What are NFTs?
NFTs, or Non-fungible tokens, are a blockchain-based technology able to provide a certificate of ownership on digital assets. A NFT is a unique and non-interchangeable unit of data stored on a blockchain, which is a type of immutable digital ledger. They use the blockchain to provide a public certificate of authenticity or proof of ownership, but do not restrict others from sharing or copying the digital files. While many are familiar with NFTs of digital artwork, today we’ll be discussing it’s possible other uses. While not covering all of the following, here is a short list of what NFTs could possibly be used for: crowdfunding rewards, tokenization of real-world assets, virtual real estate or in-game items, staking, NFT-backed loans, collateralization to secure a loan, money lending, or investments.
The younger generation and those mostly involved in crypto generally value digital goods and services the same as previous/older generations value physical goods and services. Trillions of dollars are spent each year on digital goods and roughly 15% of the entire world's economy is spent online, although not necessarily for a digital good. Younger people flock to digital only services such as Spotify, Apple Music, Netflix, Hulu, Steam, Epic Games, and it doesn’t seem to be slowing down. Gone are the days of people being concerned with owning a physical copy of the object, as owning it on your devices is what people care about. The current issue in relation to this is you cannot easily prove you own it, or services will technically lease you the ability to play an album or game and if the underlying service loses access to that media, you do as well. This is where NFTs can come in, to provide proof of ownership that cannot be taken away from you. Think of NFTs for online transactions as a possible digital receipt that is forever on the blockchain, viewable by anyone.
NFTs such as these can be used as in-game assets or even rewards for backing a cryptocurrency project, crowdfunding a film, videogame, or board game. Companies could make the NFT’s be redeemable for rewards for a film credit, an in-game item, or a physical copy of the board game. Anyone who has dealt with companies customer support, Kickstarter, or trying from anyone to get something you paid for knows how painful of a process it can be if the person on the other side requests a receipt from years ago, doesn’t believe you, or maybe you bought the item from a friend but it’s still under warranty but a different name…NFTs can solve this. The receipt is on the blockchain and under your control. Imagine how easy it would be to keep a ledger of all the receipts for items such as this in your wallet.
Another huge possibility for NFTs is that of lending in the Decentralized Finance (DeFi) space. NFTs, through DeFi, could allow a stranger to lend another person money directly, without the need of intermediaries, middlemen, or a bank. Neither party would have to reveal their identity and no audit would need to be performed. This takes away the inherent bias that banks have with or against certain customers or people. In the USA you would no longer need an ideal credit score to not get a terrible interest rate on a car or personal loan, you could simply put up some NFTs as collateral or leverage in order to get a loan. NFTs could allow small businesses to start a presence online as a way to offer digital goods and services for crypto payments and tie the NFTs into real physical goods if they wanted.
Guaranteed Proof of Receipt
Homeowners or property owners could use NFTs as a way to confirm the existence of their insurance policy, land title, or general ownership of an asset, keeping the record on the blockchain as a way to prove ownership and prevent loss of a paper trail or even tampering from local corruption. If the NFT is used to record ownership of something, proof cannot be taken away from you and ensures security and certainty in it. As an example, social security payments in the USA, if you had a NFT record of your policy and payments it would be incredibly easy to provide proof of payment, lack of payment received, etc. As someone from the USA, I know a lot of people who have dealt with the SSA (social security administration) for months on end, many times ending up in court over he-said/she-said situations that could have been solved immediately had there been proof on the blockchain.
They can be used from the record of ownership of any goods or service, to fraud prevention or protection, loan collateral or leverage, debt management, or even tying them to bills of lading for shipments, trade documents or certificates of origin between companies or countries.
In the center of the digital world you have goods and services and their payments. By employing the use of NFTs as a digital receipt on a distributed ledger such as the blockchain, there are so many possibilities and ways to make things easier for everyone. I, for one, would love to be able to pay someone anywhere in the world by sending some crypto in a few seconds and receiving a NFT as confirmation of proof that I now own what I purchased. No need for transferring to fiat, going through banks, middlemen, or a myriad of other hoops to jump through. It can all be automated through NFTs, smart contracts, and the blockchain.
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