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| By Jurica Dujmovic |
Non-fungible tokens have been gaining traction in the blockchain community and beyond.
This technology promises to revolutionize the way digital assets are exchanged and used across various industries and business models.
To gain further insight into the potential applications and implications of NFTs, I spoke to a range of experts in the field.
This included Camilla Caban, global community and marketing manager of Conflux Network (CFX, Unrated); David Kemmerer, co-founder and CEO of CoinLedger; and Brandon Tucker, head of communications at Marinade Finance (MNDE, Unrated), the No. 1 project from Solana (SOL, Unrated) by total value locked.
Camilla Caban started the discussion with where the sector is today. “While we’re still in the infancy of the NFT sector, the events and music industry has made great use of NFTs and their potential so far.”
She believes the next industry that can really take advantage of NFT technology is gaming. “NFTs have a huge potential to reach a massive audience and adoption through the gaming industry, especially if done right. We’ve already seen games on the blockchain make use of them, and we hope to see gaming really take off.”
And that makes sense. We know that players already purchase in-game items such as skins and weapons. But as of right now, those purchases exist only in a single game. An NFT of those items would allow players to actually own it. And it would give them the opportunity to sell it as well, increasing an item’s value to the players.
“We still have a bit to go before mainstream gaming heads down in that direction, but I think we’re in the process."
There’s clearly great potential in NFT gaming. But for David Kemmerer of CoinLedger, the rabbit hole goes much deeper ...
“In 2022, NFTs gained significant popularity in the media, largely due to celebrities auctioning their NFTs. The hype created an impression that anyone could create an NFT and sell it for millions of dollars. The number of bidding scams surged rapidly, prompting NFT marketplaces to take preventive measures,” Kemmerer explained.
“But the future of NFTs lies beyond the hype and scams in authentication, more so in business and economic applications.”
According to him, NFTs will transform business models and operations by creating new ownership opportunities and promoting transactions that were not feasible in traditional processes.
For example, the authentication of a physical bottle is an expensive process that involves lawyers, notaries and other experts. NFTs can facilitate that authentication process in an efficient and low-cost way, creating new opportunities for ownership and investments, including land titles and deeds.
These NFTs can be easily tracked as transactions are fully transparent, reducing the cost and time of processing the transfer and sale of assets.
Kemmerer rounded off his optimistic outlook by calling the applications for NFTs “limitless,” and anticipates adoption growing as more people key into the fact that the technology makes transactions of non-fungible assets more transparent and safer while protecting the rights of the original creators.
Brandon Tucker of Marinade Finance agreed, adding that the true strength of NFTs are their versatile utilities — many of which we’re seeing added to existing projects. According to him, these utilities create a bond between the holders and the project.
“What’s clear is that NFT holders tend to become huge advocates and voices in these communities,” he explained. “They feel a real connection and ownership to the project, which lends itself to a more direct and visibly on-chain connection.”
Regarding what those utilities can look like, Tucker elaborated: “Projects can create smart contracts within NFTs similar to tokens and enable perks like revenue sharing, decentralized autonomous organization governance and gated access to channels.
“For example, Marinade — Solana’s leading liquid staking protocol through the mSOL liquid staking derivative token — created an NFT collection to facilitate on-chain DAO governance of its project. To date, over 70% of MNDE tokens on the market have committed to the project by locking tokens within an NFT in order to participate in various governance tasks.”
But utility is just one layer supporting NFT strength.
That strength is amplified when projects offer additional benefits beyond the value of the NFT itself, such as airdrops of additional NFTs or tokens, or even access to in-person events for project holders.
Those bonuses also stand to pay off for the creators, as they bring more value to their collections and offer opportunities to create new promotions for even well-established projects.
This bond and additional value remove some selling pressure, as we saw in 2022. “Even during the market downturn of 2022, we saw resilience in leading NFT projects as well as marketplaces that are enabling the same kind of on-chain liquidity of NFTs as for others with tokens,” Tucker pointed out.
Finally, I asked these NFT experts what challenges currently stand between the relatively new technology and mass adoption. Kemmerer pointed to inadequate security — smart-contract risks and maintenance concerns — as a key roadblock for mass adoption. The risk of theft undermines most of the value of NFTs, after all.
Following that, price valuation and legal issues have also hampered NFT growth across the globe. This is where the need for some sensible, smart regulation comes in. Without that, it’ll be hard to target mainstream adoption. “When it comes to NFTs,” Kemmerer concluded, “people and companies need to understand the risks and challenges involved. The elimination of these risks will make it easier to purchase and sell NFTs in marketplaces.”
Tucker added, “In terms of challenges, the masses aren’t going to immediately understand all the smart-contract capabilities that can be integrated into a seemingly simple picture — that will take education and adoption by more social media sites like Reddit, Facebook and Twitter.
He also pointed to the general DeFi user experience as another bump. It’s no secret that for many individuals who are not tech savvy, the multistep process of setting up various self-custody wallets and navigating the decentralized market can be daunting.
Making the process more user-friendly would go a long way to opening the door to mass adoption of all DeFi projects, including NFTs.
It was great to speak with these industry leaders.
Overall, NFTs are here to stay and expected to revolutionize many industries in the near future. The experts in the field agree that NFTs offer potential for authentication, business, economic and real estate applications, as well as new ownership and investment opportunities.
While there are still some risks and challenges that need to be addressed and overcome, the potential of NFTs is immense, and they’re likely to become a major part of the blockchain landscape in the years to come.
If you’re interested in further exploring the NFT space, my colleague Joel Kruger has a service called NFT Wealth Builder. In his weekly article, Joel highlights up-and-coming artists and projects that catch his eye as solid investment opportunities and reveals major changes in the NFT space.
If you’re looking to dip your toes in NFTs, I highly recommend signing up!
Best,
Jurica
