Closing the Divide: The Progression of NFTs Towards Practical Application

Non-fungible tokens (NFTs) have significantly progressed since Beeple’s $69 million digital artwork sale created a stir in the digital asset sector. Despite the crypto ‘winter’ of 2022 impacting this developing ecosystem, the most recent Dapp Radar report indicates that the NFT market achieved $2.9 billion in trading volumes during Q2 2023.

What is particularly fascinating to note is the swift transformation of NFTs. They are evolving from simple JPEG collections into utility-driven digital collectibles, with fashion brands such as Nike and Adidas entering the space by launching their own NFTs. Additionally, forthcoming NFT-based social applications like Peer are set to redefine digital interactions in our interconnected society.

In light of these recent developments, a pressing question arises: will utility-focused NFTs catalyze the next bull market, and if so, what applications are already underway? As a dedicated supporter of the NFT ecosystem and its value proposition, I contend that the focus should not solely be on the bull market but rather on establishing a foundation for an asset class that will connect the physical world with virtual economies.

Currently, trends suggest that the forthcoming wave of NFT adoption will likely be driven by utility-centric applications. This shift is already in progress, with numerous traditional sectors developing or incorporating utility NFTs to enhance their value, as will be discussed in the following section.

Utility NFTs: From JPEGs to Real Value

As with any emerging technology, it requires several years of experimentation to identify the ideal product-market fit for widespread adoption, and NFTs are no exception. Initially, the excitement revolved around possessing a unique JPEG from esteemed collections like the Bored Ape Yacht Club (BAYC), Cryptopunks, or Azuki, but that is no longer the main emphasis.

Investment is gradually redirecting towards genuine value, with significant progress being made in tokenizing real-world assets (RWAs) through NFT technology. Ideally, NFTs are being employed to represent physical assets such as real estate, stocks, and private equity on the blockchain. Estimates from the Boston Consulting Group (BCG) suggest that this burgeoning market could reach $16 trillion by 2030.

Some major players in the traditional banking sector, including Goldman Sachs, have recognized the untapped potential and are investigating the tokenization of financial instruments.

“We are actually exploring NFTs in the context of financial instruments, and actually there the power is actually quite powerful,” – Mathew McDermott, global head of digital assets at Goldman Sachs.

In the fashion sector, NFT wearables are gaining traction, with prominent brands like Adidas and Nike venturing into the domain of digital collectibles. For example, Adidas has been broadening its digital fashion presence, having partnered with BAYC in 2021. Currently, Adidas features various digital collections, with the Adidas Virtual Gear Genesis collection being particularly notable.

What distinguishes these fashion NFTs is their enhanced customizability compared to conventional JPEG NFTs. Owners can style their profile pictures (PFP) and enjoy additional benefits such as exclusive club memberships and access to special product launches.

Shaping the Future of Social Applications

Certainly, the conversation about the transformative potential of NFTs would be incomplete without addressing advancements in social media.

While Mark Zuckerberg’s Horizon World metaverse did not achieve success, NFT-powered social applications like the one proposed by Peer possess significant potential to enhance our daily interactions.

This Web3 social app fundamentally introduces a digital environment that employs augmented reality (AR), allowing users to connect and virtually explore locations that may otherwise be inaccessible to them in the physical world. Moreover, Peer’s web3 social app enriches the experience by enabling users to drop or mint digital assets in real-world settings, offering an opportunity for users to gain real-world advantages while virtually exploring their surroundings.

Conversely, as NFTs subtly disrupt the social media landscape, Web2 giants, particularly Twitter and Facebook, continue to compete for supremacy. What they appear to overlook is the potential rise of NFT-powered social applications as a more formidable force, albeit gradually. With both innovators and users exploring their alternatives, it would not be surprising if the next generation of social applications is constructed on NFT technology.

Conclusion

With macro conditions still uncertain, the crypto market is evidently not yet fully out of the woods, but it is during such times that innovators engage in substantial development. NFTs are clearly emerging as a forward-looking innovation and perhaps the most substantial value yet offered by decentralized applications. What was once ambiguous is gradually becoming clearer – NFTs were not intended to be merely JPEGs but digital collectibles capable of genuinely transforming contemporary industries. And what better moment to stay informed about developments than when the crypto waters remain calm.