Non-fungible tokens (NFTs) witnessed a sharp uptick in demand in mid-2021, and it was even named that year’s Word of the Year by the Collins Dictionary. In August 2022, the total trading volume of this asset class crossed $5 billion globally, per market analysis by CoinGecko. This demand is due to the sheer versatility of NFTs, which allows the technology to be applied in different use cases across industries. Some of the critical uses of NFTs include:
1. Supporting the Play-to-Earn (P2E) gaming model
Digital collectibles are probably the most popular use of non-fungible tokens, as they enable non-duplicable in-game assets. As they cross different levels, players can earn assets that have an intrinsic value and then trade or sell them later on. Unique in-game items can increase in value over time, helping players make a profit. Even when players exit the game, they continue to own the NFT and may generate value from them in the future.
2. Enabling true ownership of digital art
Traditionally, digital and physical art remain distinct, as the former was easy to copy, share, and defraud. For example, piracy of digital artwork or files in digital media formats is almost impossible to control. As a result, digital art could never have the same value as even a basic watercolor by a rising painter.
NFTs turn this model on its head. Artists worldwide can turn their graphical designs, digital artwork, or photographs into an NFT that can be bought and sold. The blockchain carries records of all transactions without the risk of tampering, and artists can even earn royalties when an image or media file is put to commercial use.
3. Verifying memberships through “digital tickets”
NFTs can also be used as digital tickets to prove membership in an online community, a paid video game, or any other digital forum behind a paywall. On the web, users do not enjoy the same ease of identity verification as in the real world. As demand for online spaces like metaverse platforms continues to grow, proving membership is a significant business problem. One can display an NFT as proof of membership or even turn their avatars into an NFT, demonstrating the authenticity of their online identity.
4. Removing fraud in the music industry
As digital media takes over the music industry, instances of fraud and piracy have continued to grow. Also, it can be challenging for emerging musicians to turn a profit in their early years, as record labels, music vendors, ticket distributors, etc., claim the lion’s share of revenues. In contrast, non-fungible tokens allow artists to connect directly with their audience by selling digital music files. NFTs can be programmed to restrict revenue sharing to a point and no more, ensuring that the artist’s rights are not violated. Companies like Autograph.io even enable the tokenization of autographs to support artists further.
5. Purchasing digital real estate in the metaverse
Digital real estate, known as parcels, is another top use case for NFTs. Popular metaverse platforms like Decentraland or The Sandbox have sprawling real estate that is in high demand. Individuals and companies can set up virtual offices in the metaverse (decentralized apps or dApps) to unlock new revenue streams. Investors can buy and sell these parcels for a profit or lease it out to a metaverse developer. The value of these parcels can run up to millions of dollars, making it crucial to establish ownership. NFTs are a secure and tamperproof way of managing digital real estate rights.
6. Complementing the ownership of physical assets
Sometimes, buyers of real-world assets may choose to purchase an NFT with it simply to prove the history of ownership and the asset’s authenticity. For example, CarForCoin.com allows users to buy NFTs; every token is associated with a real-world car. This assures the buyer that they are getting a high-quality product with digital proof of ownership. This use case is essentially enabled by smart contracts being more secure than physical ones, and NFTs may enable easier trading if the buyer wants to sell the asset later on.
7. Storing medical records and clinical data
NFTs are applicable in any use case that involves a record of data and transactions. This makes it especially relevant for the healthcare industry, where the veracity and authenticity of records are paramount. By converting a person’s healthcare record into an NFT, one can ensure that data is not lost or tampered with. Only authorized individuals can access the data without compromising security. One such use that is slowly gaining popularity is the idea of NFT birth certificates.
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