded companies, they don’t help us so much if we want to buy fractional shares of real physical assets. That’s where NFTs come in. With NFT real estate and luxury items can be bought fractionally, similar to how stocks can be bought partially on platforms like Acorns or Robinhood. This tool can level the playing field in luxury item markets and give purchasing power to middle and low-income earners.
Music
A popular idea circulating in NFT-privy circles is the idea of NFTs shaking up the music industry and giving modern musicians more power at the negotiation table than ever before. With the tokenization of digital music, album art, and even merchandise, artists can take back their power from big labels and streaming services, both of which have historically taken much larger cuts of the profit than musicians ever have. Josh Katz, CEO and founder of NFT marketplace YellowHeart, coined the “90/10 rule” as he believes tokenized music would shift the revenue earnings from 90/10 in the labels, event venues, and streaming services favor, to 90/10 in the artist’s favor.
Ticket Buying
Ticket buying has surged into the public eye, mainly because of the economy-shifting enormity of success that Taylor Swift’s 2023 Eras Tour had, and because of how infamous the ticket buying process became, earning even the attention of the White House for how frequently scalping and fraudulent sales occurred.
NFTs have the potential to significantly reduce the amount of pain fans must go through to attend their favorite events. NFTs can be used as a digital indicator of ownership of tickets which can allow artists to directly sell their own tickets and remove the need for third-party sellers. With tickets being sold directly from one seller, reductions in the amount of fraud and scalping may occur because of the transparency and authentication abilities of blockchain based technology.
Supply-Chain
NFT traceability offers a huge advantage for businesses reliant on stable and efficient supply chains to supply their stores with products. This feature of NFTs allows businesses to know what occurs at touchpoints along a supply chain, offering businesses a crucial way to observe processes and verify whether their goods are safe, legitimate, and moving at a desired rate of speed.
Products with NFTs minted on a blockchain can be real-time tracked and monitored throughout their transit, and additionally, observing this process can allow data analysts to use data collected to improve supply-chain efficiency and flatten out hiccups with their product deliveries.
Lastly, NFTs can allow consumers to discover information about the product that they’re buying, learning information such as where fruit was grown, where an electronic was built, or where a fish was caught.
DeFi’s Intersection with NFTs
DeFi, or Decentralized Finance, is a tool that offers secure peer-to-peer financial transactions through the use of decentralized distributed ledgers and cryptocurrencies. The system eliminates the need for intermediaries like brokerages and banks to make financial transactions, instead allowing users to use applications, or digital wallets which holds their private keys giving them access to their tokens and cryptocurrencies. DeFi utilizes the same contracts (i.e., smart contracts) that NFTs use, which publish information of your transaction on a blockchain for anyone to review without changing.
NFTs are also often used as collateral in DeFi loans, based on the NFTs floor price and the NFT’s purchase history. An integrated piece of the DeFi system is its ability to automatically manage debt. If a borrower defaults on a loan, the NFT is automatically transferred through the smart contract to the loaner’s NFT wallet.
Identification
While this technology is admittedly one of the most far off on this list due to political and ethical concerns, it’s applicability to personal security as well as national security is immense. Additionally, its potential to revolutionize personal documentation is noteworthy. NFTs in this case can be used to represent certificates or identifying documents because of their containment of unique code that cannot be modified. Birth certificates, IDs, licenses, medical histories and other important personal documentation can be tokenized and stored on a secure blockchain.
Some organizations have already begun utilizing NFTs in their systems to give users a secure digital location to store and access their documents. Romania’s National Institute for Research and Development in Informatics created an NFT marketplace system, allowing users to access their government documents at will, while also being able to transfer and store government documents. University of Georgia’s New Media Institute offered degrees as NFTs, along with the option of paper certificates. According to the Washington Post, approximately 2,800 individuals obtained educational credentials without attending classes. NFTs could be a viable solution to this problem.
Healthcare
NFT technology also has applications in healthcare, public health equity and healthcare financing that could lead to greater coverage and inclusivity, as well as faster and more secure transactions. NFTs offer a pathway for ownership for patients wanting to keep their medical data out of the hands of government, big tech and data collectors.
NFTs can be used to track and securely store medical records as well as medical billing and insurance claims, which would vastly improve patient experiences at medical institutions like pharmacies, specialist visits, physical therapy appointments, etc. If documents and records were minted onto a private blockchain accessible only by pharmacists and providers, it could allow instant access for these health professionals, removing headaches for patients and customers forced to deal with administrative and bureaucratic hurdles.
Conclusion
NFTs are an enticing and prospective advancement for several different industries, and consumers in an array of different economic sectors can be excited about this technology’s potential adoption. In the coming years, NFTs should gain consideration from businesses, medical institutions, creators and artists, executive government agencies, and especially policymakers. Ensuring that the technology is properly classified under legislation, is properly regulated by appropriate agencies, and is researched and given the proper protections under law is how both industry and consumers can be convinced that the technology is reliable, safe, and government backed. It’s how the benefits of NFTs can become more than just conjecture and can actually start benefitting and improving the lives of everyday Americans.