Warren Brandeis’ cryptocurrency expert Jacob Boersma recently spoke about NFTs on BNR (Business News Radio, in Dutch).
NFTs (Non-Fungible Tokens) were all the rage in 2021, with every company and celebrity seeming to launch them. A well known instance was the auction of the NFT of Jack Dorsey’s first tweet, sold for $2.9 million. This despite the fact that there weren’t actually any rights associated with that NFT (except bragging rights): the NFT’s owner didn’t become the copyright holder of the tweet, did not get exclusive access to it (it is still visible to everyone) or the ability to otherwise use it, save for reselling it later. That is exactly what investor Sina Estavi is doing now, having put up the NFT for auction. The attention, however, is underwhelming, with many news outlets reporting that bids were remaining below $4. In fact, trade volume on OpenSea, one of the largest NFT trading platforms, is down 96% in the past year!
So of course, everyone is eagerly announcing the death of NFTs, but is that really the case?
The interesting thing about trading NFTs on the blockchain is that everything happens with full traceability and transparency: that Tweet NFT is already up to a price of $ 2,200 at the time of writing, and the auction can be followed in real time in OpenSea. In fact, auctions of NFTs could even be handled in a decentralized way by using smart contracts, providing secure exchange of ownership and secure payments without any reliance on a third party and potentially without buyers or sellers needing to expose their identity.
Dropping from the peak of inflated expectations into the trough of disillusionment is very common for any new technology moving through the Gartner Hype Cycle. The fact that NFTs seem to be dropping faster than most can partly be attributed to greatly inflated attention during the past years when we were all mostly confined to our homes during the Covid-19 pandemic and thus looking very intently at online art (and trading). In the meantime, the Generative AI revolution has grabbed everyone’s attention, shifting that attention away from blockchain-related topics.
But the unique technical properties of NFTs, which allow for real-time trading over the internet of tokenized property without the need for a centralized party, have not gone away. They have the potential for very interesting use cases, both for the trade in tangible assets such as real estate or collectible apparel, and in intangible assets (virtual real estate and virtual apparel in the metaverse, but also things like intellectual property rights).
One use case that is on the rise for NFTs is tokenization of carbon credits. The trade in such carbon offsets is increasing as the urgency of the climate crisis and the need for mitigation increase. At the same time large carbon credit certification companies have been exposed for fraud as they sometimes sold non-existing carbon offsets, and sometimes double sold the same offsets to multiple buyers. A cryptographically verifiable system of carbon credit trading, using NFT technology, can solve many of those problems. Warren Brandeis helped to build such a system already: ZeroSix.
The hype of NFTs may have gone, and it’s good riddance to overpriced monkey pictures and get-rich-quick schemes. But the technology of NFTs is set to move to a plateau of productivity, if it is coupled with use cases that really add value. Contact us to explore the strategic uses of tokenization in your own industry!