The NFT market is still in its infancy
6/20/2022, 05:05 PM
The writer is Affiliate Professor, HEC Paris, and a member of the EU Blockchain Observatory.
When it comes to NFTs, the art and digital gaming worlds have been on a roller-coaster of late. The dominance of non-fungible tokens in these markets has also drawn most of the attention. Many believe that the next big breakthrough will be to designate ownership for virtual goods in the metaverse. But what if NFTs could also provide solutions in cumbersome, archaic systems for securing property rights, thus unlocking value from tangible assets? Such possibly transformative uses of NFTs are only vaguely starting to take shape on the economic and legal horizons.
Technically, they are unique cryptographic tokens that exist on a blockchain and cannot be replicated. Unlike cryptocurrencies, they cannot be traded or exchanged at equivalency. By “twinning” an NFT with a particular version of a digital work, it becomes possible to differentiate it from its myriad other versions and thus ascribe a distinctive value to it, conferring proof of ownership on a single identifiable holder. NFTs already represent and “tokenise” physical objects, items such as artworks and luxury goods, expanding the attributes of their ownership into the digital world and permitting more efficient and secure transactions. Experiments in real estate are now being undertaken as a new way of providing needed liquidity in a system that has historically been hostage to transaction costs. The fact that NFTs can act as immutable proof of ownership and provenance could help solve a persistent problem when it comes to property in developing countries. Peruvian economist Hernando de Soto argued early on about blockchain’s potential to establish a cost-effective mechanism for formalising property rights for the poor. This would, he estimates, unlock $10tn of formerly “dead capital” around the world.
It also seems increasingly possible that the joint ownership and crowdsourcing investment of NFTs could be used to support the preservation of world heritage sites, national artistic masterpieces or threatened biodiversity zones
When it comes to NFTs, the art and digital gaming worlds have been on a roller-coaster of late. The dominance of non-fungible tokens in these markets has also drawn most of the attention. Many believe that the next big breakthrough will be to designate ownership for virtual goods in the metaverse. But what if NFTs could also provide solutions in cumbersome, archaic systems for securing property rights, thus unlocking value from tangible assets? Such possibly transformative uses of NFTs are only vaguely starting to take shape on the economic and legal horizons.
Technically, they are unique cryptographic tokens that exist on a blockchain and cannot be replicated. Unlike cryptocurrencies, they cannot be traded or exchanged at equivalency. By “twinning” an NFT with a particular version of a digital work, it becomes possible to differentiate it from its myriad other versions and thus ascribe a distinctive value to it, conferring proof of ownership on a single identifiable holder. NFTs already represent and “tokenise” physical objects, items such as artworks and luxury goods, expanding the attributes of their ownership into the digital world and permitting more efficient and secure transactions. Experiments in real estate are now being undertaken as a new way of providing needed liquidity in a system that has historically been hostage to transaction costs. The fact that NFTs can act as immutable proof of ownership and provenance could help solve a persistent problem when it comes to property in developing countries. Peruvian economist Hernando de Soto argued early on about blockchain’s potential to establish a cost-effective mechanism for formalising property rights for the poor. This would, he estimates, unlock $10tn of formerly “dead capital” around the world.
It also seems increasingly possible that the joint ownership and crowdsourcing investment of NFTs could be used to support the preservation of world heritage sites, national artistic masterpieces or threatened biodiversity zones