Non-fungible tokens find favour beyond art and entertainment
As non-fungible tokens (NFTs) rapidly draw the interest of art and entertainment enthusiasts around the globe, they are also poised to revolutionise the ownership of digital assets across multiple other sectors.
According to GlobalData’s new report: “Towards next-generation asset class: Can NFTs outlive hype as new gold of crypto economy?”, while NFTs have proven to be big business in art, entertainment and gaming, several other industries − such as finance, healthcare and real estate − are buying into the hype to fight the technology’s bubble burst claims.
An NFT is a secure digital file which validates ownership, and is stored on the blockchain system, where each NFT can represent a unique digital item, and thus is not inter-changeable.
NFTs can represent digital files, such as art, audio, videos, items in video games and other forms of assets in the physical world. While the item itself can be copied, the NFT that includes certification of ownership cannot be duplicated.
Non-fungible tokens have become hugely popular in the local and global industries, with expensive items such as real estate, digital artwork and music being "tokenised" and sold online at exorbitant prices.
The report highlights the current state of play and future potential of NFTs across key applications, including art, entertainment, fashion, finance, gaming, healthcare, music, real estate and sports.
In the entertainment industry, NFTs have been enabling entertainment companies to re-build fan economies, with limited-edition content and collectibles as a new mechanism of storytelling.
“In a rapidly-growing digital world, it is often hard to claim the ownership of creative content and distinguish it from others,” explains Kiran Raj, principal disruptive tech analyst at GlobalData.
“A copy of a JPG file, for instance, is the same as the original. As a result, there is a growing need to replicate key properties of physical assets, like proof of ownership and uniqueness. NFTs, in essence, can meet this need with their blockchain-powered unique properties, like provenance and scarcity. Slowly but surely, they are evolving to be much bigger than an art fad as their real-time use cases thrust forward in multiple industries.”
The future potential of NFTs across key applications include:
The most straightforward use case of NFTs in decentralised finance is obtaining loans against valuable digital assets without selling them.
South Africa’s NFT marketplace NFTfi allows users to put up their NFT assets, like art, as collateral for a loan, or offer loans to other users on their NFTs. The start-up has a total loan volume of more than $12 million on its platform so far.
Genetic testing facilities have been sharing the DNA of humans with big pharma companies to cut years off drug research. However, this has often raised concerns as to how these companies sell the most personal data for huge profits without passing any benefits to patients.
London start-up Shivom claims to be the world's first NFT marketplace for genomic data that can offer transparency and complete control of human DNA data.
Although still in its infancy, the virtual real estate market is evolving as a comparable asset class to traditional real estate. Brazil’s Decentraland enables the purchase of virtual lands in the form of NFTs. In July 2021, a piece of virtual land on the platform was sold for nearly $1 million.
Sotheby’s, an auction firm for art and luxury, has launched a virtual replica of its London office on Decentraland.
“The year 2021 looks to be promising for NFTs, as their use cases are slowly spreading to new domains,” comments Raj.
“However, NFT adoption as a mainstream technology can be challenged by caveats like lack of scalability, high transaction fees, high energy consumption and unsatisfying user experiences. If such roadblocks are addressed, more business leaders would be inspired to investigate the potential of NFTs to convert into new corporate functioning models.”