What Is The Purpose Of NFTs?
You can find more information about some of the most advanced use-cases and visions of NFTs on Ethereum.
Andy Warhol would probably have created Campbell’s Soup as a NFT if he had been alive in the late 1990s. It is only a matter time before Kanye West puts a few Yeezys on Ethereum. An NFT might one day prove that you can own your car.
Maximizing Earnings For Creators
Digital content is the biggest area where NFTs are most commonly used. This is because the digital content industry is in crisis. Platforms swallow up content creators’ profits and earning potential.
Artists publishing their work on social networks make money for the platform, who then sell ads to artists’ followers. Although they get exposure, exposure does not pay the bills.
NFTs are a powerful new creator economy that allows creators to not hand over ownership of their content to the platforms they use for publicising it. The content is embedded with ownership.
Funds go directly to the creators when they sell their content. The original creator may also receive royalty payments if the NFT is sold by the new owner. This guarantee is in place every time the token is sold. The token’s metadata contains the creator’s name, which cannot be altered.
Many Naysayers bring up the fact NFTs are “dumb”, often with a picture of them taking screenshots of NFT artwork. “Look! I now have that image for no cost!” They say it smugly.
Yes. However, is it possible to find a picture of Picasso’s Guernica online and become the proud owner of an expensive piece of art history worth millions of dollars?
The market can make the real thing as valuable as it is. In the end, owning the actual thing is just as valuable. A piece of content gains more value the more it is shared and used.
The verifiable real thing is always more valuable than the fake one.
Boosting Gaming Potential
Game developers are very interested in NFTs. NFTs are a way to keep track of who owns in-game items and provide a wealth of benefits for players.
You can purchase items in a lot of regular games to put into your game. If the item was an NFT, you can recoup your money by selling the item on after you are done playing. If the item is more popular, you might even make some profit.
Game developers, as issuers for the NFT, could receive a royalty each time an item is resold on the open market. This creates a mutually beneficial business model in which both developers and players can make money from the secondary NFT marketplace.
This means that even if the game’s developers stop making it, your items will still be yours.
The items you earn in-game may outlive the game. Your items will remain under your control even if the game is not maintained. In-game items can be digitally preserved and used for other purposes.
Decentraland is a virtual reality gaming platform that allows you to buy NFTs, which are virtual parcels or land you can use in your own way.
Make Ethereum Addresses Memorable
NFTs are used by the Ethereum Name Service to provide your Ethereum address using a more easily-remembered name such as mywallet.eth. This allows you to ask for ETH from someone via mywallet.eth instead of 0x123456789 .
It works in the same way as a website domain name, which makes an IP address memorable. ENS names, like domains, have value. They are usually based on their length and relevance. To transfer ownership of ENS, you don’t have to register it on a domain registry. You can instead trade your ENS name on an NFT market.
Get cryptocurrency and other NFTs.
Point to a decentralized site, such as ethereum.eth. Learn more about decentralizing your website
Any information you want to store, even profile information such as email addresses or Twitter handles.
It isn’t as advanced as digital tokenization, but the tokenization of physical items is. There are many projects that explore the tokenization of real estate and one-of-a kind fashion items.
You could purchase a car or a home with ETH, and then receive the NFT as a deed in the same transaction. It’s easy to see a future where your Ethereum wallet could be the key to your car/home – the cryptographic proof that ownership unlocks your door.
You can use NFTs to secure decentralized loans. This is especially useful if you don’t have cash or crypto-rich, but do own tangible items of value.
NFTs and Defi
In a variety of ways, the NFT and the decentralized financing (DeFi) universes are beginning to interact.
You can borrow money using collateral with DeFi applications. You can collateralise 10 Ethereum to borrow 5000 DAI ( , a stablecoin). This ensures that the lender is paid back. If the borrower fails to pay the DAI, the collateral will be sent to the lender. But not everyone has enough cryptocurrency to use as collateral.
NFTs are being used as collateral by projects. Imagine that you purchased a CryptoPunk NFT in its original form back in the day. They can be worth $1000s today. This can be used as collateral to get a loan that follows the same rules. Your CryptoPunk will be used as collateral if you fail to pay the DAI. This could be used with any token you tokenize as an NFT.
This is easy on Ethereum because the infrastructure for both NFT and DeFi is identical.
NFT creators have the option to create “shares”, which are NFTs that allow them to own a portion of their NFT. Investors and fans can own a portion of the NFT, without needing to purchase the entire thing. This opens up even more possibilities for NFT collectors and minters.
- Fractionalised NFTs can also be traded on DEXs such as Uniswap and not only NFT markets. This means that there are more buyers than sellers.
- The price of its fractions can define the overall price for an NFT.
- It’s easier to profit and own items that you are passionate about. It is harder to price out NFTs.
Although this is still an experimental method, you can find out more about fractional NFT ownership on the following exchanges.
This would allow you to own a Picasso piece. This would allow you to become a shareholder of a Picasso NFT and have an input into revenue sharing. You will likely soon be able to own a small fraction of an NFT, which will allow you to join a decentralised autonomous organization (DAO), for the management of that asset.
These organizations are Ethereum-powered and allow people to collaborate securely, much like global shareholders in an asset. Because not one penny can be spent without approval from the group,
This is an emerging market, as we have already mentioned. Different technologies are being developed, including fractionalized tokens, DAOs and NFTs. All their infrastructure is available and can be used together because they all use the same language, Ethereum. Keep an eye out for this.