As a software development team, we could not pass by the new phenomenon - NFT. We tried to dig deeper and figure out whether NFTs would be used outside of digital art. That’s why we asked experts from different spheres to share their professional opinion. We covered questions like What problem is NFT trying to solve? What is the value proposition of NFT? Whether NFTs would launder dirty money even easier?
So, this article is for everyone who’s interested in the future of NFTs. We include the most interesting opinion and discussions in this article. Our aim is to challenge the common opinion and give a sneak peek at what will be the next for NFTs.
According to the answers, we perceive the future of NFT in one of three scenarios: 1) NFTs will be used only for digital art, 2) Various sectors will use NFTs, 3) NFTs will eventually fade away. So, let’s figure out what each case is all about.
Scenario 1. NFTs are suitable only for digital art
Digital art can be easily and endlessly duplicated, but non-fungible tokens allow buyers to confirm ownership. NFTs are helping to solve problems that have long been central to digital art: How do you claim ownership of something that can be easily and endlessly duplicated? And what does ownership of art mean in the first place?
“NFTs create a direct line from artist to fan, eliminating the need for traditional gatekeepers who eat into the income generated by artists. One of the greatest advantages of NFTs is that they are recorded permanently on the blockchain and cannot be copied, imitated, or pirated. Pirated music and films are a big problem for artists who rely on people purchasing the official release, not a burned copy, to receive royalties. If NFTs can help shut down the pirated film industry, they will be saving filmmakers $71 billion dollars/year that are currently lost to pirated content.
Even now the list of NFT items in art is quite impressive. Canada-based Grimes (aka Claire Boucher), made nearly $6 million in an auction of several digital pieces she sold on NFT platform NIfty Gateway. An original Banksy artwork has been sold for $380K on OpenSea, another NFT marketplace.
The list of NFT items in the music industry is growing, too. Earlier this month, Weekend’s new song was released as NFT. And Kings of Leon will release their new album in the form of an NFT - becoming the first band to ever do so. Portugal.the Man, Shawn Mendes, and Linkin Park’s Mike Shinoda climbed on board proclaiming NFT is democratizing the industry.
According to Al Leong, CMO at AmaZix the popularity of NFTs is explained of its novelty. He commented on this: “As much as blockchain was a novelty only to climb to stratospheric heights including institutional investors and corporations like PayPal and Tesla, this will also be expected to happen with NFTs. We understand the psychology of early adopters buying NFTs and the demand driving this explosion.”
Although NFTs have a wide range of uses, the creative art industries will definitely benefit from this new trend. Collectively, collectors spent over $60 million in February for gifs, jpegs, and other digital collectibles. For many struggling artists, this is the way to realize their dreams and make a nice living at the same time. Even established art houses with a lot of history behind them are hip to the trend now and are using NFTs to make sure they remain ahead of the curve.
NFT provides the notion of authenticity to the market of digital art. Non-fungible tokens transform digital works of art into one-of-a-kind, verifiable assets that are easy to trade on the blockchain. As a result, NFT grants artists a safer marketplace since their digital works can be proved as being unique and authentic.
Scenario 2. NFTs will be used for various sectors
NFT's are often described as 100% unique digital assets that you can own. From this comes the common misconception that NFT is exactly what people buy and sell. In fact, the explanation is in the name. A non-fungible token means that people buy/sell a certain token that points to a digital asset.
"NFT that's actually incredibly powerful because you can use this token as a certificate of authenticity, originality, and ownership. Even better, it can extend beyond the digital realm to the physical domain too. You now have a decentralized, distributed, means of verifying asset ownership - whether it be of a unique photo, video, piece of music, share certificate, car part, authenticated aircraft part, vehicle, shipping container or item within a shipping container. The list is endless. A tokenized representation on an immutable ledger is hugely powerful as it can be used for traceability in pharmaceuticals, ownership of exclusive goods such as diamonds, or even for proof of copyright claim."
Brands need to keep up with the newest trends, and NFTs are no different. NFTs have already changed the way many industries do business.
“Landgraze app enables users to create and sell shares or plots of land as an NFT through tokenization of the contract. Ethernity allows the use of NFTs by artists, athletes, and users to tokenize parts of their business into shares and collectibles that owners are able to speculate on, hold, and collect. The Fuse platform enables the collateralization of NFTs on an open marketplace to free up value and utilize the capital for other means.”
The sectors like advertising, virtual real estate, and commercial art have already been significantly influenced by NFTs. In that regard, perhaps the most popular NFT market at the moment is NBA Top Shot. It’s basically a modern version of collecting baseball cards. However, in this case, you have the opportunity to collect non-fungible-tokenized NBA moments in a digital card form.
Talking about virtual real estate, Decentraland is developing Genesis City. It is a virtual land approximately the size of Washington, D.C., which is open for everyone to buy. Promises of a VR (virtual reality) future are fueling this new speculative market. Just like you buy space in a nice community, you can pretty much do the same in Genesis City. The project developers have massive expansion plans for the (virtual) metropolis, including gaming districts, hotels, resorts, casinos, and concert halls.
Decentraland developers are now working to allow users to import NFTs from other blockchains. So if you bought a costly piece of digital art and want to enjoy it within the virtual city, then you have the chance to do so. This brings us to the next business that will see a boost due to non-fungible tokens.
“Yes, NFTs will exist outside of digital art and other collectibles. The technology behind NFTs can be applied to any digital item and helps manage scarcity, payment and custody. And humanity is shifting their lives to the digital world at a rapid pace.”
At this point to have limitless access to various digital items fuels the interest to place value on scarcity again. For example social media. Think about whether people would pay more for an exclusive Instagram or Snapchat filter that they can use to deck out their digital profile or a software application that brings real personal or business value.
COVID-19 pandemic was the main trigger to affect the NFT ecosystem. As a result, the NFT market grew by 299 percent in 2020. Since we develop the digital presence over time, it’s evident that we will increase the investment flow towards digital products and services. “If you think about it, collectibles have always been treasured. People have always paid an immense amount of money for unique collectibles like for instance baseball cards,” stated Marie Tatibouet is the CMO at Gate.io, “...so it won't be surprising if NFT becomes the most dominant sector in the crypto space, with both digital and physical collectibles being NFT-ised.”
In fact, if the NFT will be incorporated into different sectors, it will affect how “ownership” as a concept can be validated via blockchains. The mechanism should take into account changes into creator’s rewards once a seller sells NFT. Marie Tatibouet commented on this: “NFTs also add a social layer to the entire art ecosystem, integrating with other industries and functions over time. The world may move to virtual exhibitions from physical exhibitions that could potentially engage a more extensive (worldwide) community (in a compelling way).”
Scenario 3. NFTs will eventually fade away
At first, there was a lot of excitement when the first news appeared about NFTs. It seems a new way to bring the demand tied to limited-quality back to the art industry. But NFTs raised more questions than answers. Environmental disputes, uncertain intellectual property, a new approach to launder dirty money (the majority of respondents commented on the high possibility of money laundering with the use of NFTs) do not benefit the perception towards NFT.
Here are a few responses:
“The problem with NFTs, or Non-Fungible Tokens, is that they are in actuality incredibly fungible. If you imagine NFTs as a kind of digital currency almost anyone can create in minutes, you will understand the issue. Anyone can easily steal anyone else's digital art, create an NFT of it, and sell it. The NFTs may not be identical or tradeable as currency per se, but simply claiming the art as yours is not difficult for NFT purposes.”
“Like any kind of rare art or artifact, the value NFTs hold is somewhat circular: they are desirable because people desire them. It's highly likely, even inevitable, that NFT trading will be used as a front for laundering and other illicit exchanges. NFTs make it easy to disguise huge amounts of money trading hands as a run-of-the-mill art purchase.”
“I think there's limited use for NFTs, and I would caution people who are considering investing in them. You have no idea who's going to be buying these tokens in the future. Chances are, this is a bubble that will burst very quickly. It doesn't have the staying power of cryptocurrency, and even that has struggled to gain traction.
The long-term use of it likely rests in more illicit activities. It's easy to see this being a means of high-stakes money-laundering. As more people understand Bitcoin and other cryptocurrencies, it becomes more dangerous to use those currencies for that means. Hardly anyone understands what NFTs are and how they work, and sadly I think that's a lot of the appeal.”
So, what are the Pros and Cons of NFTs?
Pros of NFTs
Alternative Revenue Streams for Artists. COVID-19 has left the art business in disrepair. After losing the industry’s most profitable sector, live music, and exhibitions almost entirely for the past year, many artists and companies have struggled to continue. NFTs offer a potential new form of revenue to compensate for that loss, and it provides a rare opportunity for fans to support artists directly.
Intellectual Property. NFTs could create a much easier, quicker, and more secure transfer of ownership of intellectual property like songs, recordings, and samples than the current model. The transfer of ownership via blockchain can be recorded by “smart contracts” and processed within seconds.
Ticketing. Ticketing for live and virtual events has been dogged by inefficiency, bots, scalping, hidden fees, and counterfeits for a long time. According to CNBC, 12% of people buying concert tickets get scammed, but the blockchain technology used to power NFTs makes scamming nearly impossible, allowing for much more clear transfers of ownership and easier verification. NFT ticketing (or “smart ticketing”) can also prevent secondary sales markets and scalping.
Cons of NFTs
Emerging Artists. So far, there are not many emerging artists who have tapped into the NFT market. Because NFT sales are often driven by status and hype and not by merit. It stands to reason that emerging artists would not be included in this “elite club”.
Created Scarcity. NFTs rely on the created concept that something is limited when it is not to make it appear valuable, and although this exclusivity brings in higher price tags at marketplaces, it excludes many of the artist’s fans when it was not necessary to do so. For example, digital scarcity and physical scarcity are quite different in nature. A live show with a limited amount seats in the venue is an example of physical scarcity, while live stream show with a limited number of tickets sold as NFTs creates scarcity that did not need to exist otherwise. So, more fans could have attended the live stream if only the artist allowed it.
Intellectual Property. NFT has proved the potential benefits of using blockchain to transfer ownership of intellectual property, there is still a lot of uncertainty. Given the newness of the technology and the complexity of copyright laws worldwide, smart contracts in a decentralized system could easily run into issues.
It’s safe to say that NFTs are certainly grabbing the limelight for now, but for how long is the real question. Despite this, the rise of NFTs could be an important step towards helping digital artists get the recognition and protection they’ve been crying out for some time now.
"The future of NFTs is quite unknowable -- but isn't it exciting? To be able to finally put a value on your digital creation and make sure you get its value in return is fascinating. It has already disrupted the art world, everyone is clamoring onboard. The sky is the limit, as they say... or the sky is an NFT."
If you’d like to add some arguments, pros, or cons into this conversation, feel free to contact us, so we include your thoughts in the next article!