We are now close to the end of the 3rd quarter of 2021 and while our governments are still grappling to get our society to some level of normalcy, a lot of changes have happened.
Depending under which guise you look at society whether it be social, economic, psychological, etc. Almost every compartment has been impacted.
It’s not the first our society has been through a period like this. Albeit, the challenges are a bit unique due to the underlying complexity of our current society: globalization, economical inequality, technological change, etc.
From a technological standpoint, we are at a unique inflection point. We are seeing various fields of thought being combined.
These “synergies” are creating new areas of innovation that can lead to economic growth: Artificial Intelligence, cryptocurrencies, blockchain technologies, precision medicine, etc.
At the moment, the whole rave about whether it’s justified or not is around cryptocurrencies. Most tech enthusiasts including the average layman want to get a piece of the pie.
It has not yet penetrated the everyday public but it’s getting there. Even if countries don’t want to accept bitcoin as their main currency, they would’ve to find some way to adapt to the whole digital paradigm.
At the moment, superpowers of this planet are trying to find ways on how to properly get a grip of this “crypto thing”. Some are already creating their own alternative currencies which they hope their general populace will accept.
Even though it’s not decentralized, they still got the underlying ideas and even architecture from cryptocurrencies.
Current NFT Craze
At the moment within the crypto culture, deep within the confines of this “movement”, NFTs (Non-Fungible Tokens) are all the rage. Unsurprisingly, teenagers are getting rich overnight by selling digital items on the blockchain.
These items can be in the form of pictures, sound, and other forms of digital media. If anyone could predict these 5 years prior, they could’ve made a good sum of money. But it’s still early in the market and can be fruitful for those who have the skill and know-how to do it.
When persons think about NFTs today, they might think of the financial motivation behind it such as digital art images being sold for exorbitant prices. But that’s just the first phase, NFTs will go through multiple iterations and use cases before it reaches the public.
Before I do a deep dive into NFTs and why they might be necessary. I think it’s only fair to take a step back and look at the fundamentals of this entire thing and slowly build our way up.
What are NFTS (Non-Fungible Tokens)?
NFTs are basically digital items that can come in many various forms that are integrated within the blockchain ecosystem. Due to this integration, it is assumed to be secure and finite.
Meaning that if I was to put a picture of a cat on a digital blockchain, for example, I own the rights to that image.
Thus, If I intend to send that image to my friend, he might have a copy but I am still the original owner. I have proof due to the authentication factor provided within an NFT.
Additionally, it cannot be exchanged or traded and that’s where the non-fungible part comes in.
Bitcoin and other cryptocurrencies are fungible similar to most real-world financial assets. They can be traded or exchanged. I can exchange my bitcoin for another bitcoin or trade it for another cryptocurrency if it can be executed.
With NFTs, that’s not the case. Each individual NFT is immutable and unique due to the identification system built-in. This very factor is one of the main motivations as to the applications it will be able to provide in the foreseeable future.
Types of NFTs
As explained above, NFTs can come in various digital media types: Sound, pictures, videos, collectibles, Gifs, Art, etc. At the moment digital art is all the rage.
Artists are able to make good money selling their digital art. A most recent example of this is Beeple, who sold a piece for $69 million back in March when the market was very speculative.
Brands are also waking up to the fact that they can use NFTs as a means to sell exclusivity or communicate with customers. See the types of media grow as the overall market matures and the current hype wanes off.
Digital Certificates of Authenticity
In the barest bone terms, NFTs can be seen as digital certificates of authenticity. Once an item is on the blockchain, it becomes an NFT.
The overall assumption is that it becomes unique and immutable. It cannot be muddled with, thus there is a level of safety in the overall platform.
Where safety is concerned, blockchain developers are slowly improving their technology to combat fraud but we are still some way off.
This idea of authenticity can spur through many different layers of society. If we want to think way ahead, we can look at fraud detection as a major use case.
For example, assume that our passport is now digitized and stored on an NFT platform. In theory, it would be hard to change the passport data which makes it difficult for a subject with malicious intent to execute fraud.
At the moment this idea of authenticity is flaunted about by the crypto wealthy, who can purchase art pieces that can make them the direct owner to the digital rights of art.
NFTs and Applications
NFTs will impact our society, it’s not a matter of how but it’s a matter of when. Within this decade and more to come, we will see the full implications of this novel technology which is a spun-off of the whole cryptocurrency movement.
Many layers of society will be impacted by identity, regulations, finance, etc. In the examples below, I hope to get the creative juices flowing within your mind to visualize the different applications of this technology. The ideas are speculative but can be made concrete.
Once the market has matured and applications can be built sustainably and reliably.
Finance
At the moment, cryptocurrencies are already changing the way how we perceive money.
The real changes are yet to happen, but we are edging ever closer up the tumultuous mountain of financial regulations and stripping away the conservative barriers of doing things.
NFTs will impact areas within finance such as identification, loan, insurance, fraud, etc.
Identification and Verification
Customer identification could be stored as an NFT which makes the onboarding process easier. Typically onboarding process can take a while which consists of lengthy procedures and backend flow.
Once a person’s information is stored as an NFT, banks could easily look up that individual and probably even automate the onboarding process by linking directly to the NFT platform.
A person doesn’t necessarily need to interact with anyone within the bank, they could simply signup, the platform will do all the analysis and verification.
Contracts
Contracts could be stored on an NFT platform which could make it hard for others to directly manipulate it. This one innovation could prevent a lot of fraud within a financial institution.
For example, loan agreements or insurance policies. The entire process could happen on a platform. Once the agreement is signed, it will be stored on the blockchain and can be brought up sometime later for verification.
This main concept could even be spun off into contracts of various types within various industries.
Entertainment
The entertainment industry could use NFT as a way to sell exclusive items to the buyer who deemed that particular item valuable. This could be an exclusive movie, album, song, etc.
It all depends on the creativity involved and the overall vision for the project. Below is a list of ways the entertainment industry could use NFTs.
Games
NFTs for games is going to be huge. Just imagine someone purchases a certain asset that can be used within a video game that can give them an unfair advantage or help them solve a problem.
This could be a car that can be rented in a car game that is unique to that user only. The thing that makes this is interesting is that, imagine if that person could rent his car to other players for a fee.
Over time the price that he or she paid for the car could be more than worth it. At the moment, game studios are integrating NFT technology within their platforms.
This can prove to be a new stream of income for them.
Music
Artists could find new ways of making money, by allowing their fans to make exclusive purchases. These purchases could be used as a form of investment by the fan who could sell it at a later date or probably pass it on to their grandkids.
Persons do this all the time in the physical world. Once the user purchases the music, he or she has exclusive rights to the item so they can do whatever they want with it.
Government
NFTs could definitely be used within the governmental system which is usually bureaucratic and opaque to us outsiders. Additionally, it could prove to be productive as well.
It could be used to reduce the use of papers that tend to clutter up the day-to-day process. If I should take an overview of the entire apparatus. NFTs could be used almost everywhere within the governmental system from identification, contracts, and overall governance.
Similar to what was discussed above, identification could be used to create a national identification system or national contractual system.
When most contracts are stored on the blockchain, this could help reduce corruption within governments. Especially times when contractual information is sometimes changed and footsteps are neatly covered.
Challenges Ahead
Despite the perceived opportunities, challenges are needed to be overcome. At the moment the market is still quite new and lots of issues are not yet ironed out.
Those who can manage the complexities within the different markets and tie up the loose ends are the ones who will be economically rewarded.
Below is a list of challenges I think will need to be overcome before NFTs hit mainstream.
Lack of Current Talent
Similar to what is happening now in the blockchain market. We don’t yet have a lot of talented developers who are ready to develop industry-ready applications.
Most of the processes and standards of operations are not yet organized.
To overcome this, the government will have to invest in the social capital of the people. This will help them to develop homegrown individuals who can build these applications.
Regulation
At the moment regulation is one of the major bottlenecks to blockchain adoption. Governments are just not moving fast enough to use the technology.
It’s either they are moving too slow or they are thinking about where to move forward. It will probably take decades for certain ideas to be materialized.
Especially the governmental applications, but progress is better than no progress at all.
Adoption
For NFT to truly take off, it will mainly be in the citizen’s hands. At the moment one of the reasons governments are finally taking initiative isn’t because they are so smart and futuristic.
It’s because they are feeling pressured by the citizens who use perceived “alien” technology to do financial transactions that are not a part of their law. Now they are rushing to see how they can use this technology within their country and drive economic growth.
This will be the same for NFTs as well. Once the public starts to use technologies created by international companies, governments will have to rush to create their local prototype.
In Conclusion
NFTs will prove to be a useful technology. It’s only a matter of time before the name starts to buzz around in the local media. Similar to how bitcoin is making the rounds now.
It will be pretty interesting to see how it matures over time and the use cases it will have within the confines of our society.
