On May 3, 2014, Kevin McCoy, a digital artist, minted the first – known NFT Quantum; a pixelated octagon filled with different shapes that pulse hypnotically. On November 2, 2021, it sold for over $1.4 million in a Sotheby’s auction.
NFTs (non-fungible tokens) are tokenized digital assets minted mostly on the Ethereum blockchain but were first introduced on the Bitcoin blockchain in 2012 as “colored coins,” tokens that represent physical assets. NFTs are often described as a certificate of ownership for a physical or digital asset.
More artists and creators are choosing the use of “NFT art” in their projects because of the digital scarcity, they prove ownership, and they can’t be replicated. Although NFTs are most commonly represented by art, their popularity has creators coming up with new and interesting NFT use cases for digital tokens.
1. Raising Capital
In business, it’s usually necessary to raise capital for start-up funding, expansion or a specific project. Traditionally capital has been available via investments, equity or even crowdsourcing for real-world assets. NFTs may be able to provide a creative alternative to monetizing intellectual property via digital platforms becoming a financial instrument for funding.
Let’s assume an artist needs supplies for an upcoming show. They create a collection of NFTs that will serve as a particular asset, in this case, pre-sold tickets, with incentives attached such as signed copies of prints or a discount to certain purchases. The revenue generated from the decentralized finance sales will serve as funding to complete the collection. This tends to be a better idea than pulling in an investor because the artist will be able to keep all profit made from the digital art show minus any pending expenses. If the artist chooses to attach royalties to the NFT representing tickets, which can serve as digital collectibles after the show, they will continue to make a profit each time a non-fungible token is sold on an NFT marketplace.
This NFT use case allows the artists’ fan base to not only support digital art but walk away with a unique and immutable experience.
2. Leasing Options
In today’s economy, you can pretty much find any physical assets available to rent. Whether it be tools for a weekend project, a moving van, or even clothing for a special occasion. With the use of smart contracts, the owner of the real-world assets can create non-fungible tokens (NFTs) to represent the item and lease it out.
The smart contract will serve as the leasing agreement notating the terms that are held on the blockchain network. The NFT created to represent the specific assets could be something as simple as a logo. Since there would be no paperwork to sign, this NFT use case transaction will be quick and effortless. All rights and responsibilities outlined in the agreement are recorded permanently using blockchain technology, where they are held safe and accessible to the creator and lessee.
3. Exclusive Content
Beyond the potential to create digital assets, NFTs provide creators the opportunity to protect their intellectual property and preserve content.
With the attraction that going viral has given to brands, they can now do so with the security of knowing their content can be easily traced back to the creator. NFTs allow access to the source and history of every communication made allowing for content validity and fraud reduction. The NFT use cases around content are endless.
With so many musicians hungry for independence and more control over their art, NFTs could possibly become a huge game-changer in the music industry. A few artists have already made millions creating NFTs from exclusive drops or digital companions to remastered collections. These projects have allowed fans to benefit financially as well with the option to resale the digital items through a secondary market in the NFT space.
Some may wonder how different digital content as an NFT would be from streaming for the artist. Setting aside the fact that artists get paid a fraction of the profit made from larger streaming services as they would with just one NFT, consider that none of the revenue is shared and they stand to generate passive, continuous income with royalties any time the NFT is resold on secondary markets or an NFT marketplace.
Crypto contracts seem to be on the rise with professional athletes creating a pathway for NFTs to become an option of monetization for pro sports. Through this NFT use, high-profile teams and organizations have been rolling out collectibles, artwork, branded content, and event ticketing creating innovative experiences for fans.
Collectibles already make it easy for fans to engage with their favorite teams but collectible NFTs take that engagement to another level for NFT owners. Because of the ability to resale the NFT, the collectible becomes an investment into the organization or player. As 3D worlds become more popular, these investments will increase in value from the enticement of showcasing exclusive perks through the easier verification of ownership.
With the branding popularity that NFTs hold, more collaborations will begin to emerge allowing for almost immediate global recognition. The NBA Top Shot platform and Sorare, two of the most popular NFT start-ups, have raised more than $1 billion in funding and have made over $1 billion in sales between them so far.
6. Supply Chain
People have become more conscious about where the items they purchase originate and how they may or may not have been manufactured. Supply chain data such as origin and authenticity are easily verifiable with NFTs by way of smart contracts.
For instance, in this NFT use case in fashion, one could verify if their purchase is counterfeit or authentic. If the production of the food that’s consumed is important, you could trace where it was originally produced.
This structure has the opportunity to revolutionize the manufacturing industry in any capacity by easing the processes of tracking, product identification, ownership authenticating, and verifying product certifications.
The owner can create an NFT to represent a physical object so transactions can be safely stored and the supply chain tracked.
Origin and Authentication
Third parties can confirm the origin of a physical product connected to the NFT because they contain an immutable record of transactions.
Product certifications such as “organic” can be attached to an NFT minted by the manufacturer which would be accessible via a public registry to the end-user.
These options also have the ability to increase the value of any product yet the supply chain is currently one of the rarely used NFT use cases we have seen adopted.
The use of documentation as tokens on decentralized networks is not an NFT idea that has been receiving a lot of buzz but has the potential to be a necessary resource in any NFT transaction in the very near future.
Personal identity management, physical property deeds, medical records, certification, licensing, and terms & conditions are all examples of the types of documents that could be turned into or attached to NFTs. Because non-fungible contracts call for an offer and accept the agreement, the use of NFTs in documenting is fairly simple. Incorporate the use of artificial intelligence in the generation of these documents and this NFT use case becomes a win-win for all parties involved.
For instance, a life insurance policy held on as a non-fungible document will most likely require a death certificate to be sent to the authorizer. Once verified, the policyholder could be paid out instantly. Imagine the ease of purchasing a home or finalizing an adoption without any extra paperwork.
8. Gaming Industry
Over 3 billion people around the world play video games and the industry is rapidly evolving into a monetized sport. With the progression of decentralized games, NFTs have taken over the industry with their unique benefits. Players are utilizing a common non-fungible token as characters, commodities, special abilities, and other tradable objects within the game. The most attractive aspect, however, is the ability to generate additional income by selling this digital real estate.
Character representation and special non-fungible items can accrue value over time as a game gains popularity allowing the player the option to trade for financial rewards. In some games, players can battle with their NFTs in exchange for crypto or build virtual lands interacting with others or performing activities to gain rewards.
Gaming was traditionally a play-to-win model where upgrades and items may have helped with competition but there was no financial return. The new play-to-earn idea provides a source of income for players who gain rewards for their participation in games and raises concerns over ownership of this virtual real estate.
To acquire play-to-earn games, players would need to trade non-fungible tokens or earn NFTs as in-game rewards. To start, they would invest in an NFT character, giving them ownership that could eventually be sold to other players in a marketplace or used to farm crypto and new NFTs. Both would establish an economy within the virtual worlds.
Brands are beginning to implement NFTs graciously into their marketing campaigns with exclusive drops and trendy memes as crypto art.
An NFT drop, the release of a specific project, is an ideal way to get the word out about a product launch in the real world. It includes the date, time, and minting price of the NFT. Normally there are limited quantities available, which will also be disclosed during promotion, making drops ideal to build anticipation and allow for the product to gain traction prior to release.
Memes were already popular, adding the rising interest of NFTs to them just makes sense from a marketing perspective. TacoBell incorporated a series of taco-themed crypto art gifs into their marketing strategy which sold out in 30 minutes. The use of memes in marketing can help build brand awareness, partnerships with digital artists, and build consumer engagement.
10. Events and Ticketing Industry
The most common use of an NFT at an event would be a virtual ticket, the representation for access to an actual event. However, the idea is to create value around the non-fungible tokens in order to monetize it benefiting everyone involved. There are a few ways this can be achieved.
Promoters can sell tickets receiving an instant commission upon each sale, never having to wait for a payout or change in financial structure. Rewards or prizes in the form of fungible assets can be attached to the NFT and randomly assigned creating an extra incentive to buy. The venue can offer discounted upgrades to NFT holders or special promotions or offers connected specifically to that venue. The organizer can create an exclusive group of NFT holders and put on events specifically for them.
Ticketing in the digital form will create quick and effortless experiences for spectators and unlimited resources for promoters, event planners, and venue owners. The options digitizing events on the blockchain through non-fungible tokens can lead to real-world assets that can come of it, are endless.
11. Digital Real Estate Applications
Digital real estate, or virtual real estate, mainly involves the purchase of standard domain names, websites, and social media account management for internet businesses. One reason selling digital real estate is highly profitable is there is little to no overhead. This option fits well into the NFT marketplace when thinking of customizable domain names or more specifically, crypto addresses or blockchain domains. Blockchain domains can work as a naming registry for crypto wallet addresses or they can point to content hosted on the blockchain, like a website. Through companies like Ethereum Name Service (ENS) and Unstoppable Domains, blockchain technology makes it easier to purchase NFTs by using blockchain domain names instead of those long wallet addresses.
Investing in digital real estate applications and creating digital scarcity for highly sought-after domains will inevitably increase the value of blockchain domains making the early investor a lot of money just as we saw previously with the standard domain name service.
12. Social Media
NFT marketplaces are the epicenter for the facilitation of sales for non-fungible tokens but social media plays a huge role in their marketing. Social media is the quickest way to reach out to a community about a drop or communicate about an auction.
Social media also plays the role of an exhibition for digital artworks and allows the artist to control how the content is displayed and received. Creators can easily share links and call to action, give a description of the digital collectibles as well as directly engage and interact with their audience on social media platforms.
Most social media platforms are adopting features to support the sales of NFTs with in-app shops. A lot of NFTs sold acquire their validity through the interactions held on social media platforms determining monetary value and shaping the future of NFT use cases.
13. Fashion Industry
The scarcity of NFTs makes them appealing to luxury brands and certain brands like Nike and Adidas have begun creating digital apparel for augmented reality collections while Burberry and Louis Vuitton are leveraging gaming to promote their brand.
Branded NFTs create opportunities for recurring royalties through resales. This can be highly beneficial in the luxury resale market. Because each NFT proves the authenticity of the fungible assets, resale transactions will be easier and more profitable for both the brand by way of royalties and the reseller.
Branded NFTs will allow for unique experiences for customers, maximize brand awareness and provide brands the potential to control the use of their digital assets. As more brands explore the use of NFTs, more opportunities to expand digital apparel arise.
Since NFTs emerged in 2012, the different ways to utilize them have continued to expand. With consistent research and development, more NFT use cases will flourish. One of the most amazing things about technology is it is ever-expanding and the accuracy and consistency of NFTs make the expansion more necessary than ever.