NFTs have taken over the headlines with reports of some digital art NFTs selling for tens of millions. To most onlookers, this explosive growth in NFT sales seems bizarre even as some opine that NFTs might be nothing more than a passing trend that will soon die out. However, NFTs are a game-changing technology set to revolutionize multiple industries.
The contemporary art scene is already changing rapidly with the advent of NFTs. This emerging technology is making it possible for artists to create NFT-based digital art, thus affording them the freedom to sell their work directly to the consumer free from traditional mediums. However, NFTs are not only good for digital collectible artworks.
In this article, we will discuss what NFTs are as well as their many use cases.
NFT stands for non-fungible tokens and refers to a unique digital asset built on the blockchain with indivisible characteristics meaning you cannot divide it into smaller parts as you would a single Bitcoin.
Every NFT is unique to the extent that it cannot be substituted for any other asset of its kind. NFTs are similar to collectible baseball cards that are unique with a distinct value. They can also be compared to cryptocurrencies built on the blockchain as they are immutable, traceable with provable ownership.
However, the difference between an NFT and a regular crypto asset is that an NFT is uniquely programmable such that there is a clear distinction from one NFT to another. The reason for using blockchain with NFTs is to have a sort of immutable digital receipt of ownership with every NFT.
NFTs are ideal for creating digital collectibles that can be sold and traded, especially in games. In fact, many experts believe that the marriage of NFTs and video games is nothing short of a match made in heaven.
NFTs have several use cases in the gaming industry; for example, you can create NFT-based assets that signify ownership over digital collectibles such as video game avatars and skins or even real-life physical items like virtual property within a game. For instance, you could use an NFT to signify ownership over a virtual building that you have claimed within a game world.
New business models involving the trading of assets are already emerging in the gaming industry since most gamers follow an asset-creation lifecycle whereby they buy digital collectibles, play with them for a while and eventually sell them when they want to make money or get bored or simply want to go to the next level in the game.
My DeFi Pet for instance is a virtual pet game that combines a blockchain gaming experience with NFTs such that players can collect and breed virtual characterized pets made into NFTs. These NFT pets are dynamic such that a player can breed or evolve them to create new NFTs pets or level-up existing ones. Also, players can battle with their digital collectible pets, sell those pets to other players in an auction and perform other activities in the My DeFi Pet platform.
Fashion, luxury, and lifestyle present another opportunity for NFTs to shine. As more people embrace the notion of purchasing clothes online than ever before, NFT-based fashion items, especially those with limited editions could enjoy a solid uptake going forward.
If you combine this trend with the move to give consumers greater choice in how they purchase fashion items such as having the option to pay in installments rather than upfront, you could find that NFTs are poised to disrupt this trillion-dollar global business.
For example, since most luxury items are prone to mimicry, NFTs can be used to track the authenticity of luxury items. You could verify on the blockchain whether your luxury watch or pair of cool sneakers is an original piece as the fashion brand will be able to create a truly limited edition of each product in the form of an NFT. The possibilities are endless, and consumers can even use the fashion and luxury items they own to access new product editions.
Trace Network is an enterprise-grade DeFi protocol that is focusing on how fashion, luxury, and lifestyle brands can use the power of NFTs to achieve better inventory management. Given that consumer items in the fashion, luxury, and lifestyle sectors are usually high ticket items, theft and poor supply chain management can lead to major losses. Trace Network aims to solve these and other challenges by allowing any brand to mint NFTs that correspond to any of their products.
Trace Network is working to enable fashion NFTs for the Meterverse. In its simplest terms, a Meterverse is set to be the next evolutionary step of the internet. It will bring about unlimited interoperability between online platforms enabling users to build an online avatar that remains the same through every platform,
Already, most video games continue towards this trend of building small Meterveses where players can have an avatar representing their identity in the game, and any change effected by a player to the platform is felt by all other players in the game. This is seen as a precursor to the actual worldwide Meterverse and experts predict that self expression through virtual fashion items will become a huge move toward a complete Metervese experience.
Already, Meterverse fashion NFTs are booming with some selling for thousands of dollars. With Trace Network, various fashion brands will be able to mint NFT versions of their products and users will have their avatars in the Meterverse wear those fashion NFT items.
NFTs are also applicable in the world of finance in that they can be used to create liquidity especially on decentralized finance platforms such as decentralized exchanges and other DeFi lending and borrowing platforms. SYNC Network for instance offers a high yield liquidity mining reward that makes use of NFTs to incentivize liquidity provision on Uniswap.
SYNC Network's NFTs are called CryptoBonds and are designed as ERC-721 tokens with built in smart contracts programmed to lock liquidity for Uniswap market pairs white listed by SYNC Network. Given that a market is only as healthy as its source of liquidity, SyncNetwork's CryptoBonds facilitate a stable source of liquidity as liquidity providers are not able to pull liquidity from the pool on a whim. The good part is that the CryptoBond NFT can still be traded similar to any other NFT thereby giving liquidity providers a way out in-case they want to exit before the CryptoBond's maturity date.
What's more, users who lock liquidity with SYN Network's CryptoBonds can borrow DAI or WETH for up to 90 days while using their CryptoBond as collateral for the loan. The SYNC Network does not facilitate these loans in house. The loans are offered from one user to another. Lenders make loan offers and borrowers can accept the ones they like. If the borrower repays the loan they receive their CryptoBond back to their wallet. If they default on the loan the CryptoBond is transferred to the lender.
With this design, SYN Network is able to incentivise long term liquidity provision while using NFTs to strengthen crypto projects.
NFTs are poised to transform a multitude of industries ranging from the ones we have covered to other unmentioned industries such as the entertainment world.
Given that NFTs can be used to create digital ownership rights that can be stored in digital wallets, potential use cases could create solutions for industries that are plagued by fraud and counterfeiting such as the fantasy sports market and even the real estate industry.
The blockchain is here to stay, and non-fungible tokens are only proving that we are just getting started in exploring the endless possibilities of what blockchain technology can do.