Most of the news on non-fungible tokens (NFTs) that is making headlines today reports on the crazy money that is being made by digital artists and those who are investing in their blockchain creations. For those who are familiar with those headlines, it is easy to understand why people are excited about the opportunities that NFTs have brought to the art world. Consider the case of Nyla Hayes, who recently became TIME magazine’s first artist-in-residence. She has made almost $4 million selling NFTs, and she is twelve years old.
Dig deeper into the news, however, and you will find that there is a lot more to NFTs than the changes they have brought to the art world. NFTs hold tremendous potential for a wide range of businesses, from healthcare to real estate to finance to travel. Understanding how they may disrupt your industry begins with understanding the utility of NFT technology.
Leveraging Blockchain in the Business World
Blockchain technology, which has been around for decades, came to prominence in the business world when it was used as the foundation to support cryptocurrency. Blockchain is critical to crypto because it allows for the recording of transactions in a secure and decentralized way. The value and the ownership of crypto can be established because of the secure records that are tied to crypto via blockchain.
NFTs rely on the same blockchain technology to keep the digital assets they represent secure. However, NFTs are different from cryptocurrency because they represent a unique, or non-fungible, asset. Ownership of NFTs, like artwork, can be established and authenticated because NFTs are non-fungible. While copies of the work may exist, the original can always be identified and its ownership verified by the record in the blockchain.
The National Basketball Association provides an example of the way in which the digital ownership utility of NFTs is being leveraged in the business world. In March 2021, the NBA launched NBA Top Shot, which allows fans to purchase NFTs that capture epic NBA “moments” on video. While anyone can watch the play, only one person can own the NBA Top Shot NFT of the play. The Top Shot platform reportedly made more than $50 million in sales during a 30-day period in early 2022.
Adding the Utility of Smart Contracts
The ability to secure ownership of digital assets is a key utility of NFTs, but it is not the only thing that has the business world excited. Smart contracts, which run on decentralized, secure programming that is connected to NFTs are another innovation that promises to disrupt many business practices.
In essence, smart contracts are programs that trigger an action when a predetermined condition is met. And, thanks to blockchain, they do it in a secure and decentralized way without third party involvement. Royalty contracts, which NFT artists commonly attach to their artworks, are an example of this. They allow for artists to be paid a royalty on their work every time that the work is sold. Because the blockchain associated with an NFT artwork must be updated each time that ownership is transferred, the contract will be activated each time the work changes hands.
Smart contracts are already seeing use beyond the art world, including in real estate transactions, which traditionally involve lengthy and complicated processes for transferring ownership. Propy, which calls itself a “real estate innovator,” is streamlining real estate transactions by converting conventional real estate into NFTs. Selling the real estate NFT involves simply adding the record of the sale to the property’s blockchain, which secures all of the appropriate legal documents. Propy has used the process successfully overseas and has plans to test it in the US in February 2022.
Contributing to the Creation of Digital Identities
Engaging in digital spaces requires having a digital identity. Some are already referring to NFTs as the “new standard” for securing and maintaining those identities.
Not only do NFTs allow for authenticating identities in a way that is essential in settings like online healthcare and online education, but NFTs can also be used in a more casual setting for enhancing the avatars that are used to represent people in online platforms. For many businesses, providing branded assets that can enhance online identities has become an easy entry point to the world of NFTs.
Decentraland is a browser-based immersive virtual world in which users can explore, create, and trade NFTs that include clothing as well as real estate. In July 2021, Coca-Cola auctioned off a collection of NFTs that included a branded jacket that could be worn by avatars within Decentraland. The auction netted more than $575,000, with proceeds going to Special Olympics International.
Already, many companies are testing the waters and learning how NFTs can enhance the products and services that they offer. Whether you are looking to expand your brand into digital spaces or provide the type of streamlined and secure transactions that digital natives have come to expect, NFTs are a powerful tool that should be explored and understood.