When people think about NFTs, they usually think of expensive JPEG images that bizarrely sell for millions of dollars, and that's a problem. This is akin to believing the internet is nothing more than a place to share memes and dismissing it as "probably nothing." Now that NFT collectible prices have crashed, real innovation can happen, and this stigma can be broken as better uses of NFTs are explored.
NFTs, or "non-fungible tokens," are a type of cryptocurrency where each token is unique from the rest and contains an embedded URL linking to its unique content and metadata. NFTs are comparable to deeds of ownership where the URL points to the thing the token grants ownership of (allegedly, always check the fine print), which affords tremendous flexibility in what NFTs can do and represent. Unfortunately, during the 2020-2021 cryptocurrency bull-run, investors and retail speculators threw millions into NFT profile picture collections with no use cases, often paying $100-$1000 to mint each token hoping to land the next million dollar NFT, which only incentivized more collections and various knock-offs to emerge as blatant copy-paste cash-grabs, understandably leading to the misunderstanding of NFTs today.
The overexposure of elite JPEG collections like Bored Ape Yacht Club and CryptoPunks brought NFTs' least exciting use case to mainstream awareness, resulting in outright confusion among non-crypto people. However, anyone who visits OpenSea will notice there are more sections than just collectibles, such as NFT domain names for crypto wallets, music, art and photography, sports, trading card games (which NFTs are well suited for), land plots and avatar gear for virtual worlds, and even "utility" NFTs. NFTs are especially suitable for blockchain-based gaming and metaverse items, allowing the existence of virtual property with real-world value. For example, the virtual metaverse worlds Decentraland and The Sandbox both have NFT-based economies, with scarce NFT land plots running thousands of dollars. Players can create and sell their own NFT avatar gear on in-game marketplaces. Blockchain gaming and "GameFi" sectors also use NFTs extensively, such as the adorable yield-generating Aavegotchi pets or the wildly successful Axie Infinity battle-pets. These four examples are vastly more interesting than JPEG collectibles, yet they receive little attention outside crypto.
NFT Use Cases Are Vast And Innovative
One powerful feature that is commonly underrated is the ability to check a crypto wallet for particular NFTs as part of conditional logic. This feature is widely used for private Discord servers, where a bot is used to auto-approve and kicks Discord users based on which NFTs they own. NFT-based DAO governance communities utilize this ability for assigning roles and voting power. Websites can check for NFTs in a visitor's crypto wallet, providing hidden areas/content for them to discover. NFTs can even be used for selling online professional services as tokens, using free market economics to determine the price for that service.
NFT source code is open-source, allowing developers to experiment with new and exciting features for their NFTs. For example, creating non-transferable NFTs sacrifices value for utility, such as airdropping an NFT lawsuit to a scammer's wallet, using NFT metadata to verify the authenticity and fight counterfeit products, or providing membership IDs. NFTs can also be used to represent real-world items and property deeds, using the blockchain to record transactions and ownership data instead of private databases. These examples barely scratch the surface of what NFTs can do, and all of them are more interesting than collectible JPEGs.
NFTs are misunderstood thanks to the hype surrounding JPEG collectibles, which obfuscated NFTs' best use cases under a mountain of speculative trash. However, listing all the uses for NFTs to someone convinced they are only "expensive JPEGs" is as hopeless as listing the benefits of the internet to someone convinced it is only for sharing memes. Instead, people need to stop thinking NFTs are collectibles and begin thinking of them as a technology under which collectibles exist alongside hundreds of more exciting use cases.
Sources: OpenSea, Decentraland, The Sandbox, Aavegotchi, Axie Infinity