When most people hear “NFTs,” or non-fungible tokens, they may roll their eyes or think how crazy it was that people used to pay six figures for digital images of apes. Others may associate NFTs, which rose to prominence during the 2020-21 cryptocurrency bull run, as another example of blockchain-based scams. And these thoughts are understandable considering how badly the market crashed in 2022.
Blockchain and Web3 projects have emerged from the down market with a renewed mission. This means more emphasis on real-world value such as tokenized assets and decentralized finance products and fewer token launches based purely on speculation.
This trend can be seen by projects building platforms and products before launching a token, which was not always the case before the last year or two. As such, there has been a substantial decline in crypto-related scams and hacks—staples from the 2022 bear market plunge.
Since many would argue that NFTs don’t typically hold any real-world value, the question is what, if any, is their role in the revamped Web3 space?
Long gone are the days of million-dollar sales that symbolized the hype-driven 2021 NFT craze. Like cryptocurrencies and Web3, NFTs have evolved with time, presenting the industry with a wider variety of use cases that go far beyond a member’s club or speculation.
To understand how NFTs provide more utility and value for users, it’s important to be familiar with the underlying technology that they use.
Just like with most cryptocurrencies, NFTs are built using blockchain’s decentralized ledger alongside smart contracts to establish the rules for their creation, transfer, and use. However, NFTs use a different token standard that removes their fungibility and prevents them from being split, while providing a unique identifier that enables indisputable ownership. When an NFT is sold or transferred, the smart contract automatically updates the blockchain with the owner’s wallet address.
While digital art is the most common association with NFTs, the reality is that it was just the first and most prominent use case. Digital art NFTs will still exist as a niche community within the broader crypto ecosystem but the technology on which they are built can serve as a foundation for so many wider real-world applications.
Vixichain, a layer 1 blockchain solving institutional reluctance to interact with public blockchains, for example, is designing a “non-fungible stable token” for banks to engage with crypto and decentralized finance on public blockchains in a compliant and privacy-oriented manner.
Since transaction history is fully accessible to anyone able to read a public blockchain’s code, Vixichain blends NFT traceability and proof of ownership with a stablecoin’s ability to serve as a universal medium of exchange. This allows Vixichain’s stablecoin to securely link its network of banks with blockchains and access the vast majority of decentralized finance protocols, where most of the industry’s liquidity sits.
Vixichain’s NFT stablecoin is backed by fiat currency and stored in a transparent trust account to serve as liquidity reserves. The project is still in the development stages but demonstrates a unique use case of NFT technology that bridges the divide between traditional banking and decentralized finance.
By bringing banks a way to interact with public blockchains without needing to jump through hoops, Vixichain demonstrates how NFTs can evolve to offer tangible benefits to institutions. By repurposing the underlying technology behind what was thought to be a superficial use case, Vixichain puts a new spin on NFT usage beyond a collectible.
Aside from institutional usage, NFTs have been serving as a proof of authenticity for several luxury items while also being used by artists to tokenize royalties of songs, granting them greater control over their music. NFTs are even starting to be used to improve supply chain management by applying unique digital identities to verify authenticity and combat counterfeiting.
As more industries recognize the potential of blockchain technology to help enhance efficiency, we can expect to see more unique NFT applications.