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Posted on May 26th, 2022

NFTs: Looking Beyond Digital Art

CONTRIBUTING AUTHORS

Haan Palcu-Chang

Crypto Content Specialist

Non-fungible tokens (NFTs) are one of the most talked about—and often the most derided—digital assets on the blockchain. Lots of this derision comes from the default stance of many that NFTs are nothing more than useless blurry images.

But while the NFT market has become largely synonymous with digital art—due in large part to the eye-catching number some of have sold for—it’s important to remember that NFTs have a wide array of potential use cases that go beyond proving ownership over a JPEG.

Key NFT takeaways

  • NFTs are digital assets that use blockchain technology to prove their uniqueness.
  • They’ve exploded into the common consciousness over the last two years with trading spiking 21000% between 2020 and 2021. (2)
  • NFT use cases are expanding rapidly, with real estate, medicine, and book publishing all being industries that could make use of the technology.

What are NFTs?

Before we begin, let’s start with a quick refresher of what an NFT is:

An NFT is a non-fungible token. “Non-fungibility” is simply a way to say that something is unique and not interchangeable. That means a non-fungible token is a digital asset that can prove its uniqueness by recording its provenance, ownership, and scarcity on a blockchain. For a more in-depth look, check out our NFT whitepaper.

As mentioned, digital art and digital collectibles are where NFTs have seen their highest profile use cases. Artwork like “The Merge,” “Everydays,” and “Cryptopunk 5822” have sold for $91.8 million, $69.3 million, and $23.7 million, respectively. (2) (3)

We even minted two ourselves to commemorate the first birthdays of our Purpose Bitcoin ETF and Purpose Ether ETF.

Purpose Investments NFT commemorating our Ether ETF

But NFTs are quickly proving themselves to be useful in a wide variety of sectors, as at their core they represent the secure ownership of an asset—and that asset doesn’t have to be art or memorabilia.

NFTs in the medical industry

One industry that has begun to explore the potentials of NFTs is the healthcare sector. The prospect of NFTs as a way for individuals to have more agency over their own medical data is an interesting topic to contemplate.

Consider this: you’re one of millions of people who have ordered and used a direct-to-consumer DNA testing kit. And great, you’ve found out that you’re 13% Polynesian. What’s not so great is that now that the company has a detailed breakdown of your genetic information which they can now further profit from.

These companies can create products built around the information they got from your genetic data or sell off your genetic information to a litany of prospective buyers. It’s a system whereby large corporations and pharmaceutical companies profit from your genetic or medical data, not you. (4)

NFTs offer the possibility of giving people more agency over this intimate information and, if they so choose, monetizing it. In theory, you could mint your genetic data or medical records as an NFT. You could encrypt the NFT so that only people that have paid for it would have access to it. And you could choose who to initially pass that information onto.

It may seem farfetched, but there are actually companies trying to make this happen right now. A startup called Aimedis, whose elevator pitch is: “revolutionizing how de-identified data across the globe will be exchanged and monetized,” is already trying to get that started.

They are in the midst of creating a platform that will organize and disseminate medical information into NFTs. The idea being that digital, encoded personal medical records will not only be more efficient in information transmission, but will also allow their clients to profit from the sharing of their medical records. (4)

What’s more, they are creating their own blockchain to store the data, run by nodes on people’s cellphones, in order to decentralize the network as much as possible and thereby making the control over this information hard to achieve by a single entity. (4)

There is a growing ecosystem of NFT usage that goes far beyond digital art and collectibles

Real estate: a new way to transfer ownership?

Real estate is another field in which NFT usage could have some valid use cases. After all, it’s an industry built largely around the transfer of ownership. And as we mentioned before, an NFT’s utility lies in its ability to digitally convey ownership of something.

It’s not a stretch to think that house titles, deeds or other legal documents could be packed together as NFTs and put on the blockchain in order to transfer property more efficiently.

In fact, NFTs have been successfully used to transfer property ownership in Ukraine and Portugal—using the Ethereum and Cardano blockchains, respectively (5).

Of course, the problem right now is that there aren’t fully fleshed out systems in place for guaranteeing the legality of an NFT and making sure that it is, indeed, passing ownership on from one person to the next.

While on the buyer and sellers side the purchases for the Ukrainian and Portuguese properties went relatively frictionlessly, they did require a very large amount of work on the side of the companies in charge of selling these properties. On top of the normal legal paperwork required for buying property, they also had to do their due diligence with local regulators to make sure there were no additional legal or tax implications for the NFTs. (6)

So, in a practical sense, these sales were more a case of: “Hey, look at us, we are doing something cool.” Although they did highlight the potential for NFTs to streamline the buying and selling of property—especially as municipal and federal governments expand the use case of blockchain technology in their record-keeping.

Book publishing: books as NFTs

While NFT’s could potentially revolutionize how societies interact with property or medical records, those use cases are still in their embryonic stages.

Book publishing, on the other hand, is a field that does seem ripe and ready for a large-scale adoption of NFT technology in the here and now.

For starters, books are already highly digitized. There’s a robust e-reader and e-book market, with 30% of American readers consuming their books at least partly in a digital format. (6)

But the model could be improved upon to better suit creators and consumers. On the consumer side, actual ownership of digital books is limited. Sure, you buy a book through a service like Amazon or Kobo, and you get it on your e-reader. However, if that service provider decides to close up shop or goes bankrupt, you won’t have access to the material you purchased.

It’s also cumbersome or not possible at all to pass your e-books on to someone else or re-sell them. However, a book minted as an NFT can stay in your digital wallet and lives on the blockchain. It’s yours so long as there’s the internet, and you can choose to pass it on or sell it to whoever you want.

For authors, the positive implications are probably a bit more compelling. NFTs can be encrypted so they are much harder to pirate. Because they offer an immutable record of where and when they were created, NFTs can make challenges to someone’s copyright much harder. (7)

Further, NFT books could be programmed to allow royalties to go directly to the author after every sale or resale. This would improve the existing royalty model where authors can wait weeks or months to get paid out by their publisher. (7)

What’s next for NFTs?

All the potential use cases for NFTs have clearly not yet been explored. And it goes without saying, that the technology will be better suited for certain applications more than others. However, it does look like the NFTs will continue to grow in social, economic, and cultural relevance over the next few years.

–Haan Palcu-Chang, Crypto Content Specialist at Purpose Investments


Sources

1.“Trading in NFTs spiked 21,000% to more than $17 billion in 2021,” CNBC: https://www.cnbc.com/2022/03/10/trading-in-nfts-spiked-21000percent-to-top-17-billion-in-2021-report.html

2. “Beeple sold an NFT for $69 million,” The Verge: https://www.theverge.com/2021/3/11/22325054/beeple-christies-nft-sale-cost-everydays-69-million

3. “PAK’s NFT Artwork ‘The Merge’ Sells for $91.8 Million,” Barron’s: https://www.barrons.com/articles/paks-nft-artwork-the-merge-sells-for-91-8-million-01638918205

4. “NFT In Healthcare: How Patients Could Monetise Their Health Data,” Medical Futurist: https://medicalfuturist.com/nfts-an-health-data/

5. “IDO documents,” Aimedis Whitepaper: https://aimedis.io/documents

6. “NFTs And The Future Of Commercial Real Estate, ”Forbes: https://www.forbes.com/sites/forbesbusinesscouncil/2022/02/16/nfts-and-the-future-of-commercial-real-estate/?sh=7d014f389bac

7. “NFTs for Books,” Book Riot: https://bookriot.com/nfts-for-books/#:~:text=%E2%80%9CAn%20NFT%20is%20simply%20a,good%20at%20a%20similar%20price.%E2%80%9D

8. “Three-in-ten Americans now read e-books,” Pew Research: https://www.pewresearch.org/fact-tank/2022/01/06/three-in-ten-americans-now-read-e-books/


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