There are more and more use cases for NFTs. These digital assets built on the blockchain have characteristics that make them unique and that allow their use beyond the art industry. The total market capitalization of NFTs exceeds $766 billion, with over 35,887 NFTs worth $110 million sold in the last 24 hours alone. Although NFTs emerged years ago, it was in 2021 that they exploded. 

What are NFTs? 5 Use Cases

Digital representation of a physical asset or a digital asset on the blockchain are the development of NFTs. Their main characteristic is that they are finite and that they have been designed to have unique and digitally verifiable properties. 

The forerunners of crypto art were the visionaries Matt Hall and John Watkinson. Both launched in June 2017 CryptoPunks, a collection of 10,000 collectible tokens hosted on the Ethereum blockchain. These algorithmically generated drawings were the first NFTs to inhabit the popular blockchain. When CryptoPunks launched, anyone with an Ethereum wallet could order them for free. In 2019, the price of each of these drawings was worth around 40 dollars. In 2021, the famous auction house Shoteby’s sold a CryptoPunk for $11.8 million.

NFT use cases

1. Video games

In the video game sector, NFTs make it possible to connect the virtual world with the real world. In traditional video games, if for example you need a horse to move from one place to another within the game, there is the possibility of buying it with real money. However, when you get tired of that video game because a better one has come out, the €10 you spent on the horse is irrecoverable.

NFTs allow you to recover that money. They even allow you to earn money with the investment. In a video game built on the blockchain, that horse is purchased as an NFT and ownership of the horse is in our crypto wallet. It’s the closest thing to having a horse in real life. If you get tired of the game, you can sell the horse as an NFT in the game’s own marketplace. Depending on supply and demand, or even how you treated the horse, you can make or lose money from reselling the horse. If the video game allows you to train your horse to be faster or more resistant, it will have more value. In other words, the development of NFTs allows you to monetize the time you spend playing video games.

Main source of income and community

In fact, blockchain games are becoming an alternative to generate income in countries with economic crises. Young and old participate in these games. There are people who say they have abandoned their traditional jobs to dedicate themselves fully to playing. For example, one of the most famous blockchain games, Axie Infinity, provides its players with average monthly earnings of between $100 and $600, but there are some, the least, who earn $2,500 per month.

Beyond money, NFTs allow the creation of a community and a governance model within video games. For example, in Axie Infinity, players can obtain a type of token that gives them the right to participate, with a vote, in decision-making. Among such decisions, establish measures to avoid high commissions to be able to play. Other games, such as Gods Unchained, award cryptocurrency for participation in voting proposals intended to determine game development.

2. Real-world assets

One of the use cases of NFTs is the transformation of real-world assets into NFTs. In fact, almost everything can be converted to NFT: cattle, cars, bicycles, houses, etc. Proof of ownership is the key feature of NFTs in this regard. Making it easy to track asset ownership and information, each NFT is recorded on the blockchain. 

Real estate is one of the clearest use cases. When buying a house, it is important to know if it is free of debts, legal claims or perhaps it is interesting to know how many reforms it has undergone over time. For example, if the houses that are built from now on were converted into NFTs and uploaded to the blockchain, it would be possible to have a clear and immutable record of all the information on the property. In addition, it would allow houses to be sold as NFTs in marketplaces similar to Idealista, but in a more secure way.

A website for the sale of houses between users could be created that would work completely with smart contracts. Once you buy the NFT/house, you are the legal owner. Likewise, going a little further, Decentralized Finance could be introduced into the operation so that you could request a loan through a smart contract by placing another NFT as collateral.

 Attempts have already been made to sell a house as an NFT, although legal barriers currently prevent this type of operation, Such was the case of Shane Dulgeroff, a 27-year-old real estate broker from California, who put his house up for auction as an NFT on Opensea. Due to its high price ($2 million), the sale did not take place.

3. Logistics-automotive sector

As in real estate, NFTs can be used to ensure that supply chain data is trustworthy. An NFT can include information on the origins of the materials, where and when they were built, and what warehouses they passed through. In the same way, in the case of a car, it could be automated through a smart contract so that the kilometers that the car does are uploaded to the NFT. This could have enormous benefits when it comes to verifying the information in the sale of second-hand cars, since being in the blockchain we would be sure that this information is correct.

4. Decentralized Finance (DeFi)

Another of the most common uses of NFTs is to serve as collateral in a DeFi loan. For example, on Aave, a smart contract allows you to obtain a cryptocurrency loan by leaving an NFT as collateral. This works in a similar way to when you go to the bank to ask for a loan and put your house up as collateral. With the big difference that here the banks are replaced by smart contracts . The value of the NFT held as collateral depends on its market value, its properties and its usefulness.

5. Entertainment-Sports

Another sector where NFTs are already present and may have a promising future is in the entertainment industry. A movie, song or video can be created as an NFT, allowing payments to be automated based on the number of times played. This would allow the elimination of intermediaries and the main beneficiaries would be the content creators. In addition, the authorship of the content could be more effectively and securely demonstrated.

In the world of sports, NFTs are being used as the new trading cards. In fact, NFTs are quite similar to paper trading cards, but with the main difference that blockchain allows them to prove their authenticity and turn them into digital assets for collectors and investors.

 

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