Why NFTs are Currently Useless (mostly) - the Future of Web3 and NFTs

NFTs took the world by storm in the last year or so - however, they are no new concept. I remember them being represented as Cryptokittes back in 2017, where they were the first real application to cause traffic on Ethereum.

Now it is a rapidly growing industry, it’s currently being used to facilitate the likes of funny-looking monkeys and cats.  Not only that - many celebrities and influencers are also pushing them to an almost overwhelming degree.

Here’s the catch, though:

most nfts are useless.

Or, at least with how they are being utilized today. Besides being yet another digital asset used as a vehicle of investment, they offer no true utility. One can actually argue that it contains the same utility and attraction as that of Dogecoin. Most are a novelty, providing no real or true value (with the exceptions being unique and actual pieces of art).

However, the potential of this technology surpasses the mere way it is being utilized as we see it.  NFTs can provide a vehicle of liquidity, authenticity, and provenance for any asset to be represented on Web3 - this includes physical assets as well as digital.

Current State of NFTs

The current state of NFTs are rather simplistic in the process of obtaining or owning one.  The buyer simply identifies an NFT they like visually, or thinks that has the potential to rise in price, and purchases it as they would any other token.  It’s held in a wallet, such as Metamask, and behaves like any ordinary token (besides the fact that it's “one of a kind”).**

There is a flaw here - the token has no utility other than being bought and sold other than any other cryptocurrency.  The artwork can be displayed, or set as a profile picture - however,  there is no genuine utility beyond the novelty of the art and proof of ownership. Most people end up buying them for speculation anyway, rather than the novelty aspect.

The power of smart contracts and on-chain on the blockchain is what really drives the usage of decentralized applications - what if we could combine the power of a non-fungible asset, with all of its benefits, while also giving it a logic, utility, and behavioral properties to make it infinitely more useful?

What is a utility NFT? How can NFTs have utility (use cases!)?

The future in NFTs doesn't lie just with representing a piece of art - although that will certainly be an application to persist.  The inherent properties of an NFT present many opportunities for both businesses and individuals to take full advantage of much more creative use cases alongside artistic pieces.

On the business side, there have been numerous opportunities presented in the supply chain and retail space.

For example - each batch of a product can be represented as an NFT as the final step in the supply chain process. It acts as a sort of stamp of certification, co-minted by all relevant authorities.  This means that on the retail side, consumers, as well as retailers can scan the product to ensure that it is authentic, came from a humane or environmentally sustainable source.

The concept of recording supply chain information on the blockchain is not new - in fact, it’s something I have done for a couple of companies by now.

It’s the usage of NFT to “seal the deal”, and add an immutable, provable conclusion to a stream of data.

Furthermore, just as a picture can be attached to an NFT, in theory, one could attach multiple pieces of data to a single NFT - certifications, videos, etc.

For use cases in the real estate space, for example, the numerous documents needed can be added or updated over time via a metadata mechanism.  In other words, just as artwork can be represented via an NFT, you could represent an entire real estate deal via an NFT, then have to change owners once the deal goes through. The entire deal would add to the provenance and history to the piece of land.

NFTs can even act as keys to a building, which when combined with IoT, allows for a full stack solution using just the blockchain to facilitate who can enter which portion of the building, and when based on what NFT they own.  You can also make NFTs non-transferrable to negate the possibility of anyone ever sharing their key without permission. The use of logic with NFTs allows for this to happen, along with specific permissions with each NFT if applicable.

As we can see - there are quite a few use cases for how an NFT can do a lot more than just hold value. It can serve as a digital marker for many different use cases or applications.

The future of NFTs - the fusion of the digital and real world?

Regardless of how NFTs are being currently used, they will be a prevalent part of our future as a whole.  Whether used for identity, proof of access or merely just to represent the asset portfolio of an individual, it can represent a multitude of things - both physical and digital.

NFTs will be part of the process that solidifies the blur between the digital and real, physical world.  The concept of a metaverse is a large part of this - as NFTs are used in metaverse concepts to represent items and ownership of such items.  It could be in the near future that physical assets are represented there, with their ownership and presence being both provable online and in reality.

Protocols that allow for the easy creation of assets will help provide a common protocol to ensure it is the “glue” that solidifies the bond between the physical and digital world. It also plays a huge part in providing the logic and utility that has been missing to solve real-world problems. Having these applications available will be crucial to ensuring the survival and viability of this technology.

So, what’s the verdict?

The main purpose of this article was to shed light on the true potential of NFTs, and how they may be a crucial part of our future.  From identity to a way to liquidate assets, the use of a non-fungible token can be incredibly useful.  Furthermore, it’s only through adding additional features to NFTs that this can be possible - metadata, smart contract implementations, and overall having more multi-layered and dynamic setups with these digital assets that will truly drive the future.