NFTs, or Non-Fungible Tokens, have garnered a lot of attention for their use in the digital art world, but their potential extends far beyond that. In this article, I’ll explain how NFTs are being used to solve real problems.

Tokens 101

Before diving into NFTs, it’s helpful to explain what tokens are.

Types of tokens

Tokens can be fungible, non-fungible or a hybrid of both.

Fungible Tokens

Fungible tokens are identical and fully interchangeable. They can be best compared to coins of your local currency. If both of us have one euro and we switch our euros, nothing changes. This is fungibility.

Non-Fungible Tokens (NFTs)

Non-Fungible Tokens (NFTs) are unique and cannot be interchanged on a one-to-one basis. The uniqueness is often represented by a digital object or a physical asset. Digital art is the most well-known example, but NFTs can also represent real estate, with the NFT serving as a digital title deed.

This is the type of token we’re focusing on in this article.

Embedded rights

Tokens always have certain embedded rights, which can include:

• Usage rights

• Access rights

• Property rights

• Voting rights

Sometimes these rights overlap. For example:

• A token representing a share in a company usually includes both a property right (dividend) and a governance right (voting).

• A token representing real estate usually embeds a property right (ownership) but can also include a usage right (timesharing).

For now, it’s important to understand that tokens have embedded rights. I’ll cover this topic in more detail in a future article.

How NFTs are being used

1. Gaming assets and virtual worlds

NFTs are revolutionizing the gaming industry by allowing players to own, trade, and monetize in-game assets. These assets could be anything from characters and skins to weapons and virtual real estate. NFTs provide true ownership, meaning that even if a game shuts down, the assets still belong to the players.

Example: Axie Infinity is a popular play-to-earn game where players collect and breed digital pets called Axies. Each Axie is an NFT that can be traded or sold on various marketplaces. The game has created a vibrant economy where players earn income by participating in the game.

2. Digital identity and credentials

NFTs can serve as verifiable proof of identity or credentials, allowing individuals to maintain control over their personal information while ensuring its authenticity. This has applications in everything from digital passports to educational certificates.

Example: IncentiVerse, a project I founded, is working on decentralized identity solutions that use NFTs to represent verifiable credentials. These NFTs can be used to prove identity, education, professional achievements, and more, without relying on centralized authorities.

3. Real estate

In real estate, NFTs can represent ownership of physical property or shares in a property, enabling fractional ownership, easier transfer of property rights, and more transparent transactions.

Example: Xcavate is a blockchain-based real estate platform that facilitates a modular protocol for tokenizing real estate assets. It’s particularly unique because it independently varifies owner ID, asset attributes and price before an NFT can be minted.

4. Supply chain management

NFTs can be used to track the provenance and authenticity of goods as they move through the supply chain. This is particularly valuable in industries like luxury goods, pharmaceuticals, and food, where verifying the origin and authenticity of products is crucial.

Example: IBM Food Trust is a blockchain-based solution employed by various companies to enhance transparency and traceability in the food supply chain. While primarily using blockchain technology, NFTs are being explored within this ecosystem to represent unique items or batches of goods, providing an immutable record of their journey from farm to table.

5. Ticketing and access control

NFTs can be used for ticketing at events or as access control for digital or physical spaces. This ensures that tickets are unique, easily transferable, and helps in preventing fraud.

Example: YellowHeart is a platform that uses NFTs for ticketing. They have partnered with artists and venues to issue NFT tickets, which can include additional benefits like exclusive content or perks for ticket holders.

6. Intellectual property and royalties

NFTs can represent ownership of intellectual property (IP) and enable automatic royalty payments. This is particularly useful in creative industries where tracking the use of IP and ensuring creators are fairly compensated is often challenging.

Example: Async Art allows artists to create programmable art that can change over time or in response to external events. The art is minted as an NFT, and the platform automates royalty payments to the artist each time the NFT is resold.

7. Charity and social impact

NFTs can be used in fundraising for charities or social causes by providing a digital certificate of donations made or by creating unique digital assets that donors can purchase, with the proceeds going to support specific initiatives.

Example: Trrue is developing a donation crowdfunding module as a part of its system. This module uses NFTs to certify donations. The NFT can be used by donors to generate the documents required by their local tax authority.

8. Music and entertainment

Musicians and entertainers can use NFTs to directly sell their work to fans, bypassing traditional intermediaries. This can include anything from individual songs to concert tickets or exclusive experiences.

Example: Royal is a platform that allows musicians to sell fractional ownership of their songs to fans through NFTs. In return, fans receive a share of the royalties, creating a new way for artists to fund their projects and for fans to invest in music.

9. Healthcare

NFTs can secure sensitive health records, ensuring that individuals maintain control over their personal data while allowing for easy sharing with healthcare providers when necessary.

Example: While still in the early stages, there are experimental EHR Data projects exploring the use of NFTs to tokenize and secure health records. This could empower patients to manage their health data securely and share it with doctors or researchers as needed.

Other (future) use cases of NFTs

The potential for NFTs extends to areas not yet fully explored but holding great promise for the future:

• Legal contracts: NFTs could represent legal contracts, simplifying complex legal agreements and ensuring that all parties involved have access to a verifiable, immutable version of the contract.
  
  
  

• Tokenized assets and securities: NFTs could represent shares in a company or other financial instruments, enabling more accessible and transparent trading of assets on decentralized platforms.
  
  
  

• Government services: NFTs could be used for various government services, such as land registry, vehicle registration, or even voting, ensuring transparency, security, and efficiency while eradicating corruption.
  
  
  

Conclusion

NFTs are far more than just a trend in digital art; they offer a wide range of applications that can solve real-world problems. From revolutionizing industries like gaming and real estate to potentially transforming how we manage identity, intellectual property, and legal contracts, NFTs are poised to become a foundational technology for the digital economy.

As we look beyond the hype, the true value of NFTs lies in their ability to provide verifiable ownership, transparency, and decentralization across a wide range of applications.

Let’s connect

Interested in how NFTs are reshaping industries beyond digital art? Or would you like to dive deeper into some of the examples? What’s your favorite NFT project? Join the conversation and share your thoughts!