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How NFTs Are Playing a Role in The Blockchain Revolution

| November 17, 2023

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Blockchain technology is responsible for several ingenious introductions to the world of finance. The 2021 crypto bull market brought blockchain-based instruments to the forefront, some of which constantly made their rounds on financial news media and were subject to mass attention because of the publicity provided by social media. Blockchain-related innovations were, therefore, in the limelight, but one surpassed the popularity of the rest, garnering mainstream coverage about its developments even beyond the financial world.

NFTs (Non-Fungible Tokens) were the most popular buzzword out of multiple industries, such as finance and technology, for the better part of a year, thanks to the use case it found in the world of digital art and collectables. The large-scale excitement aroused by NFTs, specifically trendy JPEG collections and Twitter profile pictures, brought people from all over to invest in this niche portion of finance. The use cases, however, extend beyond things that seem flimsy to the happenings of the real world. Understanding how NFTs can bring real-world impact requires one to understand what fungibility is, what makes these assets non-fungible and why the application NFTs find in things like digital art collections is important.

What Is Fungibility?

Crypto and fiat currencies are suitable as a medium for transactions because of one major factor — their fungibility. For example, the value of one bitcoin is the same as the value of another bitcoin. Similarly, one dollar bill is no different than another in terms of value which makes them interchangeable, implying that they possess the same purchasing power. These factors offer the trait of fungibility to assets like currencies.

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What Qualifies as Non-Fungibility?

On the contrary, non-fungible assets are one-of-a-kind and cannot be interchanged with any other asset, the way fungible assets can be. A limited-edition collectable trading card, for example, will be unique and have its own value. It can’t be matched by another trading card from the same collection or another as its significance and rarity make it hard for such objects to be evaluated which in turn makes it infeasible for them to be interchanged like it’s possible with two different dollar bills.

Famous art pieces like A Starry Night and many others are non-fungible, too, due to all the factors that make them unique. Replicas may look indistinguishable but can never replace the original in appeal or value, making the original non-fungible.

And then there are Non-Fungible Tokens

Like collectable cards, custom jewellery, and rare paintings, NFTs are one-of-a-kind assets that derive their uniqueness from blockchain tokenization. While cryptocurrencies like BTC and ETH are fungible, NFTs achieve their non-fungibility because of the distinct identification codes and metadata that are a part of their makeup. Technically speaking, these tokens are of ERC-721 and ERC-1155 — standards that define the parameters that make them unique, thanks to the underlying code. These token standards are different from the ERC-20 or similar standards that represent fungible tokens on programmable blockchains like Ethereum and others.

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NFT Versatility Is Pushing the Boundaries of Blockchain Adoption

The ability of blockchains to represent real-world and digital objects in the form of non-fungible tokens is bringing use cases that impact a large list of industries. These smart contract-driven assets enable immutable storage of the sale and ownership history of associated articles for anyone to view on the distributed ledger. It also enables the transfer of ownership of these assets through a simple transaction that is similar to sending cryptocurrencies from one wallet to another.

By enhancing the accessibility and security of information on the blockchain, NFTs bring unprecedented levels of transparency while eliminating corrupt practices prevalent in industries that rely on multiple intermediaries for their functioning. With all these use cases in tow, the initial hysteria caused by JPEG NFTs is quite trivial, as the technology’s implications lie beyond displaying pictures on social media applications.

NFTs Make Real Estate Acquisition Simple

Real estate is an industry where NFTs are finding a mighty use case considering the issues that are plaguing it. Fraudulent sales, corruption and high costs of transactions are commonplace in the industry, which blockchain tokenization, specifically the tokenization of real estate asset deeds into NFTs, is throwing out. The decentralization of real estate is making verification and acquisition of properties more convenient and cost-efficient without the need for intermediaries. Still, in the nascent stages of adoption, the shift of real estate transactions on-chain will reduce the need for cumbersome paperwork and physical documentation processes otherwise involved in the transfer of ownership rights from the seller to the buyer.

Resale on Secondary Markets Turns Simpler with NFTs

Various industries whose products are resold on secondary markets are being impacted thanks to NFT integration greatly. The immaculate recordkeeping establishes providence for assets that are being resold, allowing potential buyers to verify and decide on the fair value of such products. When it comes to art and collectables, these records help establish the authenticity of goods on sale as well as the credentials and authority of the seller to facilitate such transactions.

NFTs representing digital art and collectables themselves have a huge secondary market where users buy and sell NFTs procured from creators with other interested participants.

Supply Chains Are More Efficient Than Ever Thanks to NFTs

Supply chains are integral to global commerce, allowing the movement of raw materials and finished products from one corner of the world to another. It requires complex logistics networks for the cross-border movement of goods, all happening in compliance with applicable legal and regulatory requirements stipulated by various jurisdictions. So far, the entire process remains opaque and requires the processing of tons of paperwork and customs documentation, all of which can be streamlined by the implementation of blockchain technology and NFTs.

Tokenization of commodities and trade documentation improves traceability and compliance. On the one hand, NFTs representing the consignments help businesses and end users trace the origin and movement of products they procure through the entire supply chain. Meanwhile, tokenization of trade documentation and shipping manifests as NFTs cut down the time and effort otherwise spent on verifying the shipment and associated paperwork for trade financing, as well as customs clearance at each port or checkpoint along the way.

NFTs Lead Blockchain’s Universal Integration

The acceptance of blockchain technology is growing, and NFTs are one of the major reasons. While these highly distinct assets find revolutionary use cases within several existing industries, they are also creating new ones, like GameFi, which offer people avenues to earn significantly in ways which weren’t possible before.

Blockchain applications are therefore blending into several facets of the trade, commerce, and technology, revolutionizing the way they operate. NFTs, with their versatile use cases, are leading this revolution.

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