With a few exceptions, new technologies are almost always worse in almost every way than solutions that have been around for a while. In the beginning, personal computers were slower, had less memory, and less storage space than mainframes. But PCs cost less back then. Because they didn’t do well, not many companies put money into them because they didn’t think they would be worth it. But because they were cheap, anyone could buy one, which opened up a new market that mainframes never reached. This is a classic example of the Innovator’s Dilemma.
The path of the NFT
Both NFTs and crypto are the same. Blockchains are more expensive, slower, and harder to use than other cloud solutions, but they offer security that can’t be beat and ownership that isn’t centralized. Just like the PC, blockchain will quickly get better and be used in more fields.
Right now, especially for NFTs, we’re at the very start of this path. There aren’t many industries that can take advantage of their ability to prove digital ownership without a central party, even though they are slow and hard to use. Collectible digital art is one market that NFTs have jumped on, but things are starting to change there, too.
In proto-Metaverse platforms like The Sandbox or Decentraland, NFTs have already been used as land titles for virtual land. In these kinds of worlds, users can also buy virtual clothes and accessories for their avatars. Nike and RTFKT, for example, are interested in this market.
Applications for NFT
Digitizing Existing Systems
NFTs can also be used to digitize systems that would benefit from the fact that blockchain is immutable and distributed. I recently talked to Tey El-Rjula. During the Gulf War, his birth certificate was burned, so he was sent to a refugee camp. El-Rjula said that official documents like deeds, titles, diplomas, and birth certificates could be wrapped in an NFT. This makes sure that the documents are easy to check, safe, can’t be changed, and won’t get lost.
The property of ideas
Intellectual property is another interesting way that NFTs can be used. I led a session on DeSci, or decentralized science, at the 2022 Cloud Wars Expo. DeSci is all about using blockchain in science. Molecule came up with the idea of putting IP licensing agreements into an NFT and then selling this NFT on a marketplace to move IP from a lab to a startup. By doing this, the process of transferring IP is greatly streamlined. This takes valuable research out of universities that wouldn’t be able to use their IP otherwise and gives researchers a new way to get funding.
Research and discoveries in science
These so-called IP-NFTs can bring life-changing drug discoveries, sustainability projects, and other research results into the real world, where they can help people. With this new way to get money from Web3, researchers can spend less time writing grant proposals and making presentations to investors and more time doing research. I don’t know what’s better than bored ape JPEGs, but this is.
Chances for artists and people who make things
In general, Web3 technologies like NFTs make it possible for projects and entities to start bringing in money from the public as soon as they begin. Artists and creators can use this in an interesting way by giving NFTs to fans who want to help them out. Instead of giving money through traditional channels like GoFundMe, these fans can invest in the creator just like they would invest in a company. The fan can resell the NFT for a possible profit, or the creator can add benefits to holding the NFT, like giving access to exclusive content or even a “dividend” to show appreciation for long-time fans.
Why NFTs are good
The advantages of holding NFTs instead of trading them are often called their “utility.” Even though profile picture NFTs like CryptoPunks aren’t very useful, there are a lot that are. For example, CryptoSwarm.ai, a project I’m a part of, sells NFTs as subscription passes to our financial forecasting reports, which we make with the help of collective intelligence. In Part Three of this series, I’ll talk more about that.
Most NFTs give you access to a community as well. When it comes to blue-chip projects, like the Bored Ape Yacht Club, this neighborhood is full of famous people and people with high incomes. Some people would pay $100,000 or more to get into these exclusive clubs.
Brett Malinowski, a well-known NFT influencer, says that more and more businesses are making their own NFT marketplaces, wallets, and even custom chains. This could also be a way to go if you need to meet specific business needs.
One Last Thing
Don’t forget that it’s still very early. In a few years, this landscape won’t look the same, and we’ll laugh about how NFTs were only good for taking pictures of apes at first. At some point, people will buy NFTs without even knowing it, whether they are in amusement parks, shopping malls, or the Metaverse. Don’t forget about the Innovator’s Dilemma: technologies that get better quickly but only help a few people have a lot of power to change things. Right now, the best thing you can do is keep an eye on things and learn as much as you can.