Non-fungible tokens have been all the buzz over the past month. This is mostly because NFT enthusiasts have noticed that digital NFTs appreciate at a crazy fast pace compared to more traditional cryptocurrency coins.
This has led many people to ask about the future of NFTs. What exactly can an NFT be used for? What are the true limits of the technology?
This article will answer all those questions and more.
A Brief Overview of NFTs
The concept of NFTs should be understood by most at this point. For those that do not know, NFT stands for non-fungible token.
This refers to a cryptocurrency token that is unique from any other token. These can exist on any blockchain, but they are most popular on the Etehereum blockchain as an ERC-721 token.
The most interesting part about ERC-721 non-fungible tokens is that they can have smart contracts attached to them. The smart contract compatibility really adds to the potential uses for these tokens.
Current Uses for NFTs
NFTs have a lot of uses. In fact, almost all of the future uses of NFTs are currently usable with NFTs.
The thing is that almost no one, outside of some musicians and blockchain games, uses NFTs for these purposes.
For the purposes of this article, the only current use for an NFT is as an authentication tool for digital artwork. It helps to imagine the CryptoPunk #1337 NFT as a digital authentication for that particular piece of art. Anyone can save the JPEG image to their computer, but only one person will have the NFT of that particular punk.
The interesting part with NFTs is that the creator of the token can program the NFT to take a fee every time the token is traded. That changes things quite a bit because the creator can still receive compensation for a long time after the original minting of the NFT.
The Future of NFTs
NFTs have quite a lot of potential uses for them. The below list only scratches the surface on potential uses. Most of the uses for NFTs are covered by this list. However, people are very creative and come up with new ways to use NFTs all the time.
NFTs + DeFi
The first major use for an NFT is a fusion of NFTs and decentralized finance (DeFi). In our opinion, this is the next big thing with NFTs.
This will work by allowing NFT holders to put up their NFT as collateral for loans. The most difficult part with this is appraising the NFT, but this will likely be determined on a more individual basis on a platform than an automated method like more traditional DeFi lending platforms.
NFTs in Gaming
Blockchain gaming combined with NFTs will likely be a huge growth point for the industry in the next few years. This will mostly revolve around turning certain in-game items into NFTs.
The rarer in-game NFTs on popular games could be worth quite a bit of money as a form of showing off wealth on blockchain games.
Other games like the Ethereum blockchain game Loot, launched on August 31, 2021, have sort of flipped the script on blockchain gaming by releasing the items before the game.
The point still stands that NFTs will likely play a big part in blockchain gaming.
NFTs in Music
Music appears to be the one industry that will see the most significant amount of change due to the rise of NFTs. The entire industry will change in the near future similar to how it changed with the adoption of the internet by the general public.
Some ways NFTs can be used with music include turning songs into NFTs, attaching song rights to NFTs, and attaching other benefits to ownership of the NFT.
The possibilities are basically endless when it comes to combining NFTs with music. The above list only scratches the surface for potential uses of an NFT.
Another interesting one that sort of relates to music, but can apply to anything, involves using the NFT as a sort of venture capital opportunity. For instance, an artist could release the rights to an album as an NFT before the album is released as a way to crowdfundd the recording and promotion of the album.
That would essentially crowdsource the recording company, normally in charge of paying the advance to the artist, to the people. The benefit with this is that it cuts out the middlemen (record company) providing more money for the artist and better prices for the consumer. Granted, the record company does a lot of promotional work, so the artist must hire specialists or learn to promote their music on their own.
NFTs in Real Estate
Real estate is another industry that can be disrupted by NFTs. This industry will likely not be disrupted for a long time because a lot of government laws must be changed before NFTs can take over this industry.
Anyway, real estate NFTs would work by turning the physical deed to a house into an NFT deed. This NFT deed can then be traded like a normal token. It would also be locked in a smart contract until the loan to fund the purchase of the NFT is fully paid.
Again, this will eventually occur in some form. It probably will not be on the Ethereum blockchain because that is non-reversible, which could lead to people losing their home to scammers. The point still stands that real estate NFTs will more likely than not exist at some point in the future.
NFTs + Hyperrealistic VR
The final form for NFTs almost certainly involves a fusion of NFTs with hyper realistic virtual reality (VR). This has been discussed ad nauseum in sci-fi for the past few decades. Perhaps the best known example of this is the book and movie Ready Player One.
The characters in that movie live in a world that has a hyper realistic VR sandbox style game. They can battle, create skins, create weapons, and do other things to earn in-game currency.
You can think of the skins, weapons, and artwork as an NFT. For example, someone with a CryptoPunk NFT could put that NFT into their trophy room along with some NFT skins and weapons.
That is the basics of how NFTs would combine with VR or augmented reality (AR).
The great news is that the team behind Ethereum could build out their own VR system that interacts with the Ethereum blockchain, which would allow people to have all their NFTs in the virtual world.
Timeline for an NFT Future
It is very difficult to create a timeline for an NFT future because technology moves fast. NFTs can likely be grouped in with blockchain technology because the two are very similar.
With that in mind, it took the internet about 25 years (1983-2008) to become near ubiquitous. Blockchain technology was released in 2009, so we would say that 2035 is a good prediction for when NFTs can become ubiquitous.
We know that is a long time away, but that is talking about NFTs becoming on the same level of something like Ready Player One. The technology will improve incrementally over time in a manner that will not even feel noticeable.
Just think of how much the internet changed from 1999 to 2009. You can apply that level of change and adoption to blockchain tech and NFTs and you will likely arrive in a similar situation.
The future for NFTs is very bright. The uses for technology like this are more or less infinite. Everything in your life can be turned into an NFT as a form of ownership at a minimum.
More interestingly, hyper realistic VR will turn NFTs from an interesting digital item to a very useful item in a new world.