There is currently so much fuss in the NFT space as the crypto subsector has lately become the centre of attraction. It has gathered so much pace in the past few months with the news of big sales making headlines. A couple of weeks ago, an NFT art was sold for $69 million making it the third-priciest sales made by a living artist.
NFTs have reeled in a better way for artists to make enormous profits from their works. Lately, the technology is starting to spread across other fields as well, including sports, music, virtual assets etc.
However, a very crucial question to ask is if NFTs have a future in the DeFi ecosystem, especially in the post-pandemic era. Another big question is how mainstream users can benefit from this disrupting technology.
What Are NFTs?
An NFT is a cryptocurrency that can take the form of any digital asset like JPEG, songs, video clip etc. They are similar to other cryptocurrencies in that they are managed on the blockchain. NFTs hold their value as a form of cryptocurrency but unlike others like Bitcoin, they are unique and non-exchangeable.
For instance, an artist can convert one of his artworks to an NFT and decide to auction on an online marketplace. The buyer or highest bidder walks away with a non-fungible digital file– the NFT – instead of physical artwork.
The Future of NFTs in DeFi
NFTs are unique – like a plane ticket – in that they can’t be owned at the same time by two persons. Hence, their value also depends on the scarcity created. The draw with NFT is that they are programmed on a smart contract and can take anything digital, like real estate, gears, accessories, art etc.
The fact that they utilize smart contracts makes DeFi their major market. Therefore, the potential of NFTs in the DeFi space could be far-reaching in the future. NFTs are managed on the blockchain, so, there is no fear of duplication since ownership details can be verified. Areas where these assets can thrive in the DeFi space include:
Recently, an NFL player Patrick Mahomes sold his NFT digital art for $3.7 million, so NFTs are not new to sports. However, a cool implementation could be to leverage fans nostalgia. Imagine if there were NFTs for the “best moments from NBA history.” Although this is not impossible, however, NBA Mavericks owner, Mark Cuban revealed that creating the market could be a bit challenging.
NFTs can be used to digitalize individual unique features such as appearance, medical history etc. This will make it difficult to falsify personal records. It will also help people have better control over their data and can be used as proof of identity when required.
Celebrity cards, digital lands, virtual jerseys and many more are currently traded as NFTs. However, another twist could be if fashion-related items can be converted to NFTs. For instance, Andres Reisinger, a designer from Argentina sold some virtual furniture for $70,000. So, there could be a broader market in the future for Fashion in the NFT space.
Although there are quite some controversies about the climatic effects of NFTs since they are managed on the Ethereum blockchain. NFT supporters claim that it can help the digital art market if low-energy blockchains are used.
There is no doubt about the potential of NFTs in the DeFi space and how they can help with the sales of illiquid assets. Although NFTs make up a little percentage of Ethereum’s transactions, there are current efforts on how to employ safe environmental practices.
Ignoring the hype, there is no telling how vast NFTs can grow in the DeFi ecosystem, but its future is definitely promising. This innovative technology, although in its infancy, will evolve in the future.