In the second part of our series focusing on NFTs (Non-Fungible Tokens), Francesco Vincenti, an NFT creator, looks at the applications for NFTs in finance.
Click here if you missed the first article in this series.
When I explain NFTs (non-fungible tokens) for the first time, I never give the same definition twice.
“Ethereum hasn’t been built just for financial applications”
The most straightforward way to define an NFT is: the first means of giving digital assets three of the same characteristics of physical assets: ownership, marketability and tradability.
Technically, an NFT is a blockchain-based technology able to provide a certificate of ownership on digital assets. This enables us to convert any web content into an investment asset. In these early days, we can summarise the overall utility of the blockchain technology for humankind into a few words: maximisation of financial freedom.
NFTs could have a major impact on finance and fintech by tokenizing a wide range of assets
It’s important to underline that most advancements made by blockchain so far are in DeFi (Decentralized Finance), however Vitalik Buterin recently commented at the Ethereum CC in Paris, “that Ethereum hasn’t been built just for financial applications.”
Most NFTs applications are built on top of Ethereum, a leading blockchain today. NFTs could have a major impact on finance and fintech by tokenizing a wide range of assets, and connecting real-world finance origination to DeFi markets.We are living in the era of digital transformation and video games, so NFTs are well-placed to impact on culture. New generations value digital goods as previous generations valued physical goods, and spend nearly as much time in the digital world as they do in the physical world.
Here are some financial uses for NFTs:
- Investments (personal and venture)
- Crowdfunding
- Tokenization of real-world assets
- Virtual real estate
- Fractionalization
- Staking
- NFT-backed loans
- Collateralization
- Lending
Finance capital no longer has a need for intermediaries
NFTs allow for decentralization in these uses. In blockchain, decentralization refers to the transfer of control and decision-making from a centralized entity (individual, organization, or group thereof) to a distributed network. Thus, by storing data across its peer-to-peer network, the blockchain eliminates a number of risks that come with data being held centrally.
Distributed Ledger Technologies (DLTs) are a major breakthrough. DLTs mean that finance capital no longer has a need for intermediaries. Middlemen are currently necessary in order for parties to establish trust in transactions, trades contracts or investments.
The advantages of decentralizing investment could be: lower friction for transactions due to automation, much quicker (real-time) results and analysis of market conditions, greater security through transparency, and a higher level of customization for financial products and services.
The NFT and DeFi duo will allow a complete stranger to lend you money directly. No identity will be revealed and no audit is performed on either party.
Tokens are the essential part of this new digital economy: they consist of payment tokens, security tokens, utility tokens, governance tokens and hybrids. There are a variety of ways NFTs have already begun to be utilised for financial purposes.
An alternative personal investment
First, NFTs are being used as a personal alternative investment by people that include digital assets in their portfolio, varying from digital art, collectibles, in-game assets, music, sports cards and utility tokens. These categories open to a new world of investment, since for the first time, you can own a piece of the web or content from your favourite creator. This allows investors to invest in creators. If a creator is anyone using creativity to produce something new, and culture is the history of human creativity, then buying an NFT means investing in culture.
NFT industry is being validated with platform investment
Leading ventures have also validated the NFT industry by investing in some of the best apps and platforms. The largest NFT marketplace, Opensea, is backed by Andreessen Horowitz . Another major firm investing massively in the NFT industry is Coinbase Ventures, which is funding some of the flagship projects as Dapper Labs , Bitski , Rally and Audius. Visa bought a CryptoPunk NFT, declaring to their stakeholders that “NFTs will play important role in the future of retail, social media, entertainment, and commerce and by buying a cultural icon for the crypto community we’re just at the beginning of our work into the space.”
Other funds creating informative content about NFT and investing are Metapurse Fund and Delphi Digital.
With NFTs, the future of crowdfunding
Ethereum: The Infinite Garden is a documentary film about the history of Ethereum, entirely financed by a crypto crowdfunding campaign. Thanks to the tools created by Mirror, they were able to raise more than 3M $ in 24 hours.
How was it possible to raise the funds in such a short time? By the incentives that NFTs provided to top contributors. Investors received exclusive NFTs and on-screen film credits based on their ranking in the crowdfunding leaderboard.
Parallel – this is a video game developed on the blockchain that is a clear example of using NFTs for crowdfunding. The team behind the game created NFTs as an in-game asset to be sold to the community before the launch. They used the revenues to fund the game development from the concept through to the beta version. NFT buyers will be able to use their NFTs in the game once it is ready, allowing early investors access to exclusive features. This is a level of participation and interaction between customers and creators never seen before in game development.
Since NFTs are assets transparently stored on the blockchain, the developers are able to verify the owner, and consequently the rights attached.
Francesco Vincenti, creator of 2 LIVES, Jersey’s first NFT Art Exhibition planned in fall 2021.
Click here for information about 2 LIVES and click here for information about Franceso Vincenti.
We are seeking funding from corporate sponsors or private individuals who share our vision of delivering growth of Jersey’s technology, finance and culture sectors. If you are interested in sponsoring 2 LIVES we’d love to talk with you. Details are available here or email us at [email protected]
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The information contained on this website and any resources available is not intended as, and shall not be understood or construed as, financial advice. The publisher and/or author are not an attorney, accountant or financial advisor, nor are they holding ourselves out to be, and the information contained on this website is not a substitute for financial advice from a professional who is aware of the facts and circumstances of your individual situation.
