The Future of NFTs: Digital Certificates, Explained
Non-fungible tokens (NFT) have received a lot of attention in the media over the past year. This is no doubt partly a consequence of celebrities auctioning off their NFTs for hundreds of thousands, if not millions, of dollars. For example, Twitter founder Jack Dorsey’s first tweet sold for $2.9 million (about £2.4 million). This creates a sense of hype and celebrity status, giving the impression that anyone can create an NFT and then auction it off for millions of dollars.
Whenever there is money to be made, unscrupulous activity comes to the surface. Unfortunately, that’s human nature. We’ve observed all kinds of scams – from phishing scams to bidding scams to fake NFTs (eg OpenSea reported that over 80 percent of NFTs minted using the minting tool were counterfeit). NFT marketplaces have taken measures to prevent fraudulent behavior on their platforms and we will see increasing consumer protections as the technology matures.
However, we need to look past the hype and scams, as the core power of NFTs is authentication. NFTs are here to stay, because the possibilities are limitless and go beyond collectibles and celebrity tweets or photos. The future of NFTs lies in business and financial applications.
Whatever we do in everyday life is transaction-based. To facilitate any transaction and transfer of ownership, authentication is key. A transfer of ownership will not occur without authentication of the assets being transferred and the persons (or entities) participating in the transaction. This is the true power of NFTs, providing authentication and facilitating the transfer of ownership.
How NFTs will change future business
NFTs can create new ownership opportunities and facilitate transactions that were not feasible in traditional systems. BlockBar is an example of such a scenario. The BlockBar platform sells NFTs of rare or exclusive alcohol, including a Glenfiddich 1973 whiskey and a 1976 Dictador rum in a Lalique bottle.
The NFTs authenticate the physical rare bottles, which are stored in a climate-controlled and bonded warehouse in Singapore. Each NFT represents an ownership of a physical bottle, and this ownership can be transferred or sold between people globally, without anyone having the bottle at their dinner table.
Theoretically, this exchange of ownership could go on for years, until someone decides to open the bottle. When this happens, the NFT will be destroyed so that it cannot change ownership anymore.
This type of transaction has not been feasible in traditional systems. Authenticating a physical bottle is an expensive process, involving lawyers, notaries or other intermediaries, and has therefore never been done before. NFTs enable such a transaction in an efficient and affordable way, opening opportunities for ownership and value-added investments.
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A digital proof of ownership such as an NFT can prove ownership of anything. It is not limited to virtual or digital content such as images, videos, audio or tweets. An NFT can prove that someone owns a car, or has a marriage license or university degree. These NFT certificates can be stored in the user’s account on the blockchain, and shared when needed. Their utility and purpose is not as an asset or an investment to be traded, but rather as an authentication of a certificate, as in the traditional system.
NFTs have the potential to revolutionize the real estate industry by replacing land deeds, titles and all documentation confirming the ownership of real estate assets with NFTs. These NFT certificates are trackable and traceable and transactions are completely transparent, which will significantly reduce the cost and time of processing any change in the asset or change and transfer of ownership.
Collectible avatars on Reddit are a good example, and their success is a testament to the power of NFTs. The original aim was to give artists the opportunity to create and sell their work. Artists are paid for each collectible avatar sold on the Reddit platform and are entitled to receive royalties from secondary sales on other open marketplaces. The value of this avatar goes beyond just a collectible.
The business and financial applications for NFTs are limitless, and their use can continue to grow as they make transactions smoother, safer and more transparent, while protecting the rights of creators and providing a certificate of authentication.
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