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NFT’s are a very interesting development in the past few years. Many ideas around NFT’s involve more advanced internet concepts such as the metaverse. However, in recent years adoption of metaverse, at least in the way that Meta has conceptualized it has grown increasingly unlikely. While web three and VR may certainly be in store for the future, it seems that widespread adoption is yet a way off. Thus, I believe the most practical usage of NFT’s pertains to how they may serve a concrete use in the physical real world. The reason behind this is that when an NFT can directly serve a purpose in the real world it can serve to create and preserve value. I believe that they can serve two very important functions: proof of ownership and proof of authenticity.
The idea was floated in the lecture, that NFTs could replace the function of receipts. The video talked about a man who was able to sell an antique Rolex watch, not just because it was an expensive antique watch, but because it had all the correct paperwork and receipts to support its authenticity. Counterfeit products abound today, especially of luxury brands. The idea is that a brand could implant a chip in a designer handbag and then create an NFT that correlates to that chip. This NFT would be entirely unique within the blockchain, and a fraudulent copy could not be created of it. Due to the transparent nature of the blockchain, this would enable a customer to immediately tell the authenticity of a bag, and if a company wanted to go even further, the factory that it was created at. I believe that this is one of the simplest yet most valuable ways that NFTs could be used as it would enable transparency in the market, thereby preserving the value of the customers’ goods.
The second area which NFTs could be very useful is proof of ownership. They could function like deeds or titles. The beauty of this is that all past owners would be easily seen on the blockchain. If this was applied to automobiles, I wouldn’t have to pay for a CarFax report every time I wanted to buy a new car. I could simply look up the unique token ID associated with that car, and then I would be able to see every single wallet that had previously owned that car, along with the transaction dates. One issue that could arise with this is the fact that for proof of ownership to serve its intended legal purpose, it is generally issued by the government of the associated country. I am sure that many people value the decentralized nature of NFTs, but I could foresee difficulty getting governing bodies to recognize them as valid certificates of ownership- which would then defeat the point. Additionally, there is the underlying issue that a crypto wallet serves as a single point of failure. Losing the keys to the wallet would result in losing the entire wallet. If the assets lost amounted to a few invaluable NFT’s for metaverse clothing items, the losses would be negligible; however, if it was the deed to one’s home, it would be devastating.
I must say that I am very skeptical of more abstract NFT projects, especially regarding speculatory investments. Just like anything else in the world, an NFT is only worth what an individual is willing to pay. This has been exemplified by the NFT market crash since 2021, where, on average NFT’s have lost 90% of their value. For example, the Bored Ape Yacht Club (BAYC) NFT’s have decreased from a peak price in the millions of dollars to a rough average of $28,000. In the instance of BAYC, this is most likely because the value of the NFT hinged on the perceived “coolness” and feeling of “membership” that one got from owning this NFT. Once the hype surrounding it died down, so did the price. Another thing that was mentioned in the lecture video was the fact that people could utilize NFT’s to own “property” in the metaverse. It was pitched as a way to generate income, as one could then rent this “metaverse property” out for a profit. The issue underlying this vision, much like many other proposed metaverse projects, is that the value proposition is significantly lacking. How much benefit does a person get from a piece of land in the metaverse? Until the metaverse receives more widespread adoption, it doesn’t seem like it would be that much.
