3 Use Cases for NFTs

published on 23 June 2022

The term NFT has become synonymous with the mass and sometimes irrational hysteria associated with the latest Web3 movement. Critics of the NFT space cite extreme valuations, “imaginary ownership” and limited utility as being reasons as to why the space carries all the symptoms of a bubble. 

And they’re right. Some NFTs such as ‘The Merge’ have sold for more than $90 million which is more expensive than the most expensive Van Gogh painting ever sold.  

NFT sales volume and value from June 2021 to June 2022. Source: nonfungible.com
NFT sales volume and value from June 2021 to June 2022. Source: nonfungible.com

According to the data from Nonfungible.com, there has been more than a 90 percent reduction in the number of NFTs since the fall of last year. Suffice to say not only is there a bubble, but it has already popped.  

Nevertheless, the underpinning NFT technology will have applications and just like the dotcom bubble before it, the actual utility and real-world use cases of NFTs will manifest themselves in the years and decades after the bubble has burst. Here are three, practical, NFT use cases that can potentially change the world. 

Tokenization of assets

NFTs are a revolution in the creation of securities.  Previously, the creation of securities was an expensive process involving financial institutions and law firms.  In order to securitize an asset, companies had to pay a sizable amount to the parties involved with creating them. As a result, the creation of securities has historically been limited to assets that represent significant value: Investments in companies, real estate, and commodities. 

With NFTs, the process of creating securities has been simplified.  It no longer requires an investment bank or the use of complex contracts.  The result is ordinary assets can be turned into transactable, fungible, securities.  Everything from wine, to customer loyalty programs, can be issued as NFTs and the result of this will be the creation of entirely new tradeable asset classes.  

Moreover, if the cost of creating securities is dramatically reduced, this methodology of securitization will eventually be applied to the traditional financial investments of stocks, commodities and real estate.  The NYSE, for example, recently filed for a patent to trade NFTs.  It’s possible that these traditional mediums of exchanging securities are starting to recognize that the future evolution of the securities markets will involve this technology. 

Event tickets

Tickets for concerts, sporting events, and conferences will be NFTs in the future.  Fraud in the ticket industry is a large problem and there are estimates that as much as 11 percent of ticket sales for concerts are fraudulent according to ticket vendor Aventus

Moreover, the concert ticket industry is missing out on billions of dollars in the secondary market with scalped tickets.  With NFTs, scalped tickets will become a lucrative part of the event industry.  Tickets constructed as NFTs will enable the incorporation of smart contracts which means that the original issuer of the tickets will collect royalties from secondary sales.  Also, the validity of a ticket can be verified on the blockchain which would prevent much of the fraud. 

NFTs as philanthropy

NFTs can be used for a number of philanthropic purposes.  They are a unique means of supporting organizations because they are a form of donation that can actually be resold.  People wanting to donate and support a philanthropic cause have an incentive to purchase the NFTs on the secondary market because a portion of the proceeds will go to the philanthropic organization as a result of the royalty.  The Giving Block, for instance, has developed an entire marketplace for philanthropy based on NFTs. 

With the technology we’re developing at ARC, we enable organizations to leverage our software to help deploy these new use cases for NFTs.  We are not a marketplace for transacting art, there are no bored apes on our platform, and we do not believe that eight-figure jpegs are the future. We help real businesses mint and sell NFTs for utility-based use cases that we believe will solve many of the problems that exist in the market today.   

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