TL;DR
- Before the use of non-fungible tokens (NFTs), it was extremely difficult to create digital scarcity.
- Digital scarcity refers to the limitation on the total supply of digital items or currencies.
- Blockchain and smart contracts made the creation and trading of NFTs possible.
- NFT transactions are immutable, verifiable, and transparent, providing a perfect solution to provide digital identification and ownership.
- Digital and real-world assets, such as certificates, domain names, real estate, jewelry, and perishable goods, can all be backed by an NFT.
Before the introduction of non-fungible tokens (NFTs), it was extremely difficult to create digital security for digital properties, such as pictures, videos, songs, artworks, and other virtual assets. While there are safeguards in place to prevent the piracy of digital works, internet users can easily make copies and distribute them.
But now, we have blockchain technology and smart contracts where you can secure your digital properties as NFTs on the blockchain! But this is just the tip of the iceberg!
Despite being in its early stages, there is a myriad of projects in the space which provide significant value to both developers and users. The technology behind NFT is used in the real estate, luxury goods, and shipping industries to log history and verify the authenticity of items. And there are many other exciting use cases that can revolutionize entire industries.
Providing Certificates and Identification
Because NFTs are unique to each other, tokenizing official documents such as Birth Certificates, Diploma Certificates, and more with blockchain is now possible.
Since the NFT can be linked back to its original owner, the certification may be provided directly through the blockchain. The use of NFTs to digitally store and safeguard identification papers such as driver's licenses, passports, medical records, personal profiles, transcripts, and addresses provides individuals more control over their information, reducing the chances of identity theft and forgery.
The potential of this use case has already been demonstrated in the education, corporate, and medical industries. Some schools are now offering digital certifications to their students and employees. In the medical field, Enjin ($ENJ) has partnered with Health Hero to create Go! By Health Hero, a new health monitoring and engagement app that introduces the concept of Well-being Non-Fungible Tokens, or W-NFTs.
Ownership of Domain Names
The Internet Corporation for Assigned Names and Numbers (ICANN), the global organization in charge of the policies for the domain name system (DNS), works with minimal supervision, which recently raised concerns about censorship and security of websites.
Just this February, ICANN was asked to block all the top-level domains operated from within Russia and revoke their websites, which would effectively restrict access to all websites registered on .ru, .su and .рф domains, regardless of the website’s political affiliation.
A blockchain-based domain name system is now being studied as an alternative to ICANN. Domain names registered on a blockchain network are added to a public ledger where they will remain until removed or changed by the owner. The private keys of domain owners are stored securely in a blockchain-based system.
Decentralized DNS alternatives like the Ethereum Name Service (ENS) and Unstoppable Domains offer crypto-addresses that are analogous to social media handles like Instagram and Twitter usernames, but each name must be unique. ENS and Unstoppable Domains make it possible to purchase and sell crypto addresses and these NFTs are tradable in an NFT Marketplace like Opensea.
Trading of Online and Physical Properties
NFTs may be used to transact real estate in both the online and offline spheres. Decentraland (MANA) is a game where virtual real estate is becoming increasingly popular. In Decentraland, you can create, buy and sell real estate in the metaverse. With the use of NFT, it can prove the ownership of the digital asset in the metaverse.
Although there have been some successful online real estate transactions the use of NFT in the physical real estate market is still in its infancy. Title searches and ownership verification in the real world might be streamlined with the use of NFTs and blockchain technology.
One example of how this system could develop, happened in April 2021, when Shane Dulgeroff tokenized a house for sale in California. The token also comes with an original piece of cryptographic artwork. The winner of the auction for the NFT will acquire the artwork and the physical property. Yet the buyer's and seller's legal standing in the transaction and their respective rights are quite uncertain, given the lack of legal backing from U.S. laws.
Ownership of Real-World Assets
Although NFTs are often linked to artworks, they have been created and sold as digital representations of other real-world assets, such as sports collectibles, antiques, and retail goods.
Since a "physical NFT" is a non-fungible token that represents a claim on an actual object. Beeple, a well-known digital artist, has been known to deliver physical tokens related to his artworks, such as a high-resolution screen art display, a signed certificate of authenticity, cleaning products, etc. Physical NFTs may be traded like any other NFTs or redeemed for the underlying asset.
An NFT might be useful for establishing ownership when retailing smaller items like jewelry. For example, a certificate of authenticity comes with a genuine diamond. The certificate is used as proof that you are the rightful owner. Without the certificate, anyone trying to resell it may have trouble convincing purchasers that they are the legitimate owner. NFTs use the same principle but in the form of a blockchain-based certificate.
When an NFT is tied to an object, possessing the NFT can be as useful as having the physical item itself. Using a non-custodial wallet, the NFT can even be attached to the physical asset and we can expect to see more of this principle put into use as the NFT world evolves through time.
Logistics and Supply Chains
NFT transactions are immutable and transparent on the blockchain, this allows anyone to verify the authenticity and reliability of the data. NFTs can be made into “Digital Passports” which hold the journey of a product. Information like when the product left the factory, who was the craftsman that put the parts together, and which mode of transportation the product took to reach the retail shop and ultimately into the hands of the consumer.
NFTs can be used to trace how items like food are being transported along the supply chain, information like the temperature the food was kept in, when was the food prepared, and how long it took for the product to reach the consumer can all be stored on the blockchain.
The anti-fraud properties of blockchain can also benefit high-end luxury fashion where imitation goods are prevalent or even for car manufacturers to verify that cars are not fitted with 3rd party spare parts which can reduce the reliability of the vehicle.
As NFTs continue to gain traction, we should expect to see new applications and innovative solutions. Though, not all NFT applications have been given the resources to advance beyond the concept or experimental stage, the potential use cases for NFTs have gone way beyond just a JPEG art piece.
Disclaimer: The information and publications in this article are not intended to be and do not constitute financial advice, investment advice, trading advice, or any other advice or recommendation offered or endorsed by Coins.
Get your crypto journey started with Coins.ph
Coins.ph is regulated by the Bangko Sentral ng Pilipinas (BSP) and is the first-ever blockchain-based company in Asia to hold both Virtual Currency and Electronic Money Issuer licenses from a central bank.
Sign up for a Coins.ph account now to start trading OR download the Coins.ph app. Once you have verified your account, you can convert PHP into the cryptocurrencies of your choice.
Start trading your favorite Crypto on Coins Pro with fees as low as 0.05%!
Join the Coinmunity
Connect with like-minded crypto enthusiasts! Be the first to learn about our news and campaigns.
Join us on:
- Twitter: https://twitter.com/coinsph
- Discord: https://discord.io/coinscommunity
- Telegram (Announcements): https://t.me/coinsph_announcements
- Telegram (Community): https://t.me/coinsphfilipino
- Instagram: https://www.instagram.com/coinsph/
- Facebook: https://www.facebook.com/coinsph/
- TikTok: https://www.tiktok.com/@coinsph_official
- YouTube: https://www.youtube.com/coinsph
