Today, most people associate non-fungible tokens with crypto nerds and overhyped and overpriced pieces of digital art. Maybe it was just bad luck that the art world was where NFTs first got traction: Long before NFTs came along, it was driven by hype and speculation.
But crypto enthusiasts believe the story of NFTs is just getting going, and that more useful and predictable use cases for the tokens are ready to emerge. Though such scenarios are still far from mainstream, technology companies have already begun offering products and services to enable them.
1. Fashion goes virtual
As hard as it might be to imagine, ownership in the virtual world might one day be every bit as important as it is in the real world. An NFT proving ownership of a parcel of digital land, might be as important as the deed to a house in the physical world. “NFTs (or their descendants) will provide digital property rights to billions of people, says Animoca Brands cofounder Yat Siu. “That property will include both digital and physical goods and information of all kinds.”
Fashion brands are already looking to create digital twins of the real-world products they sell. It may work something like this: Let’s say Yves Saint Laurent sells a $5,000 evening dress to someone in one of its stores. The store might give the buyer a special NFT, a “digital twin” of the dress that the person can put on her avatar when she makes the rounds to online gaming worlds such as Roblox, Fortnite, or other digital haunts. Or it could work the other way. The woman may buy the digital twin of the dress first, the thinking goes, which would then give her ownership of the physical dress as part of the deal.
“The Roblox/Fornite generation will look for brands that blend the real and unreal, and let them show that off to friends,” says RGA London executive creative director Nick Pringle.
2. Eternal web domains
Website domains are often among the very first considerations of a company starting an online business. A simple, memorable URL can make all the difference in marketing the site and its wares. Because of that, and the limited URL extensions available, some domain names have become very expensive to buy. That’s also the reason some opportunists engage in “domain sniping”; they wait for popular domain name registrations to expire, then swoop in and buy up the URL before the owner knows what happened.
Unstoppable Domains CEO Matthew Gould tells me that you can now buy or register a domain name as an NFT on the blockchain (and store it in your crypto wallet) instead of getting one at a registrar such as Network Solutions or GoDaddy. With blockchain-based domain names come a whole new set of available top-level domains such as .crypto and.bitcoin.
NFT domain registrars such as Unstoppable Domains charge only a one-time fee for these domains, Gould says, while traditional registries ask for periodic fees in perpetuity. When site operators can buy domain names outright and own them forever, they’re no longer targets for domain sniping. Some believe, however, that because blockchain domains are decentralized and fairly anonymous, they could be used by bad actors as a tool for cybercrime.
3. ‘Play-to-earn’ games
Some games allow users to buy in-game apparel and other digital merch as NFTs. For instance players of Epic’s Fortnite game use cryptocurrency to buy skins (outfits) for their avatars. This may sound a bit strange when those skins have no value outside the digital confines of the game. But it makes sense to the millions of gamers who have spent money on digital goods within games.
Actually, NFTs don’t necessarily have to stay inside the game. The game Axie Infinity has taken off in recent months, in large part because players have a chance to make real money by playing. In the game, players buy cute digital pets called Axies. These Axies battle other Axies. Players can earn tokens for fighting well. If they earn enough tokens, they can breed their Axies to create new ones.
Players can sell their Axie NFTs on a marketplace within the game. Ultimately, players can take their tokens (from game play) and/or the proceeds from selling Axies, off the Axie Infinity platform to open marketplaces outside the game where they can convert the crypto into traditional currency if they choose.
There’s much more to it than that. Axie is actually something like chess meets Dungeons & Dragons meets Pokémon Go. It’s an example of a game developer that found a NFT-based business model that works and keeps players coming back. There’s even a documentary about Axie and the “play-to-earn revolution.” Other game developers might find their own formulas within this genre.
4. Smart event tickets
Imagine using bitcoin to buy an NFT that will get you into a concert or sporting event. The NFT might come with cool digital art or other special content from a band or sports team. Once inside the event, you may be able to use the NFT to buy extras like drinks, food, or a t-shirt. Companies like TicketMint and NuArca Labs have launched platforms to support NFT ticketing. Here’s a more detailed description of how the ticketing on the blockchain works. Even after the event is over an NFT can carry value in ways paper tickets can’t. If you’re the sort that likes to hold onto concert or game tickets as memorabilia, you can hold onto your NFT in your crypto wallet. If it represents a memorable event, the NFT could even become worth something.
Crypto enthusiasts say NFTs could eventually change the economics of the events business. NFTs are, after all, smart contracts. They can be set up so that proceeds from each sale are automatically divided up between the stakeholders. The venue might get 30%, the artist or sports team 40%, the cleaning crew 1%, and so on. Paying everyone directly via the blockchain might simplify the whole enterprise, and perhaps remove the need for some of the middlemen, the thinking goes.
5. More rewarding rewards programs
Gould tells me bands, sports teams, and promoters are watching the NFT space very closely because they see NFTs as a big opportunity to continually connect with fans. Since an NFT ticket is registered to you on the blockchain, the promoter of a concert or sports event could use it as the vehicle for a rewards program that offers extras to certain fans. This might mean admittance to a backstage party after the show, a meet-and-greet with a sports team after a game, or an event put on by the official fan club weeks after the event. Some of these special events might be real-world, while others might be virtual.
NFTs still have some real hurdles to pass before they’re ready for the masses. Financial regulators may need to make it more clear how they’ll deal with the tokens. The courts will eventually generate more case law around copyright disputes over NFTs. Blockchain infrastructure developers must work out how to scale up the use of NFTs without harming the environment.
We may finally realize NFTs have gone mainstream when we stop seeing the acronym in headlines. They are, after all, just mundane little smart contracts that can link out to valuable digital content. NFTs may ultimately be most useful when they’re quietly and harmlessly updating themselves in the background and out of the public eye.