NFTs: Its More than JPEGs
If you’re expecting another article about Bathing Ape Yacht Club or CryptoPunks, you may want to skip to the next post. If you’re interested in learning about real-world use cases of how NFTs can provide real utility outside of the hype or art world, grab a seat. I’ve been studying the technology of Non-Fungible Tokens trying to understand what all the hype is about. Do these Cryptopunks know something I don’t know, and why is Justin Bieber a believer?
I have learned that it’s a cash grab that will leave some people holding the bag, or maybe these art NFTs will stay around longer than Tomigotchis. Like all things, some of it is real, but a lot of it is fake. The people who get in on the right NFTs would have placed good “bets,” but if one out of ten NFTs holds value or rises in value, it’s fair to say that it is still a gamble. Hoping your NFT is the golden ticket to Willie Wonka’s chocolate factory! (mmm sounds like an excellent NFT idea). Anyway, back to the real reason you’re here — to learn why NFTs are not just hype. In researching the technology behind NFTs, I’ve been able to identify real-world applications of NFTs.
There are three critical functions of non-fungible tokens that can power B2B and B2C use cases. The core feature of non-fungible tokens is that they are unique. They are similar to fingerprints meaning someone can not modify them without consensus within the blockchain or manipulation of the blockchain they were created on and minted. This non-fungibility allows creators to leverage this in many ways, one being Authentication. When we speak of Authentication within the scope of technology, we refer to the Authentication of a user or user account. Authentication is used to provide permissions access to data or the ability to execute an action. Non-fungible Tokens can be implemented in a way to certify credentials. The Certification of a credential within the context of NFTs provides transparency for the specific credential, thereby providing a more well-known authorizing body to certify an organization or individual has met the stated criteria to acquire and possess the NFT certificate in their wallet. A credential can be a degree, Certification of ownership, Certification of approval. The third function of this technology is the ability to provide transparency through its Traceability. The power of NFTs and blockchain technology to provide a level of transparency and show a ledger record is without the need for a central validating entity allows more trust within the marketplace or system.
Certification
Land registries have been around since the 1700s. The mechanisms of land ownership and proof of ownership currently exist through the city-state land registries and are stored in filing cabinets in centrally located facilities. Depending on the country, they might also keep digital records of deeds and land titles. The deed or title transfer is notoriously long even in the most advanced nations and easily forged in developing countries. We now have a technology that does not require a central entity to prove ownership. This technology is powered by a network of validators that ensure that the certificates of ownership through the NFT non-fungible tokens validate the NFT and can even fractionalize ownership. In fact, through this technology, you can have thousands of people own something that is only $100 at a thousandth of a percent without a central entity serving as the manager to ensure the equitable distribution of shares while taking a fee set by that entity. There are initiatives around the world like the government of Sweden and bold entrepreneurs in the UK using NFT in this space already.
Education is another use case where NFT certificates can be used to provide decentralized transparency. We are currently in a transformation within the education space where people all over the world are leveraging MOOCs to educate themselves and gain skills that allow them to get remote jobs in the technology space as employees or freelancers. We’re also seeing people use skills that will enable them to become entrepreneurs by specializing in a specific field, craft, or marketplace. They can then utilize these skills to earn money for themselves and monetize that knowledge to teach others as well. It’s fair to say that people are learning more than ever, and autodidactic people can find whatever they want to learn online. With this newfound freedom of information, there is also a lot of misinformation. People are selling skills that they don’t have or marketing information that they are not truly educated enough on to be able to sell or teach others. With this new education system, how does one validate and verify that someone has the skills or completed a course or has a base knowledge they claim to have. Certificate NFT provides an answer by validating and bringing transparency to the criteria for the credential and making it easy to validate that the individual has successfully met the requirements set by the issuing organization. BCDiploma is doing just that by providing the technology to organizations that want to make it easier to validate a person’s stated credential.
Traceability
An example of using certificates for assets in the supply chain would be when the owner can redeem their inventory at a checkpoint or storehouse and ensure that the stock is safe with a third party, ensuring that internal or external actors do not steal it. Those who work within the supply chain are very familiar with the problem. There are many opportunities for bad actors to take advantage of the inefficiencies in any supply chain. The challenges include product origin, material and inventory loss, and the exploitation of the misinformed or uninformed producer, farmer, or miner. NFTs can be used to trace the origin of products such as conflict diamonds. Debeers have begun to use blockchain technology to provide transparency within the supply chain to ensure they know the source of their acquired diamonds. Google has partnered with miners and mining companies across South America and Africa to provide Traceability of the minerals used in our phones to ensure the fair treatment of miners and provide transparency to the end consumer they are supporting through their purchases. The United Nations also uses this blockchain technology to ensure that farmers get their fair share of the goods they produce.
Authentication
Issues of corruption are fairly well known, whether it’s in the disbursement of international aid, government funds, or public policy. Different schemes prevent well-intended funds to help reach the most vulnerable when there are few checks and balances. Whether it’s people taking money directly from the funds to bribery or redirecting funds completely, blockchain technology can address this issue of misappropriation. Specifically, NFTs enable transparency through private keys and ownership of NFTs. An NFTs unique fingerprint provides the hierarchy for permission access. It allows the security of private keys to ensure limited access while also allowing transactions to be public for all stakeholders involved. NFTs, as an authentication mechanism, enable transactions to be transparent to the public from their initiation to completion, from the source to receiver, from the production line to the consumer. We’re seeing international development organizations like the World Food Program ensure that those intended to receive aid get the funds directly into their account. In the Philippines, an enterprising 12-year old used the technology to power a fair election process.
The power of NFTs is not just a tool to get rich quickly. If we strip away the hype of the metaverse, cryptokitties, and Christie’s auctions, we can see that the value of unique digital assets allows us to create new solutions that humankind has developed solutions for but have an opportunity to be improved. NFT technology can improve the lives of the most vulnerable populations around the world by advancing them economically, transparency in governance, and shoring up economic gaps for business owners.
