Top 7 NFT Use Cases
The interest that has been shown in non-fungible tokens has led to an explosion in the market for crypto-collectibles and non-fungible artwork. The following are two of the most prominent use cases in the DeFi ecosystem, however, they are not the only ones. In regards to non-fungible tokens, their scarcity and uniqueness make them a good choice for real-world assets, logistics, music royalties, as well as other uses. We can expect to see more experimental applications as NFTs mature.
Introduction
In the past, creating a digital scarcity for assets was extremely difficult prior to non-fungible tokens being invented. Although there are copyright protections in place, consumers are able to easily copy or pirate digital artwork despite the protections that are in place. It is this development of NFTs which has led to the development of crypto art and digital collectibles, but it is not over yet. You can use NFTs in many different industries from real estate to logistics, to prove the authenticity of a wide range of unique and collectible products.
There are many interesting projects to explore as the NFT ecosystem is still relatively young, but some of these projects are already generating great value for consumers and creators.
Art NFTs
The non-fungible tokens have been a great help in solving digital art's long-standing problem of scarcity. How do you keep a work of art rare when it can be copied in a digital form? Even though there are fake works of art in the real world as well, we can usually identify them when they are fake.
Most of the value of crypto art comes from being able to establish its authenticity and ownership on a digital scale. The Ethereum blockchain allows anyone to look at CryptoPunks on the blockchain and download or save the image, but we cannot prove that we own the original. An anonymous artist created a series of NFTs, each identical except for the name.
The Cheap, The Expensive, and The Unsold were named in such a way that each piece had a different value based on its title. As a result, the collection makes you think about what makes something valuable in the art world.
The value of NFTs is not necessarily reliant on the artwork that's attached to them. In some cases, it is more important to prove ownership over the particular asset. The fact that crypto art incorporates this aspect is what makes it one of the most popular NFT uses cases out there.
Collectible NFTs
No matter if it's a PandaSwap Bunny, there is a massive demand for digital collectibles. As a matter of fact, this use case has even made it to the mainstream with the new NBA Authentic and NBA Top Shot cards.
Along with digital NFT art, these non-fungible tokens are responsible for a substantial portion of sales made on NFT marketplaces such as Opensea, BakerySwap and Treasureland. There's a lot of crossover between crypto art and NFT, and sometimes an NFT can function as both a collectible as well as a work of art. We currently support these two use cases to the fullest extent possible.
The first tweet Jack Dorsey sent out is an excellent example of how it is possible to collect NFTs. the CryptoPunks' value as collectibles and visually artistic, Dorsey's NFT is valuable purely because of its collectibility.
It was Dorsey who sold the NFT using a platform called Valuables, which tokenizes tweets. The offer can be made on any tweet of your choice. Anyone can make a counter-offer and outbid you at any moment. It is then the tweet author's decision whether to accept or reject the offer. If they approve, the tweet will be minted on the blockchain, creating a 1-of-1 NFT which will contain their autograph.
A NFT is signed by the verified handle of its original creator on Twitter, implying that only the original author can mint their tweet as a NFT. As a result of this process, you will create your own digital collectible that you can trade or keep for yourself. Initially, it can be a little hard to grasp the concept of selling a tweet, but this is a good example of how NFTs make things collectible. The concept is basically that of a digitally signed autograph.
Finance NFTs
It's easy to forget that not all NFTs derive their value from the song, the picture, or the collectible item within them. As part of decentralized finance (DeFi), NFTs are also able to provide uniquely beneficial financial benefits. Most have some artwork as well, but what makes them valuable is their functionality.
For instance, JustLiquidity offers staking options for the NFT. A user can stake a pair of tokens for a period of time in a pool and receive an NFT, which can be used to access the next pool. The NFT acts as an entrance ticket to the new pool and is destroyed once you've completed your game. The model creates a secondary market for these non-financial firms based on the fact that they provide access to the markets.
A second example is Bakery Swap's NFT food combos that provide holders with increased staking rewards. Contributing BAKE will give you access to a unique combination of NFTs that provides you with a variable amount of stake power. The users of these combos speculate on them, sell them on the secondary market, or stake them. It is this combination of NFTs with game functionality and DeFI that creates yet another very interesting use case for non-fungible tokens.
Gaming NFTs
The gaming industry has a huge need for unique products that can be traded and purchased. Gamers are already familiar with the idea of digitally scrimping for valuable items, and their rarity directly affects their price. Micro-transactions and in-game purchases have made the gaming industry a multi-billion dollar industry that could use the NFTs and blockchain technology to tap into.
NFTs are also an exciting area in terms of what they represent. Video game tokens offer the players a combination of art, collectibility, and utility. When it comes to big-budget video games, however, NFT implementation is still far away from being implemented.
Other games have been actively using blockchain technology in their games within the meantime. Battle Pets and axie Infinity are both games that have tradable pets and items like those found in Pokémon games. As an alternative, these tokens can also be bought and sold through external marketplaces (peer-to-peer sales).
Although many Gaming NFTs are cosmetic, they can be very useful as well. Axie pets each have a set of skills that allow them to fight. It is also worth pointing out that these abilities influence the pet's value when traded. Just by virtue of its desirable breeding attributes, a CryptoKitty can be an extremely valuable pet. In order to determine the value of each pet, I consider a combination of the pet's looks, features, and utility. There is more than one desire and rare aspect to be considered in the example below.
Music NFTs
A NFT can also be used to create a collectible piece of music by attaching audio files in the same manner as images and videos. Essentially, it is a digital "first edition" of a recording. As with our art example, there are other cases where attaching a song to an NFT may be useful.
Musicians usually face a big problem when it comes to getting their fair share of royalties. There are, however, at least two legal ways to achieve a balanced outcome: blockchain-based streaming platforms and blockchain-based royalty tracking systems. It is difficult for small blockchain projects to compete with Amazon Music or Youtube when offering video streaming services. Despite the purchase of MediaChain in 2017 by a giant like Spotify, artists received no tangible benefits.
Meanwhile, smaller projects have found themselves working mainly with independent artists throughout the process. It has raised 40 ETH for 50% royalty NFTs using the ERC721 token standard for their first royalty NFT sale on the platform. Whether or not this model becomes more popular depends on how large streaming services adopt it. It is an excellent idea to combine music with NFTs to create an application, but it might be challenging to make it work without the support of music labels.
Real-world asset NFTs
When a real-world asset is linked to a NFT, it can allow us to digitally prove ownership of that asset. As an example, we typically deal with property deeds in the real estate industry. It is possible to move illiquid goods (like land or houses) onto the blockchain by creating tokenized digital assets representing these deeds. We have not seen regulators providing much support for this application thus far. Although still very much in the early stages of development, it is one to keep an eye on in the near future.
A NFT representing a property for sale in California was created by Shane Dulgeroff in April 2021. A piece of crypto art is also attached to the token. The person who wins the auction will receive the NFT and will become the owner of the house. There is an uncertainty, however, about the exact legal situation of the sale and the rights of the buyer or seller.
It is helpful to have an NFT when it comes to smaller items, such as jewelry, as it can help prove that the items are legitimately owned. As an example, you can usually get a certificate of authenticity for a genuine, ethical diamond. A certificate of authenticity also serves as proof of ownership. Any seller who attempts to resell the item without the certificate will be unable to verify its authenticity and will have a difficult time convincing the buyer that they are the rightful owner of the item.
Logistics NFTs
In addition to its use in the technology sector, blockchain technology can also be useful to the logistics industry due to its immutability and transparency. These characteristics guarantee the accuracy and reliability of supply chain data. When dealing with perishable goods, such as food, commodities, and other perishables, it is important to know where these items have been and for how long.
The NFT also has the added advantage of representing a wide range of unique items. With an NFT, we can easily track a product that contains meta-data on the origin, journey, and location of the warehouse.
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An Italian manufacturer produces high-end luxury shoes. It is given an NFT on its packaging that can be easily scanned.
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Metadata about the shoes is included along with a time stamp of when and where they were created.
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When the product passes through the supply chain, it's scanned and new timestamped metadata is added as it moves through the supply chain. This may include the warehouse location and the time of arrival or departure.
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A store can scan the shoes as soon as they arrive at their final destination, and mark them as received once they are scanned. There is an exact history available to view, and it can be used to confirm the authenticity and logistics of the shoes.
To begin with, there are many hypothetical ways in which NFTs can be implemented into the supply chain. However, each requires that each stage of the chain utilize the same infrastructure. Having so many different players and stakeholders involved on a global scale can make it challenging to implement these systems effectively. There have been only a limited number of real-world applications due to this factor.
The TradeLens system by MAERSK and IBM's Foot Trust are two examples of large-scale blockchain logistics solutions. These two companies are using Hyperledger Fabric, an IBM blockchain that supports the use of NFTs. However, it is unclear whether NFTs play a role in the way NFTs operate.