NFT-2022: What to expect from a brand-new industry? Part 4

NFT is a huge branch of the blockchain economy that essentially formed before our eyes in 2021. And while few people knew what “non-fungible tokens” even were a year ago, by the end of the year, the most prominent corporations were already integrating NFT solutions into their products, and the market volume amounted to tens of billions of dollars. Let’s take a look at what we can expect from NFT in 2022.

Let’s look at new use cases for NFTs we’re certain to see in 2022. NFT is a new type of data that requires simple search, detection, and organizing mechanisms, so one particular emergent area will be powerful platforms created for this purpose. Furthermore, as NFTs become the basis of a person’s reputation and identity in cyberspace (Web 3.0), we are going to get social networks based on NFT ownership. Social signals will become an important NFT function.

Among the already existing social networks based on NFT ownership is Showtime – an Instagram for NFT owners and creators. Traditional web platforms such as eBay now support NFTs and allow searching for them. There are numerous NFT marketplaces as well, from the standard ones like OpenSea to specialized ones like Foundation, Mintbase and Paras.id.

We should also expect an NFT-based equivalent of LinkedIn. Social media platforms will develop based on the tokens we accumulate as we earn NFTs from past activities such as attending events, voting in DAOs, or providing liquidity in DeFi. We could see an NFT LinkedIn where our resumes are just a visual reputation space that shows past contributions, with people then identified and hired based on their NFT.

Another thing to look forward to is more NFT search engines. Amazon and Etsy already platform stores that sell collectibles, and they may well support NFT product searches in the future. Existing NFT marketplaces will also develop sophisticated search, discovery, and recommendation features.

Finally, NFTs will increasingly be seen as financial assets, made even more useful by various new mechanisms, such as revenue splits or NFT splits. The future will see an exponential growth of NFTs’ role in the financial sector.

Today, authors and artists can raise money for charity through NFT auctions by creating network funds to support community initiatives. NFT creators can pledge a portion of the auction proceeds to those funds, which will be automatically paid out when the NFT is sold. Now, if NFT creators want to collect money for a particular purpose, there is full transparency as to where the cash is going.

NFTs are fungible through fractionation: NFTX allows users to enter NFTs into a pool and mint an ERC20 token. Minting fungible tokens against NFTs is a step-by-step feature unlock as tokens can be used to generate income through DeFi protocols, improve price determination for NFT projects, and increase NFT liquidity by being traded through an automated market maker. Members of these fractional pools may have special rights such as voting when buying and selling the pool assets, renting out the pool NFTs, collecting dividends on income-producing pool NFTs, etc.

One distinct example is the Yield Guild project, which buys NFT game assets (like Axies in Axie Infinity) and then lends them out so that players don’t have to buy them upfront and generate income from the game. More revenue-generating NFTs are coming soon, such as Aave-integrated NFT announced by Aito.

There are already DAOs that buy NFTs as investments: PleasrDAO recently purchased Tor NFT for 500 ETH. FlamingoDAO, WhaleShark, and many other DAOs are also investing in NFTs.

One way to generate income from NFTs will be renting them for land rights. For example, landowners in metaverses like Cryptovoxels can charge users of their land rent. Cryptovoxels landowners add “employees” who can build on their land but do not own it. In the future, there will be smart contracts that landowners and tenants can use to specify costs, lease duration, and other conditions. Another way NFTs can produce revenue is through the ownership of music rights. Fan communities can unite and buy masterpieces from their favorite musicians.

Furthermore, users can split the NFT art collection by issuing ERC20 tokens and then exchanging them through Uniswap. DeFi protocols may develop features to optimize fractional NFTs. Platforms such as NFTfi currently allow clients to borrow using NFT as collateral.

Lastly, crypto projects that have not yet launched their token can issue NFTs to reward the early adopters. Once their tokens are established, they can distribute them to NFT holders.

All of these ideas are just scratching the surface of how NFTs can be applied. Two key developments will create an explosion of new, previously unimaginable NFT use cases in the near future.

The first is the new types of assets represented by NFTs as a shared mechanism that can express ownership over anything. So far, we have mainly used it for visual images, crypto games, and music. New asset types will create new use cases. These assets can include game assets from traditional game developers, texts (already appearing through Mirror), movies and videos, physical goods, real estate, characters from classic brands like Harry Potter or Disney, asset pools, and more.

The second is low transaction costs. Today, NFTs mainly exist on Ethereum, in a pricey transaction environment. When an NFT mint or transaction costs more than $50, the use cases are limited. As a result, today, we mostly view NFTs as luxury art. However, networks such as Solana, NEAR, Tezos, and others allow you to mint coins and make transactions for less than a cent. Without the constraint of high transaction costs, developers and creators will continue to invent new use cases for NFTs.