You hear Amitabh Bachchan creating it, International cricketers dabbling in it, music artists using them, and generally social media being abuzz with it, of late. NFTs. But beyond its tharooresque name of Non-Fungible Token, there doesn’t seem to exist much literature as to its real-world use cases and enterprise level applications to understand its feasibility in the business world.
This post here endeavors to clear the air on the same, by talking in detail about NFTs in a simpler language and to delve deeper into the enterprise level applications which can benefit the world of business across sectors.
NFT - for the uninitiated
In layman’s terms, fungibility refers to something easily replaceable or exchangeable for another asset or good. Non-fungibility is its opposite, an asset which is unique and irreplaceable, like a specific music track, an autographed item which is rare. A Non-Fungible token (NFT) is similar. Like any other non-fungible asset a non-fungible token or NFTs are basically something unique and irreplaceable. They usually refer to unique digital items, like artwork, original soundtracks, image files, a tweet etc. which can be then preserved for posterity. They use blockchains to establish a proof of ownership and chain of authenticity.
NFTs can be bought on a variety of platforms. You’ll need a wallet specific to the platform you’re buying on and you’ll need to fill that wallet with cryptocurrency. There are few sites that sell NFTs like Opensea, Rarible, SuperRare, etc
- Pick your item that you want to tokenize and sell
- Choose a blockchain (Ethereum, most popular), connect with digital wallet (Metamask, most popular), mint on a marketplace (OpenSea is free one)
- Choose a marketplace. The process in OpenSea is a free one.
- Register and create the NFT.
- When there is a buyer, you can sell with a fixed price or at an auction, and the royalties you want to receive
- Eversince Beeple piece made a whopping $69.3 million
- Jack Dorsey has promoted an NFT of the first-ever tweet, with bids hitting $2.5m.
- Adobe partners with Rarible and Photoshop will get a ‘prepare as NFT’ option soon
- NFTs are also making waves as in-game purchases across different video games
Key use cases of NFTs - How can business benefit from it
- Traceability use case: In any traceability system, the goods reaching the end-user will have to go through a process maintaining the efficiency and accountability. The goods that are set on a journey across different boundaries, tracking every part from manufacturing to shipping and passing on from one hand to another should reach the end-users in a highly uniform and stable system without any malfunctioning. It is very crucial for any company to document their process and the supply chain in real-time so that there is transparency across every point that they cross.
With NFTs, all the records are decentralized on blockchain, transparent and any parties along the supply chain can view them. There is no duplication and every record will be unique in NFT. There will be no worry over losing the physical documents or authentication. This can be useful in any industry that goes through the same process like the food industry, meat traceability, secure sharing of medical data and what not. Ownest uses NFT tracker to transfer responsibility for each asset. The company uses a public Blockchain to ensure maximum speed, fairness and security.
- Fashion world: Introduction of fashion NFTs in India took place recently when WazirX marketplace joined hands with FDCI x Lakme fashion week. The renowned bollywood designer Manish Malhotra will lead the industry by creating five exclusive NFTs. The designers and artisans need not worry about their work getting duplicated or somebody else stealing their own creation. Any designer creating their own masterpiece will be choosing a particular NFT marketplace and mint their work there. NFT will take care of the authenticity and proof of ownership for that work. The originality will never be lost.
Anyone interested in buying the work will be able to do that with the cryptocurrency. There will be only one copy of that work entirely and it cannot be replicated elsewhere. Louis Vuitton is also said to launch a blockchain platform that uses NFTs to authenticate the origin of high-priced goods, the quality and source of the products by tracking materials in the supply chain. With this, neither the art of craftsmanship for the very famous Letters on leather can never be replicated nor the quality of the Italian leather that the company uses will be compromised. Burberry and Louis Vuitton are turning to NFTs and gaming to promote their brands too.
- Transportation industry: NFTs in the transportation industry would also be of great use. The average vehicle has around 30,000 individual parts which can be manufactured either in-house or from a third-party provider. With NFTs coming into picture now, we can get enhanced insights into every material and any components that are used in the vehicle. Right from material getting acquired to the current location to the final product, every step in the supply chain can be tracked. In other words, the digital identity of every material can be tracked from its origin by assigning real-world materials to digital forms.
The process is going to be transparent with better visibility. Since this would be on blockchain, nobody can change or delete the information. The same can be applied to transportation-related expenses, manufacturing cost and in turn the granular costs can be controlled.
- Real estate: Duplicating the documents or transferring the ownership without noticing the landlord are very common in the real estate industry. Blockchain and NFTs are now entering this field so that nothing can go unnoticed. Whenever transferring of ownership happens between a buyer and seller, all the transactions can be recorded on the ledger. The documents can be minted on the NFT with all the transactions. Nobody can duplicate it or interchange them. This is the safest way that can be used without getting cheated by anyone. Smart contracts can also be used in NFTs which would negate the need for notaries and lawyers. TechCrunch founder Michael Arrington recently sold his NFT-backed Kyiv apartment for 36 ETH.
- Luxury goods market: The same process of the fashion world would be applicable in the luxury goods market in a different way. Any product like pieces of jewellery, handbag, high-end watch can be minted on an NFT platform. Operators like Prada and LVMH have teamed up to launch a blockchain platform called Aura, where the luxury goods would be authenticated on NFT.
The process here is a different story altogether. When a consumer buys any of the luxury goods, they will be provided with the same product on an NFT, a digital twin product. It would show them the origins of their product, the information about the manufacturing process and the materials used.
- There will be a commission to the file, which will pay you every time someone buys the piece or resales. You need to have a wallet set up, and it needs to be filled with the crypto of your choice
- Sites charge a gas fee for every sale (the price for the energy it takes to complete the transaction), along with a fee for selling and buying. Conversion fees and fluctuations in price depending on the time of day are also present. The fees can often add up more
- NFTs use a huge amount of energy in their creation. Environmental activists express concerns about the real impact it could have on the environment.
- Ethereum alone uses about the same amount of energy as the entire country of Libya. one piece called ‘Coronavirus’ consumed an incredible 192 kWh in its creation
To summarize, NFTs, though they are still in their infancy, can be extended to a wide variety of applications from logistics industries to fashion businesses. Across the world, NFT are now used predominantly in different supply chains across product categories to keep track of the journey and ensure traceability. As shown above, from preventing counterfeiting to ensuring cost control in manufacturing, NFT has immense potential to be a game-changer, businesses should definitely explore this technology as per their specific needs.