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As the cryptoasset marketplace continues to hurtle into another crypto winter, it would be tempting for investors and policymakers to focus on the current price declines at the expense of other areas. Tempting, but an approach that would be a disservice to the very investors that regulators are so actively trying to protect. Volatility is a part of any asset class, cryptoassets are still a new type of asset and technology, and so as painful as recent downturns are, they should not be the primary focus of investor conversations.
That said, it is important to acknowledge the reality that, of the wide array of cryptoassets that exist in the marketplace, non-fungible tokens (NFTs) have perhaps generated the most conversation and controversy. Widely popular and promoted by entertainers and influencers of all kinds, including many not normally associated with sound financial advice, the allure of NFTs has proven hard for investors to ignore. Nearly $40 billion have been invested into the NFT space in 2022 as of this writing, and with current declines in overall cryptoasset prices, a substantial percentage of these investments are likely underwater, if not nearly worthless.
Such dramatic headlines and damage, however, overshadow the very real and tangible use cases that NFTs can – and will – drive moving forward.
Digital identity. An idea and topic that, unsurprisingly, came to the forefront of the blockchain conversation during the last crypto winter of 2018-2019, the idea of self-sovereign identity and self-custody of information, has only become more important over the last several years. By any metric the value of data generated by institutions represents a substantial portion of the overall value assigned to said company; the S&P 500 has been dominated by such a shift for decades at this point. The importance of personal information, and control over that personal data, is a reality that has only recently come to forefront of policy and market conversations.
The fact that technology firms leverage personal data to help generate billions in profits while being relativley poor stewards of said data, and as governments the world over look toward digital currencies and identities as a potential policy tool, the trend is clear. Control over data will, in large part, control identity; what better tool to assist in this pivot than blockchain? An immutable and uncensorable ledger of transactions, able to be viewed by any member at any moment with full transparency, and also to be used by anyone with an internet connection, is a powerful tool indeed.
NFTs are, at the core of the idea, a tool by which ownership and provenance can be established, connected, and traced between the physical and digital worlds. Identity transcends either specific realm, so it makes sense that the future of identity will be at least partially blockchain based.
Real estate. Purchasing and transacting with real estate has never been presented as an especially seamless or enjoyable process. Be it commercial or residential, real estate transactions are time consuming, involve numerous verifications and reviews, and each additional touch point increases the cost of said transaction. Blockchain based applications and programs are already being implemented to attempt to streamline at least some parts of these transactions, with promising results already being generated. Returning back to the concept of NFTs, it also seems real estate records and transactions are an area where the unique nature of these instruments can be effectively leveraged.
NFTs, being unique and differentiated assets while also possessing the transparent, traceable, and accessible qualities of other blockchain-based transactions, present an almost tailor-made solution to issues involving real estate title and insurance. Developing such an immutable record of ownership and provenance presents a real-world application of NFTs that can deliver savings and benefits for millions of market participants.
Healthcare records. The healthcare space is always a complicated one to discuss, but especially in the United States the importance of quality data that is also able to shared securely by private sector organizations is of paramount importance. Debates around vaccine records, vaccine passports, and the associated implications of such records will be had over the next several years, but that misses the broader point. Demographics cannot be ignored, and as the global population continues to age – requiring more medical care over longer life spans – the importance of secure and shareable records able to be linked to an individual will only increase.
Blockchain applications already exist in the healthcare space, so this is not an entirely new concept, but the integration of NFTs on top of existing blockchain tools is a positive step forward. Since every individual is unique, and every NFT is unique, connecting these two pieces of data – linking back to the evolving conversation around self-sovereign identity – makes logical and business sense. Once again this presents a unique set of circumstances in which blockchain and blockchain-based applications can deliver tangible benefits for organizations and individuals alike.
Cryptoassets have entered a new crypto winter, and with this comes significant losses for some more recent investors; this cannot be discounted. That said, and as what usually occurs in the aftermath of such drawdowns and price declines, this is also an opportunity for real-world and tangible use cases to come to the forefront. NFTs might be viewed by some as the ideal example of speculative activity, and this is certainly true in some cases, but NFTs also present an innovative approach to integrating blockchain with existing industries. NFTs are much more than crypto artwork, and realizing that fact is the first step toward substantive investment, development, and adoption.
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