By Justin Wenczka, CRO, Verasity
If you’ve been on the internet recently, chances are you’ve come across non-fungible tokens, better known as ‘NFTs’ – blockchain-issued assets that each have unique qualities, unlike traditional cryptocurrencies. Hailed as everything from a transformation in digital art storage and ownership, to a generational transfer of wealth, NFTs have captured headlines worldwide for their eye-watering valuations on the secondary market.
But among the hype and headlines, there is deep utility hidden. NFTs’ programmability, their ease of use and transfer, and their immutable nature by virtue of blockchain technology, are giving rise to applications that go beyond digital art storage, crossing over into the realm of digital rights management for a whole host of novel applications. We discover some of these applications in this article, and pull back the curtain on NFT hype.
Physical property, digital deeds
It’s likely that your first encounter with NFTs has been through an avatar for a Crypto Twitter influencer, proudly displayed as proof they’ve splashed out on their own digital likeness in the flavour of the month NFT mint.
But venture past the headline-grabbing fun of the likes of Bored Ape Yacht Club and you’ll find that NFTs can also be used to represent real, tangible items in the physical world. For example, NFTs are already being used as property deeds in commercial real estate transactions, or as certificates of authenticity for industrial design, and potentially for numerous other purposes – from car ownership papers to birth certificates. In these applications – and in music and art – we see the basis of the mature future of non-fungible tokens as an empowering, problem-solving, fraud-proof DRM system.
Like many new technologies, NFTs are easily – and widely – misunderstood. Since bursting into the public eye for their dizzying valuations, they have acquired – along with the blockchain they are minted on, and crypto in general – an unwarranted reputation for obfuscation that could not be more at odds with their true USP, which is their transparency and ease of audit.
So, let’s start again, and go from there. An NFT is a digital deed of ownership. Now, picture the use cases. Set aside stories of cat gifs selling for millions, and focus instead on the far more functional picture of an NFT as a certificate capable of proving authenticity, tracking copyright, assigning royalties and maintaining a record of creation.
That might be for a unique piece of digital art – indeed, the NFT might be the asset itself – but it could equally be a deed of ownership for the original Mona Lisa, or any other unique physical item. An NFT minted to accompany an artwork or physical asset represents a permanent record of its ownership. And that is of great interest to contemporary artists, because when that ownership changes, the NFT can direct a share of the sale price back to the original creator in the form of royalties.
Likewise, in the music industry, artists are experimenting with limited-edition tracks minted as NFTs, as shareable files with DRM and royalty-tracking built in, and even as a means to create digital concert tickets and access credentials.
NFTs for gaming and esports
Similarly, certain sectors of the gaming industry are placing big bets on NFTs. Axie Infinity is a shining example of a thriving NFT-based in-game economy, but many other games are ripe for similar exploration. Most games already have some kind of marketplace for digital items, skins, avatars, character boosts and other virtual goods, but typically they exist in a closed ecosystem, which means they lack security when scaled and may be prone to fraud when items are traded freely.
Instead, NFTs offer a trustless and immutable option to trade those digital items – in other words, their existence doesn’t rely purely on trust, and they can’t disappear or be changed on a whim. In addition to stamping out fraud and unpredictable loss, this means they can outlast virtual worlds and be ported into new platforms – a natural evolution for digital assets in gaming.
Up until now, NFTs have existed in that familiar limbo state – clearly useful and innovative, but lacking effective infrastructure. However, we’re now at a stage where the necessary infrastructure is expanding at a rapid rate – from scalable NFT minting protocols and marketplaces that developers can leverage through simple APIs, to NFT anti-fraud solutions such as Verasity’s own Proof of View, which embeds patented anti-fraud technology within the smart contract at the very point of an NFT’s creation.
With such hurdles in the rear-view mirror, it’s our view that widespread adoption of NFT technology is becoming increasingly realistic, whether from major game companies, or governments, or anyone in the business of commerce seeking fraud protection, transparency and authenticity.
As long as NFTs – and the underlying blockchains they’re minted on – continue their trajectory towards low-cost and scalable solutions, it is entirely likely that they will rapidly become an essential and uncontroversial certified ownership in all sorts of contexts. And from there, it’s just a short step to NFTs becoming the de facto means of representing goods in our increasingly metaverse world.
