NFTs in 2023: Beyond the Hype – Real-World Use Cases and the Future of Digital Ownership

Remember the NFT frenzy of 2021? It feels like a lifetime ago in the fast-paced world of crypto. While the initial hype might have cooled down, industry experts are buzzing with anticipation for NFTs in 2023. They’re not just about collectible JPEGs anymore. Get ready for NFTs to power a new wave of consumer brand engagement and reshape our digital experiences, especially as we venture deeper into the metaverse.

NFTs: From Hype to Utility – What’s Changing in 2023?

Let’s face it, the NFT market has seen better days. But downturns often pave the way for innovation. Many key players believe that 2023 is the year to build solid foundations for the next crypto bull run. And NFTs are poised to be a cornerstone of this new infrastructure.

Forrester Research predicts that NFTs will become a crucial touchpoint for brands entering the metaverse in 2023. But why? To understand this, let’s quickly recap what NFTs are:

• NFTs are unique digital tokens that exist on a blockchain.
• They immutably record the origin and ownership of an asset, whether digital or physical.
• This unique digital identity opens up a world of possibilities beyond just digital art.

The metaverse, while still evolving, is envisioned as a massively scaled, interconnected network of 3D virtual worlds. Matthew Ball, a venture capitalist, describes it as:

“A massively scaled and interoperable network of real-time rendered 3D virtual worlds that can be experienced asynchronously and persistently by an effectively infinite number of users with an individual sense of presence, and with continuity of data, such as identity, history, entitlements, and so on.”

In this metaverse, NFTs are set to play a vital role.

Brands Embracing NFTs: Beyond Marketing Gimmicks

Major brands are not just experimenting with NFTs; they’re actively building their metaverse presence. Companies like Samsung, Nickelodeon, Gucci, and Nike are leveraging their 2022 NFT initiatives to:

• Revitalize their brand image: Tap into the innovative and forward-thinking appeal of web3.
• Attract new revenue streams: Create new digital products and experiences that consumers are willing to pay for.

Jeff MacDonald, a director at Mekanism, an ad agency, highlighted at NFT.NYC 2022 that brands are now offering exclusive perks to their web3 communities. These perks can range from financial incentives to social bragging rights.

Examples of Brand NFT Initiatives:

• Starbucks Odyssey: Pioneering an NFT-based loyalty program, Starbucks offers real-world rewards to holders of their coffee-themed NFTs. Imagine exclusive access, early product releases, or unique in-store experiences just by holding a digital token!
• Nickelodeon’s Rugrats NFTs: Tapping into nostalgia, Nickelodeon is using Recur Forever Inc. to bring back classic characters as profile picture NFTs, aiming to re-engage with their fanbase in the digital realm.
• Nike’s Virtual Sneakers: Nike is bridging the physical and digital worlds. Owners of physical Nike sneakers can equip their metaverse avatars with the same gear. This hybrid model, utilizing layer-two solutions like Polygon, is expected to become increasingly popular in 2023.

The Wall Street Journal reported at NFT.NYC that many brands are in it for the long haul with web3 strategies, indicating a shift from short-term hype to sustained engagement.

NFTs as Marketing and Monetization Tools

Beyond brand building, NFTs offer marketers innovative ways to promote and monetize products directly.

Creative Marketing with NFTs:

• Pringles CryptoCrisp NFT: In 2022, Pringles released an MP4 video NFT as part of their CryptoCrisp collection, creating a buzz around their brand in the digital space.
• McDonald’s McRib NFT: To celebrate the return of the McRib in December 2021, McDonald’s launched an NFT collection in the US, generating excitement and novelty around a classic product.

Empowering Artists: NFTs and Creator Autonomy

NFTs are not just for big corporations. Valentina Zakirova, a venture capitalist and Patreon supporter, believes that 2023 will bring unprecedented autonomy to NFT art creators. This means:

• Direct Monetization: Artists can monetize their work directly, cutting out traditional intermediaries and platforms that take a significant cut.
• Greater Control: Artists gain more control over distribution, royalties, and how their art is experienced.

Band Royalty, a tokenized music platform, is expanding its NFT-based song catalog in 2023, aiming to include over 3,000 artists. On this platform, artists get paid each time their song is played on a playlist, creating a new revenue model for musicians.

Navigating the Bear Market: Fractionalization and Resilience in NFT Art

The 2022 bear market has tested the NFT art world. Even Beeple, whose “Everydays: The First 5000 Days” NFT sold for a staggering $70 million in 2021, saw a significantly lower bid of $252,000 at a Christie’s auction in mid-2022.

To combat waning interest and make high-value art more accessible, the concept of fractionalized NFT art is gaining traction. This allows buyers to:

• Purchase fractional ownership: Instead of buying the entire NFT, buyers can own a piece of it, making it more affordable.
• Diversify investments: Fractional ownership allows for investment in a wider range of artworks.

Despite a 96% drop in Christie’s tokenized art sales from $150 million in 2021 to $5.9 million in 2022, the auction house remains committed to the intersection of art and blockchain. Christie’s even launched a web3-focused venture capital arm and invested in Layer Zero, a blockchain interoperability startup, signaling their long-term vision for NFTs in the art world and beyond.

NFTs in DeFi: Expanding Financial Applications

Looking beyond art and collectibles, NFTs are poised to gain traction in Decentralized Finance (DeFi) in 2023, driven by increased corporate investment.

Steven Boykey Sidley and Simon Dingle, authors of “Beyond Bitcoin: Decentralized Finance and the End of Banks,” envision a future where:

• NFTs as Liquidity: Users can contribute an asset’s NFT as liquidity to a decentralized exchange.
• NFT-backed Loans: Borrow cryptocurrency against NFTs and use it to invest in yield-generating DeFi products.

Platforms like NFTfi are already facilitating NFT-backed loans. Borrowers can pledge NFTs as collateral and receive loans in ETH. If a borrower defaults, the NFT goes to the lender, showcasing a practical application of NFTs in the lending space.

NFTs for Identity and Credentials: Beyond Finance and Art

Dr. Jane Thomason, chair of Kasei Holdings, a British digital asset firm, highlights another crucial application: tokenizing licenses and academic credentials using NFTs.

Imagine a future where your degree, professional certifications, or even your driver’s license are securely stored as NFTs, verifiable and easily accessible. This can streamline verification processes and reduce fraud.

NFT-Based Credit Scores: Towards Decentralized Economic Identity

One of the most groundbreaking potential innovations for 2023 is NFT-based credit scores. Charles Hoskinson has emphasized the importance of decentralized economic identity. This type of identity, powered by NFTs, could:

• Unlock Economic Potential: Bring financial services to those excluded from traditional systems, providing access to credit and financial opportunities based on on-chain reputation and activity.
• Promote Financial Inclusion: Create a more inclusive and equitable financial system by leveraging blockchain technology.

The Future is Utility: NFTs Beyond the Hype

While the NFT market is still evolving, 2023 is shaping up to be a pivotal year. The focus is shifting from speculative hype to real-world utility. From revolutionizing brand loyalty and marketing to empowering artists, transforming DeFi, and establishing decentralized digital identities, NFTs are poised to become much more than just digital collectibles. Keep an eye on this space – the NFT revolution 2.0 is just beginning!