The year 2021 would make for a great story to tell our future generations. Not just because it was the year of the deadliest wave of the coronavirus or because it was the year which saw the conception of space tourism. 2021 was the year where someone sold a picture of a trippy ape, with a king’s crown, heart sunglasses, and a psychedelic body for 2.7 million dollars. The company, Bored Ape Yacht Club, that sold this picture has 10,000 digital pictures of apes in the form of NFTs which are selling like hot cakes with sales cumulating to $1 billion at the end of 2021. In other news, Jack Dorsey, the co-founder and ex-CEO of Twitter, was offered $2.5 million for an NFT of his first-ever tweet. The NFT of the popular ‘Charlie Bit Me’ video of a baby biting his brother’s finger sold for around $761,000 and a New York Times columnist sold an NFT-enabled article for $563,000.
The NFT craze must be pretty clear by now.
What are NFTs and what can you do with it once you own it?
NFTs are digital representations of real-world objects like art, music, in-game items and other collectibles tied to a blockchain. NFTs are generally purchased with Ethereum or in dollars and the blockchain keeps a record of transactions. NFTs allow people to prove ownership of digital assets and give them, a kind of, digital bragging rights. Owners can also programme royalties for themselves before selling so that they receive a small percentage of the sale price on every future sale.
The NFT craze has taken over the world with famous footballers, singers, actors and youtubers either investing in them or launching their own NFT collections. But the investors & experts are still debating whether NFT is merely an over-hyped fad or a promising technology with a larger use case. The concept of NFTs serves the human needs of proprietorship and authenticity well. If used properly, NFT space can be a great business opportunity, where people can make decent money.
How NFTs Have Disrupted Various Industries
Art and Gaming Industry
Traditionally, the gaming formats are based on play-to-win, pay-to-play and free-to-play models where the purchased items and paid upgrades in the game offer no real-economic return. However, now blockchain-enabled games focus on generating value for players i.e., instead of making a purchase that does not guarantee any economic return to players, they invest in NFT characters. These NFTs can not only be traded in-game, but are also expanding into outside marketplaces where players are selling them for real currency. Further, NFT games also reward players with tokens traded on the crypto exchanges. Players can also use these tokens to upgrade or build their NFT items in the game.
Fashion Industry
NFTs provide a new channel for fashion brands, artists, and icons to showcase and sell their work. Luxury brands like Burberry & Coach have started to sell NFTs in their virtual fashion exhibitions through the Metaverse. Further, NFTs can serve as the solution to the counterfeiting and fraud problems faced by the luxury fashion space by being instrumental in supply chain management. For example, Prada and LVMH have teamed up to launch a blockchain platform called Aura, where consumers purchasing a high-end item will be provided a corresponding unique digital twin NFT that shows the origin of the product, including information about the manufacturing and materials. Luxury goods manufacturers have even ventured to create their own digital games with in-game NFTs. Louis Vuitton partnered with digital artist Beeple to create “Louis the Game,” which has 30 in-game NFTs. Another example is Burberry’s “Blankos Block Party” game which is expected to unveil in-game NFT accessories in 2022.
Supply Chain and Logistics
NFTs can also eliminate forging and help trace the movement of goods along the supply chain in various industries. In the auto industry, NFTs can be used to provide information about the material and components in any product(s), which would improve the two most important factors associated with vehicles – safety and cost.
Real Estate Industry (Both Real and Virtual)
In the real estate industry, NFTs could be an efficient way to conduct title checks and verify ownership history. If land assets are presented as NFTs, individuals could prove ownership through a secured and signed digital token, making the layers of intermediaries unnecessary.
With the onset of metaverse, users can create and purchase land in the virtual world using NFTs. This will allow people to find friends, participate in events, and do things they’d normally do in real life. Decentraland is developing Genesis City, which is a plot of virtual land approximately the size of Washington, D.C. The developers of this ‘city’ are working to allow users to import NFTs from other blockchains, so if you purchased a piece of digital art, you can enjoy it in the virtual city.
Media and Entertainment Industry
Game developers and other creators of digital products can combat the duplication and piracy of their new releases using NFTs since NFTs can’t be copied or pirated. This can help in shutting down the pirated film industry which will enable film makers save millions lost to pirated content. Artists are using blockchain to establish a contract on the initial sale of their music, as well as on any future sales. Artists can leverage NFTs not only to track, but also to grow their royalty base. For eg, the rights to royalties can be programmed into the token itself, such that whenever the NFT is sold or resold, a share of the sale proceeds is automatically directed to the rights holder.
Conclusion
As an application of blockchain technology, NFTs present an innovative opportunity for companies to expand their brands, build a new revenue stream and leverage their consumer following. While NFTs are, currently, one of the most powerful narratives in the crypto space, there still are some drawbacks which are not limited to but include the highly speculative nature, environmental impact due to high energy usage in executing blockchain transactions, hacking & security breaches etc. According to experts, NFTs maybe in their early phase, but they are here to stay and will attract a much larger audience in the coming years. Undoubtedly, many of the weaker projects might lose the fizz, but going forward, utility concepts in NFTs are highly likely to be the driving force for the industry.