The Next Step for NFTs — Real-World Utility Part 2
Blockchain technology has unlocked a new wave of opportunities never seen in the world before. In basic terms, blockchain can be described as an immutable digital ledger distributed among a network of computers that validates transactions and holds the records. As a result, blockchain has revolutionized the way we invest and transact by ensuring decentralization, security, and transparency.
Non-fungible tokens or NFTs have been around at least since 2014, but they only grew in popularity recently, and still, they are far away from what we can expect from the technology in the long run.
Traditionally, digital assets have been replicable without difficulty since they are just pixels displayed on a screen. For instance, as soon as an emoji is shared through the web, its value drops to zero because anybody can keep a copy identical to the original one. The same goes for videos, pictures, digital arts, or drawings.
The concept behind NFTs is that an immutable ‘blockchain certificate’ is generated and allocated to digital properties/collectibles, verifying their provenance, ownership, and degree of authenticity.
Since the certificate is minted through blockchain technology, it is decentralized and unalterable. Now let’s get back to our emoji example; using blockchain technology, you can coin the emoji into NFT and circulate it without the risk of losing value or ownership.
The original emoji continues to exist in short supply because it cannot be replicated by any means. As per the rules of demand and supply, scarcity creates demand which raises its value. But is this really true?
How is Digital Value Created?
As much as we say scarcity creates value, it cannot do that on its own. For this reason, we can view value as a combination of different conditions: Scarcity + Utility + Reputation + Liquidity = value.
- Utility: The concept of utility within economics is used to model value or worth. How the NFT can be used, and what it can be used to do.
- Reputation: A project with an impressive reputation/profile is likely to attract more audience, which derives value through the popularity of the original creator/source.
- Liquidity: Liquidity represents how easily an NFT can be converted into ready cash without affecting the overall market value.
- Scarcity: Scarcity is an economic factor that describes the increase in the market price due to an artificially low supply.
Over the past couple of months, several brands and famous names have already minted their NFT collectibles with greater or lesser success. For instance, Tesla’s CEO Elon Musk turned down a $1 million offer for his NFT song.
Formula 1 entered the digital value industry by selling digital collectible car components. The NBA Top Shot received $500 million in sales, to mention a few examples.
Elon Musk received a $1 million offer from the above examples because he is a popular figure, especially in the cryptoverse. Formula 1 is a massive brand, which makes me valuable. Scarcity as well played a vital role in driving the price of the NFTs. However, there is one key ingredient missing here: utility. The NFTs lack a specified use.
Scarcity and reputation drove the market value of the NFT collectibles. During Q1 of 2021, the digital collectibles sector generated more than $2.4 billion in transaction volume from approximately 100,000 super active users.
In Q2 of 2021, NFT sales and the daily average of unique wallets have more than doubled compared to Q1. The number of sales rallied 111.46%, while the daily average of unique wallets increased 151.86%.
Across the digital collectibles industry, there is now much significant trading activity regarding cheap NFTs, while the expensive ones are increasingly scarce. Thus, the NFTs industry could continue with the growth trajectory into becoming a massive market in itself. Still, to become truly mainstream, the digital value industry must demonstrate its real-world utility beyond sheer collectibles and speculative assets.
The Next Step for NFTs — The Utility Layer
The next generation of NFTs is expected to be dynamic. Apart from playing a critical part in safely creating the randomness needed to mint NFTs, they can also play an even more significant role in an NFTs entire lifecycle.
By linking NFTs with data outside the blockchain, Blockasset can mint dynamic NFTs that can develop and advance with regard to real-world happenings.
This will unleash a new variety of attributes for digital collectibles, in addition to unique games fundamentals.
For example, a football player’s digital trading card can comprise performance statistics like the number of goals scored and assists made. If the same trading card is transformed into an NFT and linked to the real world via oracles, they can autonomously refresh the statistics on the card depending on a player’s live game performance.
Besides, NFTs could also be created in real-time when a player hits a particular milestone, for example, reaching a record number of appearances playing for a specific club. This dynamic demeanor could turn out into a transformative stage in creating and trading digital value.
NFTs are digital collectibles, and they are ideally suited in games. Games will introduce a myriad of applications for NFTs and may allow gamers to import them and use them within the game. Making NFTs applicable in games creates real value for the entire ecosystem.
Gamers have the advantage of owning unique valuable digital collectibles or artifacts that they can sell to other players. Game creators can mint more NFT assets for their games and use the smart contract linked to the game NFT to earn a small percentage commission on future sales. As well as the conventional in-app sale or advertising revenue model, NFTs provide a new in-game economy for gaming companies to generate revenue.
Furthermore, the utility of dynamic NFTs extends further beyond collectible trading cards and gaming. Using oracles, authorities can now issue fraud-proof digital passports linked to NFTs on the blockchain.
Oracles would enable smart contracts to inquire and verify identification data and attach information to a person’s blockchain-based digital identity contingent on real-world events.
Additionally, title deeds can also be represented on the blockchain as NFTs automatically evaluated in real-time through oracles that extract information from the local IoT sensors, weather indices, and documentation of the land/property. This would facilitate the valuation of the property based on data that could be leveraged as collateral.
Another potential utility of NFTs that might become popular in the future is Music, according to S!NG’s Osler. Currently, the music industry is in a state of fluctuation. The era of CDs and digital downloads has almost faded away in favor of online music streaming, which has significantly dwindled profits, especially for artists.
This year, over 150 famous musicians in the UK, Paul McCartney, and Kate Bush, called for changes to streaming laws among the stars. They argued that “songwriters earn 50% of radio revenues, but only 15% in streaming”.
Before the emergence of the COVID-19 pandemic, musicians heavily relied upon tours to balance books. But with the future of live Music still clouded with uncertainty, the potential for non-fungible tokens to generate extra revenue draws significant interest. Moreover, given that NFTs provides artists with an opportunity to avoid additional expenses and risks that come with intermediaries, they can directly monetize their music by selling it directly to their fans.
The future of NFTs is what most people describe as metaverse, a world that is owned and controlled by its users. NFTs are not only changing music and art, but also fashion, sports, and various other industries. They allow people to purchase immortalized digital moments, whether it’s an NBA dunk, a saved shot in a game of soccer, or even a hilarious meme.
The current NFTs market is undoubtedly hype-driven, with most projects relying on pure speculation and a niche audience of investor-collectors. Such value cannot sustain in the long term, but with gaming, utilities are rising, and the real-world applications of these NFTs are increasing, so will their market value. 2021 has been super encouraging for the NFTs market, and unlocking their utility layer will see this market flourish even further.
What is Blockasset?
Blockasset believes competitive sports are all about making memories. So Blockasset is here to connect fans and athletes like never before. We are creating new stories and experiences through a unique combination of tech and sport. Life is, after all, about stories, and for a sports fan connecting directly with an athlete is the story of a lifetime.
Blockasset is a multi-sided marketplace that connects fans with athletes built on the Solana blockchain. We engage with athletes and agencies to create various packages which can be bought and traded in the Blockasset marketplace. In addition, the aim is to offer collectibles, unique sports-related items, and a variety of digital artwork by well-known and verified artists.
Blockasset will launch its very first generative collection, The Legends, very soon. Follow us on socials to stay up to date.
