Non-Fungible Tokens — Real-world Use-cases Explored
How NFTs could tokenize the world!
NFTs are slowly tokenizing the world as we know it. Each new tokenized asset on blockchain represents a small step forward towards a new virtual digital economy. NFTs have an incredibly diverse potential use-case, let’s deep dive into some real-world examples below.
Shut Up and Drive
In 2018, I had to drive my folks 200km from Kuala Lumpur to Ipoh just to have a title deed reprinted by a local land office so that a property could be sold — only to realize that because one bloke just happened to be on leave on that very day, we had to come back some other time, sigh.
Centralized institutions have a lot of roadblocks — this time all we needed was someone’s signature. For a few seconds of a pen scratching on paper, we could have saved the need for another 400km round trip.
The obvious alternative to centralized institutions is a Digital Autonomous Organisation or DAO — it’s a go-to answer for blockchain enthusiasts and Ethereum evangelists everywhere to the point that it’s hard to have a conversation about blockchains without talking about the DAO.
But how can a DAO help with this problem?
Your Lucky Ticket
The bad news is that the DAO alone won’t be able to provide a solution.
The good news is that improvements implemented in the Ethereum blockchain among others have made a solution possible. The ERC-1155 proposal which was implemented in July 2018 rocked the technology with the introduction of Non-Fungible Tokens or NFTs.
Prior to ERC-1155, fungible tokens mostly following the ERC-20 standard ruled the Ethereum blockchain. With ERC-1155, a smart contract can have many tokens just like ERC-20, except that all the tokens are unique.
A simple way to imagine this is a lottery ticket. The whole stack of tickets look the same, all except the lucky number on them. ERC-1155 tokens can be serialized in this way and even the draw itself can be performed by the DAO — similar to how the Trueflip DAO operates with its on-chain lottery.
So how does a lottery ticket solve my problem? Keep reading.
The Owner’s Manual
Since ERC-1155 tokens are unique, smart contracts can hold some metadata for each particular token. Such metadata can be matched against off-chain databases — just like those filing cabinets in that Ipoh office. Given how blockchains can provide proof of identity through a simple signed message, a title deed can be “tokenized” into an NFT, thus connecting it to the DAO.
If that title deed my folks needed to get reprinted were an NFT, we wouldn’t have to even leave home. Broadcasting a signed transaction on the blockchain would have transferred the title deed to a new owner in less than the time it would take to even get the car ready for a road trip.
We all know that a title deed is a document of ownership for a property. We have pink slips for cars, certificates for jewelry etc. All of these have the potential to be tokenized.
Though one might ask, why bother? Is it unnecessary technology complicating matters further?
First of all, it would allow a DAO to regulate and handle transfers of ownership and simplify the process. A single transaction can jump over hours of paperwork. The DAO can even utilize smart contracts to facilitate transfers that require multiple signatories, shared ownership, and even inheritance from a last will and testament programmed into a smart contract.
The Breadcrumb Trail
The blockchain, technical jargon aside, is really just a ledger that records transactions. It’s a record of every time anything on that ecosystem has ever changed hands since its genesis. This adds traceability to NFTs. From the moment that an asset is tokenized, blockchains can keep a record of every time it has changed ownership, attaching an elaborate history of where it has been, how long it has been owned by someone and the exact time it changed hands.
This would be handy for assets such as vehicles — the used car market is a great use case where everyone involved wants to know about the history of a vehicle. Combining this with insurance smart contracts can even keep track of a car’s use, mileage, maintenance, and can even tell whether it has been in an accident before.
One can even implement pre-sales of tangible goods with NFTs as redemption vouchers that double as proof of ownership. The time-stamping of transactions can even provide priority for those who made their purchase first.
Hold My Beer
You don’t necessarily have to transfer ownership with an NFT. Tokenised assets have yet another practical use — as collateral.
Smart Contracts can also lock tokens, just like NFTs for a period of time or under a set of conditions. These NFTs, if implemented as ownership tokens, can be used to put property and other assets up as collateral with a lender that will hold the NFT. Better yet, if the loan is dealt in cryptocurrency or other tokens, the entire loan process can be automated via a DAO — from interest to repayments and even the defaulting process.
You Got the Keys
Just like the joy of being handed the keys to a new car at the showroom, you know you own the car when you hold the keys. NFTs also are secured ownership of your assets, so long as you and only you hold onto the private key of your wallet.
Of course, we have to acknowledge the ever-existent problem of forgotten or lost wallets as a common weakness for NFT-backed proof of ownership but this is still an underlying problem for blockchain adoption around the world. Often the misconception of how many actors have “hacked the blockchain” don’t actually tamper with the chain itself but rather the main weaknesses — its users. From fake tokens to hijacked wallet apps, attackers often pull out the rug from under unsuspecting users who may be new or unfamiliar with how things work.
The wonderful aspect of the blockchain’s current adoption is that you get to choose your security level. At the top of the list is the motto “Not your keys, not your coins.” As long as you and only you control your private key, you are in full control of your assets big and small. For those who want something easier, managed services and wallets like Crypto.com, Coinbase and more can host a blockchain wallet for you, but you need to be certain about whether the said wallet is compatible with NFT. Further down that list would be trusting your one friend who can’t stop talking about Bitcoin to figure things out on your behalf.
Bottom line is, the less people you have to trust, the better.
The Big Business
Perhaps putting your house on the blockchain with an NFT isn’t your thing, that’s understandable — appealing to homeowners can be difficult.
Let’s shift our focus to realtors and landlords — just like some modern blockchain technologies, the promise of scalability appeals the most to those who have a lot of assets to manage. DAOs can offload a lot of the human work required to manage realty onto the blockchain and in turn, minimize human error in the pipeline. Given time if cryptocurrency adoption picks up and becomes more widely used, the DAO can then operate to collect rent, installments, and potentially automate a large part of the acquisition process.
This also applies to establishments that lease large quantities of assets such as aircraft and industrial equipment — NFTs can put inventory management onto the blockchain to tap into the automation it can provide.
Meanwhile, with specialized hardware that can be one day built into objects, items of value and collectibles from paintings to sculptures can also be tokenized, which then unlock the potential to use them as collateral as mentioned earlier as NFTs can be a secure way to prove ownership.
Making the Leap
It is possible that in the future, you could receive a digital deed along with property or assets you acquire. It could be sent to your email, given to you on a USB stick, printed in the form of a QR code, or even embedded into the hardware of the asset itself.
Right now, NFTs are still mostly a novelty on the blockchain. Apps like Cryptokitties and Enjin are a fun use case where collectibles can be traded freely.
Soon, services like Rarible could emerge as formidable and widely accepted protocols to tokenize the world of digital art. The next artwork masterpiece could be made in Photoshop and tokenized to become just as tradeable and valuable as a physical, traditional painting.
We live in a world of non-fungible things. While it seems that the blockchain is only now playing catch-up to this, one day we might be chasing after NFT tokens that have significance to us not just in monetary value but sentimental value too.
About RiveX Foundation
RiveX is a chain agnostic interoperable layer-2 solution across different blockchain protocols. RiveX aims to empower the next generation of decentralized applications, decentralized finance and enterprise solutions. RiveX has comprehensive interoperable DeFi solutions such as RX Wallet which aims to integrate DAPPS from different blockchain protocols to enable an interoperable DeFi ecosystem within RX Wallet itself.
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