NFTs, or non-fungible tokens, are unique tokens that account for a digital asset. A big selling point of NFTs is that they cannot be replicated or destroyed. This makes them ideal for use cases such as ownership verification and collectibles.
NFT technology has potential
The current mainstream use case for NFTs is as a digital collectible or asset. There are a few key reasons why people are willing to spend real money on these virtual items.
First, NFTs offer true ownership -- unlike in-game items that can be taken away at any time by the game developers.
Second, NFTs can be resold or traded -- giving them an intrinsic value that can be realized.
And, finally, NFTs can be used to show off status and achievements -- much like physical luxury items in the real world.
There are a growing number of applications for NFTs across a range of industries. For example, NFTs could be used to represent ownership of digital art, or as loyalty points that can't be replicated or destroyed, or as a verification token for physical collectibles, or even in more everyday use such as for a concert ticket or a membership card.
The possibilities are endless, and it's likely that we will see more and more use cases for NFTs in the coming years. The technology has a real use case. However, most people in the space aren't utilizing it properly.
We've got some problems to overcome first
At the moment, most NFTs are being created as vanity projects. That is, they are being used to show off status, but many don't have any real-world utility. This is fine in the short term, but for NFTs to reach their full potential they need to be used for more than just digital collectibles. The current way NFT technology is being used is damaging for it in the long term; because of this false representation, the technology is being shown in an unfavorable light to onlookers. Using large amounts of energy to mint digital collectibles doesn't exactly seem like the future. Nor does the culture of greed and status-chasing that it cultivates.
I'm a strong believer that technology has to serve some kind of purpose in the real world. I've long been a believer in the metaverse, but it has to serve a utility; and the most successful metaverse-style platforms today do. For example, Roblox serves the purpose of entertainment, connection, and expression. Those without a purpose do not succeed. Likewise, without a real-world purpose, NFTs will remain niche and overlooked as a technology.
So how can we get this technology on the path for mass utility? We first need to escape this vanity-driven grip on the technology at the moment, and go back to the drawing board. We need to create and invest in projects that use the technology for a real purpose. There are real implications for this technology when linked with physical collectibles, art, event tickets, memberships, and so on. For example, if you're a painter and selling your artwork, having an accompanying NFT would not only allow the new owner a digital certificate of authenticity, but it would also allow you to continue to earn a commission on each sale of the work -- meaning you benefit as an artist as your work appreciates in value.
Another example: Maxwell Tribeca, an upcoming social club in Manhattan, is going to use NFTs as a sort of membership card. These NFTs will be able to be bought, rented, and sold to others, in which transaction royalties go back to the club. This allows the club to maintain a certain level of exclusivity by not being financially obliged to increase membership count, but also allows a sort of secondhand economy for this limited membership -- making it potentially profitable for the patrons of the social club to hold a membership as an asset rather than an expense.
Furthermore, although the technology is much more energy efficient on certain blockchains than it has been in the past, there's still work to do. The more energy efficient this technology can become, the more scalable and suitable it will be for large-scale utility.
It's time to build
I think after this initial following of the vanity-based projects withers, as it is and will continue to do as we head into recession, we'll be left with the real utility-based projects -- and as we go back to these basic fundamentals, the age of tangible innovation for this technology will begin. It'll take some time, but there's a real future for this technology -- just not as you know it.