NFT Use Cases: Beyond the Bored Ape
Non-fungible tokens (NFTs) are an emerging technology that has seen immense growth in the digital art and video game industries. But NFTs can be more than just a new Twitter avatar that no one else can use.
What Are NFTs?
An NFT is a digital asset that represents a real-world object — such as a piece of art — that records ownership in the blockchain. Most securities and even digital assets such as cryptocurrencies are “fungible” assets, meaning that one unit of the asset is interchangeable with another. In other words, one bitcoin is the same value as another bitcoin, and one share of Apple is interchangeable with another share of Apple stock.
So “non-fungible” assets are ones that cannot be traded or exchanged for equal value, each asset is unique to itself only. How can this technology be utilized outside of digital art?
What Are NFT Use Cases?
Maybe the most prominent use of NFTs is for pieces of artwork, especially digital art. NFTs representing art give the purchaser a trackable record of ownership which can help with valuation as well as prevent theft of the artwork.
Early use cases include Cryptopunks and Bored Ape Yacht Club, algorithmically generated digital art images. Beeple, named “a visionary digital artist at the forefront of NFTs” by Christie’s, created one of the most famous examples of digital artworks with his piece Everydays: The First 5000 Days which sold for $69 million at a Christie’s auction in May 2021.
This also goes for video art such as short videos and GIFs. Notably, a looping 10-second video from Beeple called “Crossroad” depicting a naked Donald Trump lying on the ground sold for $6.6 million.
NFTs also enable artists to access profits from secondary sales of their artwork by programming royalties into the NFT smart contract.
NFTs can be thought of as digital trading cards. Sports tickets and other collectibles have been gaining popularity as tokens: “Moments,” featuring a variety of iconic sports moments, sold on the NBA Top Shot platform. In 2021, NBA Top Shot had more than 1.1 million users who traded over $800 million in NFTs.
Collectibles can also include the miscellaneous other online items sold on NFT markets. For example, Jack Dorsey sold his first tweet, reading “just setting up my twttr,” for $2.9 million in March 2021. Just a year later, the highest bid for the tweet’s resale was just $13,940, according to OpenSea.
In February 2021, NFTs generated $25 million in the music industry from artists selling artwork and music as NFTs. While art NFTs are typically just a visual asset, music NFTs have a musical component as well. OpenSea, the largest NFT marketplace, even has a dedicated catalog for music NFTs.
Many musicians including Shawn Mendes and Snoop Dogg have dipped their toes into the NFT space, using the new technology as a way to engage with fans and find new streams of monetization.
Beyond artists using NFTs to promote their music, the music itself can be sold as NFTs. Kings of Leon released their latest album, When You See Yourself, as an NFT — marking the first time listeners were able to purchase an album on the blockchain.
Ditto Music has placed NFTs on its blockchain platform Bluebox to allow purchasing shares in songs. Artists have enjoyed the benefits of secure ownership as the cut paid to intermediaries remains small. Comparatively, Spotify pays artists an average of $0.003 – $0.005 per stream.
If the rights to each song could be captured as an NFT, this either can provide the artist with a guarantee of royalties, if you pool together the top 40 or another grouping of songs, artists can fractionalize the pool and receive streaming income based on the pieces that shareholders own.
This is still in the early stages, but platforms such as Royal.io are attempting to take it mainstream. Royal.io is a platform that sells song rights as NFTs, creating a marketplace that enables users to purchase NFTs of songs and allows musicians to earn royalties as their songs rake in more streams. Headed by EDM artist 3LAU, this platform is one of many efforts to help musicians monetize their art using blockchain and crypto markets.
Online Gaming and NFTs
NFT integration into the gaming industry is already one of the most popular use cases. Video game companies can use NFTs to sell rare skins or in-game accessories, as well as utilize a blockchain network to store updatable metadata such as character stats.
There are 2 million daily players on Axie Infinity, a blockchain-enabled play-to-earn video game that has reached a valuation of $3 billion. Jamie Burke, CEO of Outlier Ventures (a UK-based blockchain VC and accelerator lab), was originally encouraged by research showing that “people spend five times more in a blockchain game than in a conventional game.”
Blockchain games allow players to buy, collect, and trade NFTs in the form of characters, creators, virtual skins, in-game accessories, and more.
Fashion & Luxury Goods
On September 30, 2021, Dolce & Gabbana sold its inaugural nine-piece collection of NFTs called “Collezione Genesi” for $5.6 million. The collection included both physical goods and their digital companions as NFTs.
For its fall 2021 collection, Gucci partnered with Christie’s auction house on an NFT video called “Aria,” which sold for $25,000 in June of last year. At London Fashion Week in 2021, a new brand called Auroboros unveiled a line of digital apparel that a user can wear using augmented reality (AR).
SVP and Head of Marketing at Christie’s, Neda Whitney, said “the ability to allow users to not only buy digital items in the fashion space but to also have unique and, oftentimes, ‘1 of 1’ certificates of ownership adds a level of exclusivity that has always worked well within the fashion culture.”
Proof of authenticity and ownership was one of the original goals behind the creation of NFTs. Because the blockchain can permanently store information regarding a product, this allows for checking for the rarity and authenticity of a physical or digital product.
Authenticity records are useful both for rare items of value, but also for commonplace items that currently face significant amounts of forgery or imitation, which can include supplements and medicine. NFTs can help solve the proliferation of fake products sold by tracking and tracing food products, and could be implemented with a QR code of nutritional information already provided.
Tokenizing Event Tickets
Event tickets are already digital assets that can only be owned by a single person at once, making them exceptionally well suited to be represented by an NFT.
Event ticket NFTs allow event attendees to verify their identity and the ticket purchased more easily than through an intermediary app such as TicketMaster. Event managers could mint a specific number of NFT tickets on a selected blockchain platform and then sell them at a fixed price. This has the potential to reduce ticket forgeries and scalping, and limit price gouging that is currently happening on third-party vendors.
NFT tickets also add back the sense of memorabilia that original paper tickets provided because these tickets can be stored and resold as collectibles.
NFTs in Real Estate
NFTs have applications for selling real estate in both the virtual and real worlds. NFTs allow for the tracking of ownership — when this comes to real estate, it means NFTs could be used to transfer land deeds, provide proof of ownership, and track changes in property value over time using timestamped NFTs.
In the virtual world, digital real estate applications can be seen in games such as Decentraland or Mars House. While virtual world real estate NFTs have several currently existing applications, real-world real estate applications of NFTs are still nascent.
NFTs can be used to simplify and speed up real estate transactions, enable smart contracts for properties, or even decentralize home rental services all while protecting data such as credit card or bank details.
Identification, Certification, and Documentation
NFTs contain code with a unique set of information that can be used to tokenize documentation such as academic certificates, degrees, licenses, and other qualifications. This identification can also be used for medical records or birth and death certificates.
The identity or certification can be issued directly over the blockchain as an NFT that can be traced back to the owner. Using NFTs to digitally store and protect personal profiles or medical history gives users better control over their data and can help prevent identity theft.
This same concept can be applied to all forms of identification — driver’s licenses or passports for example. Further development in this area of NFTs could help eliminate identify forgeries.
A similar application is for vaccine passports. The Republic of San Marino announced its adoption of NFT Covid-19 vaccination passports which use tokens to help authenticate documentation of vaccination.
NFT applications have been designed specifically to aid healthcare professionals as well – for example, NFT birth certificates create a lifelong identity on the blockchain that is linked to their birth certificate.
NFT ledgers also provide safer methods of storing sensitive medical data while still allowing authorized healthcare providers access when required. Narrowly-defined NFT use cases have emerged in recent years where hospitals, health insurance companies, and other organizations are beginning to explore how blockchains could help improve hospital operations by verifying patient identities and recording medical procedures performed without compromising patient confidentiality.
Individuals can register a domain name and sell it on the NFT market, removing the need to pay a third-party company to manage the domain name. Crypto domains are minted on a blockchain, such as Binance Smart Chain or Ethereum.
There are over 500 domain extensions including the most sought-after “.eth” that do not depend on any centralized authority. These extensions also can be used to link crypto-wallets which is not possible on non-NFT domain names. However, many browsers do not support these extensions as of writing.
NFTs are a simple way to protect intellectual property and patents. NFT tokens allow owners to prove ownership of any piece of content, which is not possible with traditional IP rights tools such as trademarks and copyrights.
Ownership of an IP can be traced over its entire history. The NFT chain would be immutable, meaning the original creator of a piece of work can prove it at any time.
The same can go for patents, where NFTs can be used to protect and certify ownership of an invention. NFTs could also provide the necessary data for verification, thus creating a public ledger that documents all transactions related to patents.
In May 2021, UC Berkeley announced that it would be auctioning NFTs for the patent disclosures for two Nobel Prize-winning inventions: CRISPR-Cas9 gene editing and cancer immunotherapy. The university will continue to own the related patents.
By using the blockchain, NFTs can be attached to a product, giving it an NFT identifier that cannot be tampered with. This provides manufacturers and consumers assurance that the product they are receiving is authentic.
Further, NFTs can give companies the ability to track their products from manufacturing through shipping and delivery. This gives customers insight into what they are spending money on as well as maintaining transparency within a company‘s supply chain.
What is the Future of NFT Use?
There is still much to be discovered about the use of NFTs and the spread of the NFT market. From virtual Versace handbags to tracking the authenticity of rare goods, people have already purchased a wide range of NFTs for a variety of different uses.
This material is provided for informational purposes only and should not be relied on as investment advice