In 2021, artist Beeple sold a piece of his work for $69 million at exclusive auction house Christie’s — an incredible feat, especially when you take into account that piece wasn’t even a physical object, but a few lines of code on a blockchain, otherwise known as an NFT, or non-fungible token.
NFTs are digital assets that cannot be replicated or substituted due to their unique use of blockchain technology, providing a secure, decentralized record of ownership. Because they cannot be copied or altered, NFTs are often used to track the ownership of property, both physical and digital. But they really got their traction recording the ownership of pieces of digital art, which could be bought and sold on NFT marketplaces.
NFT Use Cases to Know
- Event ticketing
- Virtual real estate
- Food and drink
- Supply chain
- Decentralized finance loans
- Art and collectibles
- Web3 identification
Since that fateful purchase of Beeple’s digital art, hordes of brands, celebrities and average Joes alike have hopped on the NFT hype-train, transforming it from a fringe hobby to a multi-billion-dollar industry. However, putting that hype aside, NFTs have a lot of other meaningful uses beyond just their novelty. And while it’s important to note that NFTs are certainly not perfect, they are being applied in all kinds of creative ways across a variety of industries, from music to supply chain management.
Popular NFT Use Cases
A growing number of musicians have turned to blockchain technology, and specifically NFTs, as a way to mint and preserve everything from digital music, to album art, to memorabilia.
With the use of NFTs, artists can tokenize their songs and albums, provide royalties to creators and producers, and sell their digital merchandise for an additional source of income if they want. And they’re being used by the likes of John Legend, Grimes and Kings of Leon. In fact, members of Kings of Leon were so enthused by the technology that they turned a never-before-released performance of their song “Time in Disguise” into an NFT, put it on a rocketship, and had it played in space — reportedly making it the first minted NFT tune to go interstellar.
“Traditionally, the artist takes home 10 percent of the revenue that they generate and other parties take 90 percent ... With NFTs, the artist takes 90 percent and the platform takes 10 percent.”
Beyond their inherent cool factor, NFTs are perhaps most appealing to the music industry for financial reasons. For decades, artists have felt cheated by lopsided royalty agreements or the lack of money-making potential on streaming platforms. But NFTs provide a way to cut out the middle person and take home a bigger piece of the pie financially. Josh Katz, the CEO and founder of NFT marketplace YellowHeart, calls this the “90/10 rule.”
“Traditionally, the artist takes home 10 percent of the revenue that they generate and other parties take 90 percent,” Katz told Built In earlier this year. “With NFTs, the artist takes 90 percent and the platform takes 10 percent.”
If you’re one of the millions of people vying for a seat at Taylor Swift’s much-anticipated (and, recently, highly controversial) 2023 Eras Tour, then you’re no stranger to how painful the ticket purchasing process can be.
In general, tickets to popular events tend to get sold out fast, and the rise of ticket bots has made the situation even worse. According to a 2019 report published by Distil Networks, about 39 percent of ticketing traffic consists of these bots, which buy up a bunch of tickets and then resell them on secondary markets for much higher prices. This phenomenon is not only frustrating (and costly) to consumers, but it can also rob event organizers of additional revenue, and lead to the purchase of fraudulent tickets.
NFT ticketing is a possible solution. Tickets in the form of NFTs that exist on a blockchain can act as access passes to any live or virtual event, providing a more secure and convenient alternative to traditional ticketing. Buying an NFT ticket directly from the artist removes the need for third-party sellers, likely reducing scams and scalping due to higher transparency and authenticity verification. Plus, due to the public nature of blockchain technology, event organizers could check transaction histories to prevent fraud.
Beyond these more pragmatic benefits, ticketing an event with NFTs can also potentially help issuers interact with customers in a new way, offering perks like surprise giveaways, token-gated sites and services, and access to exclusive experiences and fan clubs simply by collating data associated with holders of a specific NFT ticket.
Although the infrastructure for NFT ticketing is there, it hasn’t quite taken off yet. But individual artists have begun dabbling in this technology, including pop artist Pip and DJ Steve Aoki. And there’s a growing number of startups working to make it more widely available.
Virtual Real Estate
In order to fully understand the concept of virtual real estate, one must first understand the concept of the metaverse — a network of shared, immersive virtual worlds in which people can socialize, create, play games, shop and even work. For now, the idea of one universal metaverse remains speculative. But many tech companies are in the midst of creating it, building experiences like virtual mental health clinics, office spaces and shopping malls.
Virtual real estate is among the most important and lucrative aspects of the metaverse as it exists today, available on virtual worlds like Decentraland, The Sandbox and Roblox. Like in the real world, available land in these virtual worlds is limited, but instead of cash they’re traded with NFTs. Major brands like iHeartMedia and Gucci, as well as celebrities like Paris Hilton and Snoop Dogg have staked their own digital grounds. When a person buys a plot of virtual land, the NFT representing the ownership of that parcel is transferred to the crypto wallet of that buyer, at which point they can do everything from open a virtual concert venue to build a house and charge other players rent for staying there.
Some of these virtual worlds also allow users to create, share and monetize their own NFTs in the form of clothes, furniture, gadgets and more. For example, Roblox users can monetize their own creations and sell them to other users for real money. And most of them wind up putting that money back into the platform, spending it on games or other users’ creations, according to Deepak Chandrasekara, a former vice president of product management at Roblox. This creates a “free-market, user-driven economy,” he told Built In earlier this year.
“[It’s] not just about taking money out of the ecosystem, it’s also about using the same virtual currency and spending it across the ecosystem,” Chandrasekaran continued. “We actually have to pretty much simulate the entire world.”
Play-to-earn games have gained enormous popularity over the last couple of years, offering real-world economic incentives to the people who play them. By completing tasks, battling other players and progressing through various game levels, players are rewarded with in-game assets like virtual land, avatars, weapons, costumes and other NFTs, which can then be taken out of the game to be traded or sold on marketplaces.
There are tons of blockchain-based games on the market today, and some of the most popular ones include The Sandbox, Splinterlands and Gods Unchained. But perhaps the most well-known and influential title in this space is Axie Infinity, a two-dimensional game consisting of creatures called “axies,” which are essentially NFTs that can be bred with and battled against other axies for a chance to win crypto tokens called “smooth love potions,” or SLPs. At its peak, Axie Infinity players around the world were earning thousands of dollars a month for playing just a few hours a day, and the game became No. 1 in NFT collectibles in 2021, according to DappRadar, despite never being available on popular app stores and the larger game industry’s wariness of the entire space.
But just as quickly as Axie ascended, it ran into major problems, and its popularity has plummeted. So, too, has the entire GameFi market in which these play-to-earn games exist. As recession fears continue to loom large over the entire economy, the once white-hot cryptocurrency space has cooled off significantly, and blockchain games took the hardest hit initially. But GameFi is reportedly expected to be among the first to recover from this downturn, as indicated by recent venture capital funding data collected by popular crypto-focused news site The Block.
Food and Drink
The food and beverage industry has been building what is known commonly as the “foodverse,” a subset of the metaverse in which recipes, ingredients and entire dishes can be bought and sold as NFTs. Major food chains like McDonald’s, Wendy’s, Panera Bread and Chipotle have already begun making strides in this space, hoping to seize on both its branding and money-making opportunities.
NFTs can also function as a sort of access pass to exclusive dining experiences and offerings in the real world. For example, Flyfish Club is an NFT membership card that permits unlimited access to a 10,000 square-foot location in New York City that consists of a cocktail lounge, restaurant, and outdoor space, as well as the various culinary, cultural and social events hosted there. And then there’s the Crypto Baristas NFT, which offers discounts for its exclusive coffee brand and tickets to the annual New York Coffee Festival.
The global supply chain has seen quite a bit of technological innovation over the last several years, including adoption of blockchain technology in order to improve tracking and transparency, make payments more efficient, promote more ethical and sustainable sourcing methods, and much more. The implementation of NFTs, specifically, can make it easier to verify and track items as they go along the supply chain, from raw materials to finished products.
The average product moves through many different touchpoints on its journey to a consumer. And an NFT can be used as a sort of digital twin along this journey, where it can be paired with a specific product as a means of recording and verifying each touchpoint. Ownership of that NFT can then be transferred as the product changes hands along the supply chain until it winds up with the purchaser, enabling everyone from manufacturers to retailers to consumers alike to better understand and refine the product journey.
Plus, NFTs can provide easy visibility into not just where an item is, but all the data associated with it (what it’s made of, how it should be handled, who is buying it, and so on). Their ability to efficiently store and share this data make NFTs a good resource for providing verifiable insights that can then be used to inform decision-making in the future.
Decentralized Finance Loans
Here’s how it works: First, the lender and borrower need to agree on the given asset’s value, the length of time the borrower has to pay back the loan, and the amount of interest to be repaid on top of the original loan amount. Once that happens, the NFT is locked into a smart contract, or a self-executing program stored in a blockchain that only runs when certain predetermined conditions are met, for a pre-specified amount of time or until the borrowed amount (plus interest) is repaid in full.
While the NFT is in this contract, the technical owner of the asset is the smart contract itself, which remains the sole owner until the set terms of the contract have ended or been satisfied. No one (including the smart contract escrow) has access to the actual NFT. But if the borrower defaults on the loan, the NFT is automatically sent to the lender’s wallet as collateral for the balance of the loan, becoming the new owner of the asset.
Of course, like any financial decision, putting an NFT up as collateral comes with some risk. For one, the NFT market is extremely volatile, which can have a significant impact on how much a given NFT is valued at in the loaning process. And, if the borrower can’t pay back their loan in the time given, they automatically lose their NFT. Since it’s common practice for lenders to lend less money than what a particular asset might be worth, borrowers run the risk of losing money in the long run.
Art and Collectibles
You can’t have a roundup of NFT use cases without adding the most popular use for NFTs of all: as digital assets that can be collected and enjoyed.
Many of the NFTs collected today are regarded as pieces of digital art — the collection of which started as an exclusive activity for the techie and wealthy, but has rapidly gone mainstream thanks to wild success of NFT art collections like CryptoPunks and Bored Ape Yacht Club. Some pieces go for a couple bucks, while others go for hundreds of thousands or even millions of dollars.
These days, collecting NFTs as pieces of art is not just a potentially lucrative move, but it also opens up new opportunities for digital artists. NFT marketplaces allow for direct sales between artists and buyers, and tokenization lets the artists earn royalties from future sales. Once purchased, NFTs can be traded like any other asset, made a fixture in a person’s collection or even used as a profile picture on social media and, eventually, the metaverse.
Art isn’t the only kind of NFT that is commonly collected either. NFTs in the form of sports memorabilia like playing cards and limited-edition video clips have also become wildly popular among digital asset collectors. In 2021, consulting firm Deloitte predicted that NFTs for sports media alone would generate more than $2 billion in transactions by the end of this year.
NFTs in the form of clothing have garnered popularity as not just collectibles, but statement pieces avatars can wear when they socialize with friends, attend a concert or attend a meeting in the virtual world.
“PR and advertising for fashion designers, artists, creators and influencers will be able to reach a spread level never seen before.”
Major brands have been hopping on the bandwagon already. Gucci reportedly sold an NFT bag on Roblox for more than $4,000, making it more expensive than the actual bag. Dolce & Gabana sold a nine-piece collection of NFTs last year for a reported $5.6 million, which were each paired with physical clothing items. And earlier this year, fast fashion retailer Forever 21 opened a virtual storefront in Decentraland, where it offered NFT fashion items inspired by pieces available in its physical stores and website.
“Being part of the fashion industry, I see incredible opportunities with NFTs,” Yanie Durocher, the founder of fashion consulting agency POMPOM Creative, wrote in a recent Forbes op-ed. “PR and advertising for fashion designers, artists, creators and influencers will be able to reach a spread level never seen before. A designer’s clothes could be seen worldwide, and not just in a random ad-buy post on social media, but worn by people — potential customers and influencers who purchase the digital skins.”
Complete control over one’s online identity has been a unique selling point of blockchain technology and the entire Web3 space it is helping to build, with the next iteration of the internet promising to give ownership back to the individual. And NFTs could be a key part of that, particularly utility NFTs.
Like any other NFT, utility NFTs are unique digital assets that exist on the blockchain. But, instead of just being defined by their value based on market demand, their purpose is to offer irrefutable proof that you own something else. This could be used for your college diploma, the deed to your house or a plane ticket.
Utility NFTs are a useful way to grant access to exclusive events, premium content, special promotions or deals and more. And if a creator makes one with governing powers, some or all of the control in a given project is handed over to a collaborative community operating through a token based mechanism — similar to the way DAOs, or decentralized autonomous organizations, work.
No matter how they are used, utility NFTs enhance the concept of digital assets, offering owners a firmer hold on their own possessions and identity in the burgeoning Web3 environment.