Blockchain’s potential (predicted to grow from a $4.67 billion market in 2021 to $163.83 billion by 2029) is evident in the technology’s many benefits. Blockchain offers a decentralized marketplace with no need for an intermediary. With blockchain, every transaction is direct-to-consumer; no bank, no Spotify, no Etsy, no university. These transactions and the resulting smart contracts are also transparent and verifiable. Unlike popular marketplaces like Spotify or Etsy, both the original creator and current owner can benefit from an increase in value realized during resale.
Non-fungible tokens (NFTs) are unique assets, as compared to fungible tokens, like units of cryptocurrency, which are identical. However, NFTs may be available in a 1:1 (virtual to physical) ratio or there may be multiple NFTs available for the same good or experience.
The uniqueness of NFTs, when paired with the unparalleled benefits of blockchain, presents the opportunity for new business models. While some potential NFT use cases remain hard to imagine, these NFT business models—which can be classified into four general categories—have already been realized.
This NFT business model is probably the most familiar and is primarily discussed as it relates to digital art. However, digital collectibles also include music, sports highlights, land and livestock, fashion, and other intellectual property—even patents. Industry executive Simon Yu eloquently explains the draw of this NFT use case, saying in an interview with Finextra, “People want NFTs for the same reason they want a Picasso. They want to show it off to everyone. The difference with a digital asset is that you can showcase it to an unlimited amount of people – and prove irrefutably that you own it.”
The current model of exclusive communities places power (and profit) with a small number of people. Think about an online game and other subscription services, where reoccurring fees are exchanged for member privileges.
While your membership allows you access to a gaming community, there is likely no way for you to benefit financially from your hours of gameplay later on. The software company is the one that profits from your membership. But what if, because of NFTs, you could monetize your efforts? This could be through the sale of accessories you bought, earned, or collected in the game’s metaverse, or the sale of your place in the community. This model is currently used in decentralized autonomous organizations (DAOs) and could potentially be applied to not only gaming but fantasy sports and other membership-based communities as well.
Perhaps the most headline-grabbing attempt at an NFT community yet? A golf club.
Traditionally, proof of experiences was documented on paper. In many cases, like a college diploma or a ticket picked up at the box office, this is still true. Paper documentation has many drawbacks, including how easy it is to lose or replicate. Now and in the future, NFTs could represent experiences such as education, concerts, sporting events, and travel.
Because of blockchain’s inherent ability to cut out the middleman, this shift in how we access and document experiences could mean fewer universities (the intermediary between professors and students) and ticket sellers (the intermediary between performers and attendees). In some cases, these experiences could happen virtually, further eliminating much of the physical space required.
Of course, this is a vast oversimplification of how NFTs could change experiences. However, it’s exciting to think about how this application of NFT technology could reduce the middleman’s fees we pay for entry to a concert or give athletes some of the profits when a playoff game ticket resells for multiple times the price it was originally purchased for.
The ability to secure and verify information on the blockchain makes NFTs a solution worth considering for personal information as well. Just like replacing paper tickets, NFTs could stand in for identifying documents and healthcare records. Even voting could (someday) take place using NFTs. Personal information that is less concrete could also be stored and shared as NFTs, including social or “influence” scores.
Combining NFT Business Models
These four business models can be shaped into hundreds of different NFT use cases. For example, gaming communities often include collectible in-game assets, like a virtual Gucci bag purchased in Roblox—for more than the physical purse. Gary Vaynerchuck is one of four founders behind Flyfish Club, a private restaurant community that offers “various culinary, cultural and social experiences.” Virtual galleries help people experience NFT collectibles. And, perhaps someday soon, we’ll see social networks created specifically for NFT owners.