The Future of NFTs
Keeping up with the latest technological trends has become exhausting in recent years. From the blockchain and NFTs to the metaverse to AR and VR to AI; following these trends require a significant investment in time and energy to understand and utilize effectively, without the guarantee that they will be relevant at all in the future. During the COVID-19 pandemic I became fascinated by NFTs. I created an OpenSea account, joined countless communities on discord, and studied the market, trying to understand what the hype was all about and whether there was any value to these digital images. While I never invested in any NFTs, I was drawn to the creativity of the artists who created these collections and was in awe of how quickly a vibrant marketplace formed seemingly overnight. While I understood the aesthetic appeal and the promise of community during a pandemic, I couldn’t wrap my head around the real value in owning these things.
Non-fungible tokens trace their origins back to 2012 with Bitcoin-based colored coins, but it wasn’t until Ethereum was created in 2017 did the concept really take off. Ethereum revolutionized the nascent industry as it allowed users to host NFTs, enabling the creation, storage, programming, and trading of tokens. The first “Quantum” was minted in 2014 and NFTs were used to represent a variety of assets including real estate, digital art, and gaming tokens. The market really surged around 2021, however, with trading volumes reaching $13 billion as the NFT art market exploded in popularity. CryptoPunks and subsequently CryptoKitties became trendsetters in the way that NFT art was launched and organized. By minting a finite collection of items (10,000 in the case of CryptoPunks) artists were able to quickly drive value with scarcity. In 2021 NFTs reached their peak as an artist named Beeple sold a piece worth $69 million. This begs the question: Where is the market today and what is the legacy of NFTs?
While the NFT space continues to grow today, most NFTs today are now worthless. In a recent report entitled “Dead NFTs: The Evolving Landscape of the NFT Market,” a group of finance and blockchain tech experts found that “95% of people holding NFT collections are currently holding onto worthless investments” which means an estimate d 23 million people are holding onto these worthless investments. Aside from value, the environmental impact of minting these NFTs is significant, as it requires a tremendous amount of energy which has had an impact on overall adoption. Beyond the digital collectables that have had their day already, there is still a place for the underlying technology and real use cases. Real estate, fractional ownership, gaming, supply chain, music, and token-gated access are a few use cases that I believe should and will continue to grow as the industry matures. These use cases also highlight the versatility and disruptive potential of NFTs across various industries and I’m very excited to see what other innovative use cases emerge in the future.
One of the more interesting use cases for NFTs is in the healthcare industry. While still an emerging trend, NFTs can be used to store medical information, including patent data and history. By decentralizing patient’s medical records on the blockchain, this would create greater security and access for both medical professionals and patients looking to understand the data. The way that medical data is stored and accessed today is extremely complex and difficult to manage. While there are specific security concerns to address, this can significantly simplify the way the industry operates, which will lead to better patient outcomes. Another use case for NFTs within healthcare is in the pharmaceutical industry during clinical trials. NFTs can track and validate data integrity in clinical trials which could enhance transparency, auditability, and trust in the research process. There are already companies like RightsHash that are using NFTs to track patient consent information for clinical trials. These are only two of many potential use cases in the industry which I believe could make waves in the industry.
The other industry that provides countless use cases for NFTs is real estate. NFTs can revolutionize the industry by representing ownership, titles, and deeds on a blockchain, cutting out the time, resources, and capital required to purchase real estate. NFTs are already being used to purchase fractional shares of real estate and the first real estate NFT was sold in 2017 through a company called Propy. The ability to streamline the buying process, record the history of every step of the transaction as well as transaction history, and reduce fraud would be disruptive in an industry that has remained stagnant for years. This could result in transactions that could be closed in just a few clicks, with irrefutable proof of ownership. I believe that this is the future of real estate and will become one of the largest use cases for NFTs in the next 10–20 years.
In conclusion, NFTs have been defined in recent years by rapid growth, hype, and a subsequent fall from grace in a short period of time. The market soared in popularity, with groundbreaking sales and an explosion of creativity, yet it also witnessed a significant number of NFTs losing their value, leaving many investors with seemingly worthless holdings. While the volatility of these early years makes it difficult to predict the long-term value of the technology, I believe that NFTs hold promise and potential across various industries. Practical applications in real estate, healthcare, gaming, supply chain management, and more are emerging as viable and transformative use cases for NFTs. The healthcare sector stands to benefit the most from secure patient data management and transparent clinical trials, while real estate could see a revolution in ownership representation and transactional efficiency. While I think that we are still years away from NFTs dominating these industries, there is real promise for a future beyond the initial frenzy, and the real value of NFT technology lies in reshaping industries and facilitating meaningful advancements.
