How NFTs Could Shake Up The Economic Paradigm
NFTs have the potential to revolutionise the world’s economy. By creating a new way to represent value or digital twins of physical items, NFTs could upend traditional financial systems — not only creating opportunities for people who are currently excluded from the global economy, but eliminate other existing issues within the economy like fraud, geographic barriers and market inefficiencies.
What is an NFT?
Non-fungible tokens (NFTs) prove unique ownership of digital assets. These assets are tokenized on the blockchain to create digital certificates of ownership that can be traced and traded — and cannot be forged.
NFTs can also take advantage of smart contracts that give the original seller a cut of any future sale.
What’s more, financial products from the decentralised finance (DeFi) space like dividend payments, loans and liquidity issuances can be layered on top of NFTs for additional benefits. For example, an artist could receive a commission each time their work is re-sold, or use their work as collateral for a debt instrument.
NFTs in the Economy
The potential of NFTs extends far beyond simply selling gifs on the internet. When it comes to the financial ecosystem, NFTs can turn it on its head — creating a more secure, efficient and fairer economy.
More secure: Because NFTs are powered by blockchain technology, you can be assured that any NFT you buy is genuine, no matter how many times it changes hands, since it’s nearly impossible to create counterfeits thanks to the decentralised immutable ledger.
What’s more, NFTs have a permanent information tab that records their uniqueness on the blockchain. Think of this information as a certificate of authenticity and provenance. And thanks to the immutable nature of the blockchain, no owner can change or alter the data once it’s committed.
More efficient: Currently, there is almost always a middleman between you and your purchase — whether that’s an investment banker, a credit card company, a platform provider or a bank.
You can buy and sell NFTs on marketplaces or exchanges, but they can also be transferred on the blockchain peer-to-peer. As a result, they can create a whole new way of transacting in a completely decentralised economy with a far more open and direct marketplace.
This goes hand in hand with the next benefit that NFTs could have on the economy…
Fairer: NFTs can help to address some of the biggest economic challenges the world faces today — including inequality and poverty. By giving people ownership of their digital assets, NFTs can help reduce income inequality and create a new way for people to participate in the global economy without having to rely on traditional financial institutions.
NFTs can also create a more equal playing field by removing geographical barriers — they can create a whole new universe of digital assets that can be bought and sold around the world in an instant, whether you’re in Africa, America, Australia or Antarctica — or anywhere in between.
The Possibilities are Endless: Potential of NFTs in the Physical and Virtual Economy
Showcasing the broadness of NFTs’ applicability within the economy, the use cases of NFTs are broad, and rapidly expanding every day.
Art
Of course, art is the de-facto application area of NFTs. The boom in art NFTs paved the way for a completely new way of thinking when it comes to ownership: while anyone can copy an image, or a gif, people are still buying NFTs of artwork for up to millions of dollars. In March, a piece of digital artwork by Mike Winkelmann (known as Beeple) sold for $69.3 million after a Christie’s auction, which was viewed by 22 million people. A month earlier, a 10-second video created by Beeple sold for $6.6 million.
Why? The answer is simple: while anyone can own a copy, there can only be one proud owner of the original. And the immutability of NFTs means that owners know for sure that they own the original.
But the potential of NFTs extends far beyond just the status and satisfaction of ownership — you can bake almost any feature or benefit into your NFT to match your business needs.
Music
Let’s look at music as an example: by creating NFTs of songs, musicians can not only allow fans to own them forever, but they can also reward fans for their support by giving them special privileges, such as early access to new songs or exclusive content.
Automotive
The automotive industry is taking a similar approach to baking benefits into NFTs. Arizona-based auction company Barrett-Jackson is auctioning this year NFTs of four cars it sold for charity in March, where the winner will receive the digital packaging of an exclusive video, an illustration, and three still images. With self-driving cars shaping the future, an NFT could be used to designate shared ownership of a car and show what percentage is owned by each party, since people may not need to own the car 100 per cent of the time.
Fashion
Meanwhile, the fashion industry is illustrating the way in which NFTs can break down physical barriers. At fashion week this year, brands got around COVID-19 restrictions by displaying wearable NFTs on 3D avatars, with some of the biggest designers praising the concept as one of the most exciting ways for brands to further engage with consumers.
Sports
NFTs can also be key in eliminating ticketing fraud. Over half of sports fans are victims of online ticket fraud, and NFTs are creating a solution to this as they cannot be manipulated or duplicated. Organisers are catching onto this already: the NFL partnered with Ticketmaster to issue NFT tickets to the attendees of this year’s edition of the Super Bowl.
Gaming
When it comes to video games, NFTs have the capability to change the way the industry functions, by allowing player ownership, proven scarcity, interoperability, and immutability. Gaming social media platform fruitlab has already created a system whereby content uploaded to the platform can be represented as NFTs, which creators can sell to other community members. Creators, or individuals who have purchased fruitlab NFTs, can then be credited with PIP tokens from fruitlab’s community when the content is viewed.
This new approach to ownership is opening doors that previously didn’t even exist: Jack Dorsey sold his first tweet as an NFT for $2.9 million and an NFT version of a New York Times column sold for $560,000. These examples are just the tip of the iceberg, serving as reminders that the possibilities for the creation and sale of NFTs are functionally limitless.
As a result, it’s no surprise that a recent PwC report found that blockchain technology has the potential to add $1.76 trillion to the global economy by 2030, and it looks like NFTs will comprise a larger and larger share of that total.
Challenges Lie Ahead
Despite the immense scope of possibility that NFTs hold in shaking up the economy as we know it today, there are still some barriers that need to be overcome in order to bring NFTs into the mainstream and enable this potential overhaul of the wider economy.
Firstly, the ecological/environmental implications. Creating, buying and selling an NFT all requires interaction with a blockchain network. Currently, most NFT marketplaces run on Ethereum, which runs a Proof of Work (PoW) model — great for the economy, but not for the environment. In fact, estimates place the carbon footprint of a single Ethereum transaction at around 111.52kg CO2 — equivalent to around 247,167 Visa transactions. And in addition to the energy use of the blockchain network itself, NFT-related transactions have many more steps, for which the carbon footprint is not known.
A Sustainable Solution: Layer 2 NFT Marketplace of the Future
However, there are alternatives. The Proof of Stake (PoS) model is less energy-intensive than PoW. The Aventus Network, which powers VereNFT, is a PoS blockchain — which is not only faster than Ethereum, but greener, too.
The second hurdle to overcome is interoperability. Currently, the blockchain industry is rolling out much like the internet did, where there was siloed value in various intranets which, when connected up by the internet, led to an explosion in value through the network effect. Blockchain is the same today, with various layers 1 and 2 which all need to be connected so value can seamlessly transfer everywhere.
Because Aventus is interoperable, it can support the migration of assets, both fungible and non-fungible, between multiple networks — including Ethereum, Polkadot and beyond. This means that, unlike most NFT platforms, VereNFT can enable cross-chain interoperability for NFTs.
Finally is the issue of regulation. Currently, NFTs are not subject to regulation, which means there is little or no legal protection for those who create, invest in or trade them. In order to protect the sustainable development and widespread adoption of NFTs, and allow their full potential to be realised, legal frameworks for decentralised economies must be developed — and they should be consistent with our values of open-source, community-building, and transparency.
Start your journey by creating your own NFT marketplace with VereNFT
VereNFT is an enterprise-grade whitelabel NFT platform that supports established businesses in the creation of their own NFT strategies. To start your own NFT journey, book a demo with us at info@verenft.io, or subscribe to our newsletter.
About VereNFT
Powered by the Aventus Network, VereNFT is an enterprise-grade whitelabel NFT platform that supports established businesses in the creation of their own NFT strategies. Its solution is deeply customisable and flexible, enabling businesses to create a completely bespoke marketplace. To date, VereNFTs use cases span art, music, video games, film, sports, horse racing, data and many more.
Join Our Socials
Twitter | Instagram | Youtube | Telegram | Linkedin | Medium | Facebook | Discord |Pinterest
