Nearly everyday, it seems non fungible tokens (NFTs) are in the news with high-priced sales and celebrity endorsements. You may also have noticed a barrage of influencers dawning their latest ‘jpegs’ as profile pics (PFPs) on your favorite social media sites. Indeed, thanks in large part to a push from athletes, recording artists and other famous personalities, mainstream interest in NFTs has grown considerably.
The hype surrounding NFTs is perhaps most clearly reflected in the reports of ungodly sums of money being spent on these digital collectibles. In 2021, for example, $69 million was paid for a single digital work of art titled, Everydays: The First 5000 Days, by artist Mike Winkelmann.
Speculation in the crypto market seems to create a never-ending sequence of stories for the media to latch onto. But as the public focuses on sensationalist headlines, NFT developers have been quietly working on a number of challenges that could change the future landscape for digital artists and the communities that support them.
These unique tokens have a number of real-world use-cases that have little to do with the entertainment complex promoting them. But what exactly is an NFT? What do institutions hope to accomplish with the technology? And what do current adoption rates say about future growth of the industry? The answers to these questions may help explain a paradigm shift occurring globally in the cryptocurrency space.
NFT adoption
Finder’s recent NFT Adoption Report has shown remarkable uptake of NFTs around the globe. Nevertheless, most people still aren’t even sure what they really are. Significant gaps in ownership, likely due to a lack of awareness, exist between countries, and within key demographics.
For example, in the US, only 2.8% of internet users own any NFTs at all. However, in the Philippines, that number increases to 32%. Other high rates of NFT ownership exist in Thailand (26.6%), Malaysia (23.9%) and the UAE (23.4%).
The report also shows that significant gaps exist between men and women owning NFTs. In Vietnam, a difference of more than 10 percentage points separates males (22.7%) and females (12.4%), with men dominating ownership in the space. In Thailand, however, women owning NFTs outrank their male counterparts by 7 percentage points.
Perhaps most significantly, Finder’s report reveals the potential for future NFT ownership. In all countries surveyed, adoption rates are set to increase. This growth will likely be fueled by knowledge of the technology, as adoption and awareness remain strongly correlated.
What are NFTs?
NFTs are cryptographically produced digital tokens commonly represented by works of art. Unlike Bitcoin, or other common cryptocurrencies that can be broken down into units of equal value, every NFT is unique. In other words, NFTs can’t easily be exchanged for goods or services.
NFTs are used instead to record the ownership of assets on a public blockchain. These items are often digital in nature. However, with the inherent ability of NFTs to authenticate transactions, they are also used to represent physical assets, like real estate and automobiles.
Novel NFT use-cases
While first championed by the art community, digital ownership has proven a useful tool across multiple industries. In many cases, NFTs have become an important component of future growth.
Decentralized Finance (DeFi) platforms, another crypto-based industry seeing explosive growth, are starting to incorporate NFTs into their economic models. NFTs can now be used as collateral for loans on some DeFi platforms. And with smart contracts - automated agreements executed on a blockchain - the transfer of that NFT, should you default on your loan, can happen automatically, without the need to hire debt collectors.
The metaverse, a buzzword in crypto-circles lately, will largely depend on the use of NFTs. These virtual and augmented reality platforms, incorporating multiple spaces for NFT-based avatars to mingle, will be centered around a digital economy. Everything from virtual land to the accessories adorning your personalized crypto-companion will potentially be tradeable as NFTs in the metaverse.
Other uses for NFTs include event ticketing and even digital advertising. Wherever you look, the list continues to grow.
A new crypto paradigm
Together, growing adoption and expanding use-cases for NFTs represent a revolution in the cryptocurrency space. From DeFi to the metaverse, people are interacting with this new technology at a growing rate.
But despite the important strides being made, NFTs remain in their developmental infancy. As the technology permeates through commercial enterprise, however, their use by the population will almost certainly increase.
In a world marked by constant adaptation, we stand once again at the precipice of change. I believe NFTs have the potential to shape the future of our global economy. And as their utility grows alongside new industries of the digital era, a shift in paradigm may soon see their adoption become nearly universal.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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Finder is a global financial technology platform which allows members to save, invest and spend via the Finder mobile app and website. Finder’s mission is to help people make better financial decisions and work with partners to connect via API into the Finder platform to offer saving and investment services and products. Finder was founded in Australia in 2006 and now operates in 50+ countries with 2,600+ product partners and 10+ million visits every month, serviced by 500+ crew passionate about helping our members achieve their full financial potential.
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