NFTs have propelled themselves into the mainstream. However, while most of us are familiar with artwork like Bored Apes, the new technology has much bigger implications.
NFTs are entries on blockchain, a distributed database of records that assigns value to items. The market for NFTs – or non-fungible tokens - has essentially come out of nowhere. The volume of NFT sales surged from $82m in 2020 to $17.6bn in 2021, according to L’Atelier BNP Paribas, a foresight consultancy. The number of people buying NFTs rose over the same period from 75,000 to 2.3 million.
Nadya Ivanova is chief operating officer and foresight lead at L’Atelier BNP Paribas. She says 2021 was “a breakthrough year for NFTs in terms of the volume and value of transactions, the interest of mainstream brands, the emergence of new digital communities, and the tens of billions of dollars of funding that went into projects”.
But if NFTs entered the cultural conversation last year through art projects, they now seem poised to grow beyond their artistic roots. The reality is NFTs can be applied in any number of areas and used to represent anything – not just artwork. Here are five new use cases for the technology.
1. Building communities
NFTs are part of the Web3 concept, a new vision for the future of the internet built on the idea of community. Web3 envisions a decentralised internet, where no one person or company holds undue power over the others. It’s meant to be egalitarian and community-minded. Because NFTs are built on the blockchain that helps decentralise the internet, they signify that sense of community.
“The most important potential future use of NFTs is to use it as a community token,” says Andres Guadamuz, a reader in intellectual property law at the University of Sussex who has studied NFTs. “It acts as an identification point for communities.”
There are already some examples of this concept. While they’re closely tied to the NFT art sector, they could become more widespread. Guadamuz points to the Bored Ape Yacht Club, perhaps the most famous NFT art collection of all, which boasts celebrity collectors including Jimmy Fallon and Paris Hilton.
Owners possess the rights to the artwork, yes, but they really own the associated token. This has a deeper meaning. “It’s a token that serves as an invitation to enter spaces that otherwise would be closed,” Guadamuz says. “I find that aspect – for community management and identification management – has a lot of potential.”
2. Asset management
NFTs could be used to evidence ownership of an item, an idea that has “been talked about quite a lot,” Guadamuz says. This could help the technology gain even more mainstream acceptance in the coming years.
So-called asset management is already being used in video games. Players gain an NFT associated with an item that they purchase in one game, which they can port over to another version of the game or a sequel. Such technology could soon be the norm in the wider world.
“It could be used as some form of evidence of property or digital assets in the metaverse, if it actually takes off,” says Guadamuz. If the metaverse is to deliver on the aspirations of proponents like Facebook’s Mark Zuckerberg, this could be key. A billion of us could end up in the metaverse by the end of the decade, in Zuckerberg’s vision of the future: knowing who owns what in a digital, virtual reality environment will be more important than ever.
3. Trying before buying
NFTs could be vital for asset management in the metaverse. But what about those tricky moments before you decide to buy?
“There is huge potential for NFTs in the fashion and beauty industry, especially when we consider that everyday consumers will soon possess digital personas and identities,” says Alice Chang, CEO and founder of fashion tech firm Perfect Corp. “Consumers will leverage these digital personas to explore and experience the metaverse. They will want these digital avatars to accurately represent their style and personality.” Beauty and fashion NFTs will play a role here, she says, along with augmented reality (AR) technology.
The opportunity to try before you buy items such as make-up or clothing will be a boon for NFTs. The technology could enable customers to virtually try on items they could then purchase in the real world, alongside a digital copy to wear in the metaverse. Both would be linked by an NFT, which would help connect the online and offline versions.
“This innovative solution introduces a new dimension of interactivity and engagement in the NFT space, by allowing consumers to not only buy the NFT, but also try on and experience the product in an exciting new way,” says Chang.
Scalpers and the secondary market are a major headache for the events and entertainment industry, taking a significant chunk of the potential profits for a live event. To address the problem, concert organisers have turned to technology. For example, smartphone apps and ticketing are associated with individuals, hampering the ability for tickets to be resold.
However, even this technology is fallible. NFTs could empower the industry to finally beat the touts.
“It’s plain to see how fraud could be negated: if all original tickets were to be recorded on a blockchain, that would really minimise the number of fake tickets on the market,” says Luke Jackson, senior associate at law firm Walker Morris, who monitors technology and digital innovation. “In turn, less reliance would be placed on third-party intermediaries to facilitate resales of tickets.”
It’s possible to combine some of the tout-busting benefits with the other strengths of NFTs, like the ability to build a community. “There are exciting possibilities for the artists or sports clubs hosting the events to engage with their fans,” says Jackson. “If every show has a corresponding ‘ticket stub NFT’, the event holders can reward those that attend regularly or have supported them in the early days or through difficult times.”
“Music has always been utilised and adopted by tech and new hardware,” says Miles Leonard, co-founder of TokenTraxx, a Web3 startup. “Music is once again at the heart of the explosion of Web3 and NFTs.”
In the past, exclusive album tracks were included for fan clubs, or money-can’t-buy merchandise. NFTs can be used in a similar way. For example, fans who buy them could gain access to bands or artists backstage, drinks in a DJ booth, or a personal writing camp with a songwriter. This benefits the fans, but also the artists. “Where NFTs have really shifted the paradigm in music is with emerging artists who are not receiving a workable income through their streaming platforms, despite the thousands or millions of streams they receive,” says Leonard.
This would help address the longstanding challenge of making money from music. “Through their NFT drops, artists are now taking 80% of the value in their offering, not 10%,” Leonard says.