NFTs: the new wild west
It is now rarer to find someone who hasn’t heard of an NFT than someone who has. Rarer still is the person who can properly describe what an NFT is or how it might be used.
This, in part, is down to the fact that the technology is still very much in its infancy – it’s the wild west, and cowboys are making out like bandits with sales of monkey drawings and digital houses alike.
Non-fungible tokens (NFTs) are unique identifying codes linked to a real-world or digital asset. Unlike cryptocurrencies, NFTs cannot be exchanged for other NFTs; they are non-fungible. The use cases for this tech are still yet to be fully discovered, but here are a few of the most interesting at the moment:
When most people think of NFTs, digital art is what their mind goes to first. The first ever NFT-exclusive artwork to be offered by a major auction house, Everydays: the First 5000 Days, sold for $69.3m at Christie’s in March of 2011. The digital artist who created the piece, known as Beeple, complied a collage of his first 5000 one-a-day digital artworks for the sale.
News of such vast sums of cash being dumped on such an intangible asset set the NFT word ablaze. Since then, Beeple has gone on to rake in a further c.$29m from NFTs and has started off a generation of wannabes in his wake.
Whether or not you would personally buy a digital piece of art – I can’t say I would – there is one purported benefit that might make you think twice.
NFTs can have royalty-fee structures coded into them. This means that the royalty holder could still receive royalty fees from secondary and tertiary sales of the asset. This could be a massive step for artists looking to increase their already tiny piece of the revenue pie – particularly with regards to the music industry.
Aside from this, NFT art does seem to be a bit of a bubble that’s set to burst. Certainly, one could argue that buying a digital copy of a painting isn’t much different from buying a print of a painting, despite you still receiving no tangible product as a result of your purchase, but it seems we can expect to see a downfall in these get-rich-quick art deals as the technology matures.
Supply chain use cases
Perhaps more interesting is the potential use of NFTs within the supply chain. One of the key attributes of the NFT is its association to the blockchain. The blockchain, in essence, is a decentralised digital ledger. This ledger can be used to record all sorts of information such as the date it was sold, who sold/bought it, who handled the transport of the asset, etc.
- Using this blockchain – or ledger – manufacturers could create NFTs to sit on their assets at various stages of its production and distribution:
- Each step of the manufacturing/distribution process could be tracked in one place, reducing the risk of mishandling/product losses.
- NFTs could be attached to parts of reusable packaging, letting the previous handlers be known to everyone after them in the asset’s lifecycle.
- Luxury and high-value goods would come with an NFT-verified confirmation of uniqueness that also serves as a certificate of the new owner’s absolute ownership of the asset.
- Certification-based NFTs could be produced by regulatory organisations to sit alongside an asset’s blockchain ledger. For example, ‘Organic’ or ‘Fair-Trade’ foods could be verified by the end consumer simply by clicking a link in their asset’s blockchain record.
Further to this, increased transparency surrounding the transportation of food – and indeed other perishable goods – would be invaluable to many producers. Knowing where a product has come from, how long it’s taken to reach you, and when it will expire – all in one place – could be the next step in the advancement of supply chains.
NFTs are still very much in their infancy. This is an important fact to keep in mind when thinking about the technology and its real-world uses. Discussions about its implementation into serious business practices have been marred by associations with volatile and intangible pieces of art, but promising use cases seem to be lurking just over the horizon for the NFT world.
If you have a business involved in the supply chain – or indeed have any questions about your company’s options looking to the future – we’d be delighted to get in touch.