NFTs are not evil - just better tokenization technology
This is a follow-up note on the "Blockchains are here to stay", where I argue, for all my not-yet enlightened friends, that blockchain is just an inevitable evolution of technology. As more and more data sharing needed to happen for businesses to run smooth and efficient operations it made no sense to duplicate and re-validate the same data again and again.
In this note I'm gonna talk about NFTs (non-fungible tokens) as a tool for tokenization of anything. I will assume here that you know the difference between fungible tokens (like Bitcoin or any other currency) and non-fungible tokens. To make it simple, I will add that tokenization of real-world assets is here for a couple of centuries. Basically, since banks and trusted merchants appeared in the business.
First, what is tokenization in NFTs; NFTs (non-fungible tokens) are unique cryptographic tokens that exist on a blockchain. They can represent real-world items like artwork, real estate, land, etc.. What "tokenizing" of real-world tangible assets does is that it makes buying, selling, and trading them more efficient while reducing the probability of fraud.
Coming back to my point, the idea of digital representations of physical assets is not novel nor is the use of unique identification. If you have ever seen a landowner certificate on paper or received a certificate proving you bought a gold brick (or gold necklace) or a painting in the gallery, even stock ownership certificates on the name, you have seen tokenized asset or proof of asset ownership. They all fall in this category. All these use cases were less sophisticated versions of NFTs, typically relying on trusted third parties or centralized entities for a guarantee of true origin and confirmation of your action (buy/sell).
Now combine these concepts with the benefits of a tamper-resistant blockchain, and smart contracts capabilities, and they become a potent force for change in many areas. And I mean many areas, not just trading jpegs or art.
- Very typical and hopefully quickly approaching examples of NFTs use in real life can be digital identities (no two identities are the same), digital passports (I can't travel with your passport), educational records (your diploma and grades is not the same as mine), wins and scores in IRL (in real life) disciplines or digital competitions and gaming (my winning score is not yours), access passes to buildings, offices, communities (IRL or digital).
- And of course, there are many more use-cases where tokenization touches some real-life assets and allows for easier ownership proof (you own your car) and also monitoring and transfer of such ownership, which then has additional steps involved.
Those steps can be easily modeled online - e.g. I sold my car to you as an NFT and now we have to finish the transfer in real-life, i.e. need to bring you my car and hand over the keys and you need to confirm it so I would get the money which might be held by the smart contract until the proof of IRL swap is confirmed.
Anyway, NFTs' use cases are many and what they will do is they will help digitize ownership and transaction further. This is a good thing especially if done on a global or at least regional (like Europe, USA, etc.) level.
As you see, there's way more to NFTs than just "buying jpegs" with monkeys or crazy drawings and there's no evil in NFTs either.
Look at it as new technology and objectively think about how it could improve your business. Is there a chance it would make you more efficient, more interesting or more open?
Those are the right questions to ask now for any business owner...
If you enjoyed this one sing-up for next ones and if you wanna share your experience or discuss your projects just hit me up via contacts.