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The floor price of popular non-fungible tokens (NFTs) is plummeting. Across the board we see stories of huge amounts of money disappearing and no one is immune. All eyes are on the crypto industry; all eyes are watching to see where innovation will take us. Yet it often feels like the headlines focus on trivial market fluctuations driven largely by random explosions of activity in trading and the beating of NFTs.
The future is clear: we have to move past the prevailing view that NFTs should be limited to buying and selling pixels.
It’s time for industry leaders to focus our collective efforts on the possibilities. As we march towards the new frontier where the digital and physical worlds converge, it’s time to focus our synergy on driving actual use cases for NFTs.
Recent news has spawned endless permutations of stories about the value of incredibly popular (and for a time liquid) NFTs and their subsequent steep price decline. These stories beg the question: Without any intrinsic value beyond what the market determines their value to be, how valuable can these pixels really be?
Early conversations around NFTs excitedly pointed to the fact that digital ownership allowed an artist’s work to maintain its place in the artist’s portfolio or in the hands of the buyer, truly combating theft and unlawful use of digital art. This opened up a new avenue for the technology and catapulted some artists into the stratosphere (and for many rightly so); Beeple broke records with “Every day – The first 5000 days”, sold for $69.3 million, until Pak’s series of NFTs “The mergegrossed a whopping $91.8 million.
In art and indeed collectibles, there are clear use cases for using the revolutionary technology behind NFTs. However, the technology is increasingly being abused and used as a novelty more than anything else. Marketplaces have witnessed simple jpegs being sold well into the tens of thousands of dollars, with no real intrinsic value underlying the offerings. The main value proposition of these NFTs is largely based on the fact that buyers can sell the images for a higher price.
As time has repeatedly shown, the vast majority of NFTs are painfully overvalued.
The industry is overdue for some self-examination and it’s time to really think about what the intrinsic value of NFTs might look like. The new horizon is approaching. For COZ, this represents the digital world that you can physically touch and interact with. In other words, the non-fungible item (NFI) has arrived.
In practice, an NFI means that you take a physical asset, such as a ring, and give it a software development kit. In theory, these items cannot be stolen, as all assets using NFI technology are unique, meaning you can prove ownership of items. On a more technical level, the technology exposes a censored, counterfeit-resistant payload that is cryptographically on-chain and tied to the item. So in general, it takes any physical item (be it a ring, a piece of art, a t-shirt, a handbag) and gives it a software development kit that allows for interaction.
Brands notice. Yvel, a jewelry house, launched its Independent Non-Fungible Security (INFS), a trading platform that merges blockchain with real guarantees in the form of unique gold coins adorned with diamonds and other precious stones. Crurated, a wine community, uses blockchain and NFTs with every bottle of wine that enters the warehouse. Each bottle is assigned an NFT – registered on the blockchain – to verify authenticity and provide important information, which is then updated as the wine is bought and sold.
Although an emerging technology, NFIs also show tremendous potential in terms of traceability (as physical assets are each cryptographically unique and information is stored on the blockchain), by providing proof of ownership (as blockchains are critical in managing and confirming ownership in a decentralized manner), and linking loyalty rewards to individual physical assets.
Marking the beginning of what is possible, these examples illustrate the key determinant so often missing from the conversation: intrinsic value.
NFTs are increasingly being used in real estate, preserving cultural and relevant political information, and even facilitating fundraising for disenfranchised people around the world, which will no doubt have a positive impact over time on the course of innovation.
As we look to the future, we should focus on these tangible — and especially useful — use cases. They represent way too much potential to be rejected in favor of headline grabbers.
As we see prices rise and fall on NFT marketplaces, it is very easy to believe that the cycle will continue in repeated patterns. However, when we take a step back, NFTs clearly have endless potential.
We are only at the beginning of realizing what is possible. Opportunities lie where the digital and physical worlds meet.