5 Major Roles of Non-Fungible Tokens in the Global World
NFTs have stormed the digital world. Many people view it as a momentary trend. Others think it shows how digital ownership will look.
Let's discuss NFTs' roles across industries and why they are getting so much influence.
What Makes NFTs So Special?
An NFT is a digitalization of assets representing an item or a piece of content that belongs to someone. Unlike digital currencies, like Bitcoin, where each coin is similar and has the exact value, NFTs are non-interchangeable.
Blockchain technology: NFTs are based on blockchain technology, offering unique token verification that cannot be copied or altered easily. This helps verify the ownership and authenticity of a work.
Indivisibility: Unlike the cryptocurrencies that can further be divided into satoshis, such as Bitcoin, NFTs are indivisible.
You couldn't own half an NFT; you either have it or don't.
Read more: What are NFTs and Why Are They So Expensive?
5 Major Roles of NFTs
NFTs provide various sectors with new changes to interact with digital assets, take audience engagement to another level, and even ease investment in fundamental global properties.
1. Digital Ownership and Intellectual Property
NFTs simply revolutionized the way we look at digital ownership. With the prior status of owning anything digital, one had only a copy that could be instantly duplicated and shared.
NFTs are different, and with unmistakable examples of ownership, they have ushered in new territories in which one can create and collect.
Digital Content Ownership: An NFT can stand for anything digital, be it a piece of art, music, videos, or even virtual real estate. They empower creators to sell directly to consumers without intermediaries.
Intellectual Property and Legal Rights: Intellectual property is the legal rights that protect works. For example, the copyright for an artwork or the license for an invention. It also empowers the creator to tokenize the said work with an NFT. In any case, it still has to be stated explicitly that an NFT owner does not gain IP rights. Unless expressly stated, no right to reproduce and sell a digital artwork is granted to a buyer of an NFT for a digital work.
2. New Business Models: Transformed Industries
NFTs are giving way to new business models in the gaming, art, and music sectors and even in real estate. How?
Gaming Industry: While in-game items are incorporated in the games Axie Infinity and The Sandbox, for example, NFTs can be purchased, sold, and exchanged. These could be anything from characters and weapons to land in virtual worlds. It gives game developers a sense of ownership and a further income stream.
Art and Collectibles: NFTs changed the nature of art. It gave digital artists the ability to sell art directly to collectors. While traditional art sales would allow an artist to make money off the first sale, with NFTs, there is the potential for smart contracts securing the artist's income at each resale.
Music Industry: This is happening in the music industry, too. Artists like Kings of Leon and Grimes started selling NFTs with their music, exclusive content, merchandise, or even experiences such as concert experiences with them. If taken up by big artists or bands, this will allow fans to help out a favourite artist in a new way and feel a sense of ownership over their work.
Real Estate: Believe it or not, NFTs are finding their way into the real estate market. Companies like OpenSea are enabling the buying and selling of virtual real estate by implementing NFTs. In some cases, even physical property transactions are explored using NFTs to provide much easier and more transparent global transactions.
3. Decentralization and Empowerment: Power to Creators
One of the most exciting things about NFTs is how they give creators so much power while decentralizing control over one's work.
DID: Added to that is the form of adoption getting NFTs recognized, and that is decentralized identity, commonly known as DID. DIDs, therefore, manage people's digital identities, which go a long way in tremendously proving ownership and authenticity in the space of digital collectibles. With DIDs, creators and collectors are sure that the digital assets they deal with are genuine and not fraudulent.
Direct Monetization: Traditionally, artists and creators were supposed to put their works out to market, galleries, or record labels before they could be released and sold. With the power of NFT, this has now changed—you can allow creators to monetize directly by selling unique editions of their works, giving a share of royalties on secondary sales, and, most importantly, giving an up-close touch when dealing with the audience.
4. Tokenization of Real-World Assets
It is not only digital content; real-world assets are also represented in NFTs to open up new investment opportunities.
Fractional Ownership: This means the critical advantage of tokenizing real-world assets is to offer fractional ownership. This means that you no longer need a great deal of money to afford to invest in a property but can instead buy a fraction of it through an NFT. This has opened up investing in real estate to a more significant proportion of the market.
High Liquidity: Due to the tokenization of assets, which provides fractional ownership, it becomes easy to trade these fractions on secondary markets for enhanced liquidity, which was impossible earlier. For example, it could take years to sell a property, but you would be able to sell your share of it fast and efficiently.
Other industries: The tokenization fever is moving from real estate into other luxury asset classes, including fine art, luxury goods, fine wine, and sports contracts. For example, with the help of platforms, investors can now buy a fraction of a luxury vehicle or get a share in some rare vintage as a wine collector.
5. Transfrontier transactions: simplification of world trade
NFTs are at work, too, in making cross-border transactions possible, specifically in industries where transparency and security are required.
Blockchain transparency: Since blockchain technology ensures immutability in the case of NFT transactions, it brings down fraud risks and possible disputes, making cross-border transactions much easier and more dependable.
Security Measures: Many NFT platforms have currently integrated Know Your Customer and Anti-Money Laundering protocols into their systems, knowing there is a problem regarding money laundering through this particular digital currency.
Bottom Line!
NFTs are increasingly becoming popular, no doubt!! However, every crypt-enthusiast must proceed with caution. For more information, contact the Crypto Accountants.