New technologies take time to get absorbed into mainstream culture. But with the hyper-acceleration of information flows and cultural exchange, sometimes these emerging technologies are thrust onto the world stage prematurely, even before their fans can truly comprehend what's going on.
A prime example is the recent penetration of NFTs (non-fungible tokens) into the mainstream media cycle. It's no surprise that coverage has focused more on sensationalist stories of speculation rather than the inextricable ties to the emancipatory, disruptive potential of cryptos in general. But while upending our assumptions about aesthetics, value, and ownership is already compelling enough, the possibilities of what NFTs can offer go beyond CryptoPunk avatars or a $69 million Beeple art project.
It's here at the tail end of this most recent hype cycle — i.e., after the groundbreaking, thought-provoking contributions from blockchain specialist Paris Hilton and full-stack developer Lindsay Lohan — that we can start to formulate how these unique, non-fungible tokens might play out. If CryptoKitties' 2017 debut can be viewed as a cute, playful test of Ethereum's network limitations, how can we better understand the potential of the current NFT ecosystem in a crypto/cultural space that's rapidly maturing? What possibilities might NFTs enable outside of digital art and collectibles?
Here are possible directions and use cases for NFTs, both established and not.
If there's any industry that has a synergistic relationship with cryptos, it's the gaming industry. After all, CryptoKitties is a game first and foremost, and it's not hard to imagine new peer-to-peer marketplaces and communities coalescing around a secondary gaming economy. Gamers are young, adventurous, and already used to virtual worlds, microtransactions, and tokenized currencies. Except here, NFTs would allow actual ownership of your purplish, animated skin, which you could one day even lend to another player and earn yield.
Licenses, Documents & Certifications
NFTs are inseparable from the concepts of authenticity and ownership, so tokenizing licenses, documents, and certifications of real-world assets would be a perfect fit under the right regulatory conditions. Everything from marriage certificates to medical histories to academic credentials could take the form of NFTs, allowing us to spend less time worrying about filing, transferring, and verifying records, and more time doing what you love (e.g. shilling shitcoins on Telegram).
NFTs could dramatically transform the dire state of the music industry. For once, priority would go to the artist rather than the record label and/or platform. Musicians could track royalties or create blockchain-based streaming platforms that would pay artists every time their music is played. Like with art NFTs, musicians could get a percentage of all future exchanges, and NFTs could even be viewed as a token of patronage. There have already been notable experiments from the likes of 3LAU, Steve Aoki, and Holly Herndon (the latter of whom is doing important work to combat the misinformation and confusion regarding NFTs and the environment).
One of blockchain's most obvious applications is in logistics/supply chain management. All flows — from inventory to information to financial — would be transparent, tamper-proof, and more efficient across the board. Throw in NFTs and their built-in provenance, and you'd be able to verify supply chain details, ownership, and more via timestamped metadata. For instance, you could scan the QR code on a plum and instantly see its geographic origin, or scan a high-end jacket to ensure it's not sewn by a 10-year-old.
It's not just virtual land that would be perfect as NFTs, but real-world property can be tokenized on the blockchain, too. The labor-intensive paperwork and expensive transfers of ownership would give way to a secure, frictionless trading of assets, without pressure from third-party intermediaries. And that could just be a starting point. For example, imagine buying a house as an NFT with your Massive Crypto Gains™, then immediately borrowing against the NFT using a DApp at a high interest rate. Easy decentralized goodness.
From the sports industry to art-based communities, tokenizing tickets on the blockchain would be a game changer for the events economy. It would not only prevent scammers and scalpers, but also increase efficiency, reduce cost, and decouple the ticketing system from monopolies. And because they would exist in the realm of programmable money, NFT tickets could open up new revenue possibilities, like reselling tickets as collectibles or rewarding hardcore fans for multiple ticket purchases.
The utility and benefits of NFTs of course have relevance in the financial world, too. For example, NFTs could be used to prove ownership in a company and award NFT dividend payments. They can also act as tickets to liquidity pools or enable unique staking rewards for hodlers. Tokenized assets could even be used as collateral for loans, while smaller investors can pool resources to purchase fractional interests of an NFT to diversify their investments.
Like the gaming industry, the Metaverse goes hand-in-hand with NFTs, but to an even larger, potentially life-altering extent. A good first step would be populating virtual worlds and augmented realities with the goods enabled by NFTs to acclimate people to scarcity and ownership in a digital environment. But if the Metaverse's physical/virtual convergence actually comes to fruition as envisioned, then every conceivable asset in the Metaverse could exist as an NFT, unconstrained by resource limitations, supply chain risks, or even physics itself .
Where do NFTs go from here?
These are just some of the potential use cases for NFTs. With the hype now dying down and valuations dropping in line with the market, this will be a prime moment for NFT communities to iron out the kinks while developing even more innovative products and ideas. We are already starting to see wild experiments from unexpected places, ranging from the brilliant to the corporate to the absurd. Whether the next hype cycle can prompt the same mania and speculation will likely depend on the broader perception of cryptos, but one thing is excitingly clear: we are only just starting to understand the disruptive possibilities of NFTs.