What is it about non-fungible tokens (NFTs) that give them significant potential for real world use?
NFTs are cryptocurrency tokens that represent virtual and real assets. “Non-fungible” means each token is unique — it can’t be interchanged with another, can’t be replicated, and can’t be forged.
NFTs are built on a blockchain, a decentralized ledger that tracks transactions, guarantees ownership, and is transparent (meaning it can be seen by all). NFTs can be bought, sold and traded, and their tie to the blockchain creates an authentic record of those transactions. Because NFTs provide “smart contract” capabilities, features can be programmed into the token.
These six practical uses of NFTs in today’s real world are only a glimpse of what is to come for this innovative technology.
1. Ticketing for sporting events, concerts and more.
In 2021, the National Football League (NFL) began issuing tickets to select games with an NFT attached. The NFT provided the ticketholder with a virtual image memorializing the game — a collectible that could be traded or sold on the market. The NFL’s initiative will be continued for the 2022 season.
But commemoratives only scratch the surface of the potential use cases for NFT ticketing. A sports team can use an NFT’s smart contract feature to help engage a fan base by programming the asset to provide access to future events, exclusive merchandise, and opportunities to engage with team members.
Concert and festival organizers have already broken into the web3 arena with NFT token-gated events. A platform called YellowHeart issues NFT tickets that can be paid for with cryptocurrency or a credit card using an app. They’ve worked with Maroon 5, the Blue Note Jazz Club, MGM Resorts and others using NFT technology that allows artists to communicate with ticket holders and share photos and perks.
And, with mainstream adoption of NFT ticketing, event organizers will be able to virtually eliminate fraud associated with creation and resale of counterfeit tickets. Because the blockchain allows customers to trace the NFT ticket back to its original issuer, it ensures authenticity. Plus, event organizers can use an NFT smart contract to track and generate profit from ticket resales.
2. Real Estate Transactions.
In early 2022, a Florida house was auctioned as an NFT. The property rights to the home were minted into the digital token, and the sale attracted thousands of bidders. The transfer to the buyer was instant and seamless.
The real estate industry, rife with cumbersome paperwork, is poised to benefit from NFT technology. Today, transfer of ownership requires a title search, title insurance, escrow and mortgage paperwork, and often multiple contracts. But blockchain technology will permit the ongoing coding of that information into the NFT, providing a verifiable chain of ownership and record of improvements and encumbrances. The prospects for streamlining transactions are significant.
3. Ensuring Authenticity of Physical Assets.
Attaching an NFT to a physical product creates a unique digital identification that can be used to verify authenticity. A British jeweler is currently taking advantage the technology by pairing its goods with a digital NFT representation. The NFT documents ownership and history of the item, starting at its source. Likewise, Richemont, Cartier’s parent company, employs NFTs to facilitate internal tracking of luxury goods.
Even Scotch whiskey brand Glenfiddich has launched a limited edition NFT which provides a counterfeit-proof certificate of ownership to a rare liquor. The company holds the liquor in its possession until the NFT owner claims it, and until then, the NFT representing the product can be traded on a secondary market.
4. Environmental Social Governance and Carbon Emissions.
Companies are already using NFT technology to facilitate carbon trading used to combat climate change. Environmental governance requires measurement of carbon output and verification that actions have created a quantifiable offset. NFTs can fill that need.
A company called AirCarbon Exchange (ACX) offers tokenized offsets from around the globe on its own exchange, using a traditional commodities trading architecture. The Moss crypto carbon project offers businesses and individuals a tokenized method to offset carbon emissions. For example, passengers flying on Brazil’s largest airline, GOL, can offset flight carbon emissions using the Moss platform. Moss ties NFTs to offsets in specific locations, such as the Amazon rainforest, and allows for traceable and transparent transactions. Likewise, web3 company Toucan helps bring carbon credits to the blockchain for purchase by energy-consuming entities moving toward carbon neutrality.
5. Supply Chain.
The ability of blockchain to provide a transparent and unchangeable ledger of transactions makes it an emerging technology in the supply chain sector. For example, retailer Walmart uses blockchain technology to track food chain supply. Supplier information is added and stored on the blockchain, allowing products to be traced from farm to shelf. A food’s origin can be identified instantly, helping to detect contaminants and prevent food-associated diseases and illness.
Similarly, in the luxury goods sector, an NFT associated with a product will provide an immutable and traceable record of the source of materials and labor, ensuring the product is sourced as represented.
6. Education and the “Learn to Earn” Model
Various cryptocurrency exchanges and projects have used NFTs as incentives for learning. The Coinbase, KuCoin and Binance exchanges offer cryptocurrency as rewards for learning about various types of coins and passing an online quiz. Rug Radio also used the learn to earn model by offering weekly education on DAOs, tokens, smart contracts and security to the public. Its members received rewards for learning in the form of tokens useful in its ecosystem.
NFTs provide a means to incentivize students of all ages. In the future, learners could earn tokens to pay for further education or extracurricular activities. NFT technology also holds promise in creating a permanent and immutable record of academic history and merit-based accomplishment.