What do NFTs mean for the future - Chapter 1

This story begins with digitalization. Digitalization has come to affect everything in our lives. Processes, business models, even our relationships and identities.

At the end of the day, technology only becomes a competitive advantage when it is placed at the service of people, improving their experience, supporting and making their lives easier.

Innovative technologies provide us with a fantastic opportunity to improve and streamline customer relationships. But the application of technology also has its limits related to issues of security, respect for privacy and individual freedom.

It is HOW we use technology that will truly make the difference.

But let's start from the beginning.

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A matter of trust

In 2008, the Lehman brothers’ crisis hit, which ultimately resulted in a profound crisis of trust in financial institutions. Shortly after, Satoshi Nakamoto´s Bitcoin white paper was released, and we could argue, decentralized technology was born.

Blockchain removes the human factor: being transparent and auditable to all parties involved. As soon as a smart contract is released, it becomes autonomous and eliminates the risk of third-party manual manipulation. This means that you are establishing more trust in your financial system and financial services. Instant, accurate, secure and transparent transactions at a low cost.  

Blockchain and cryptocurrencies have given control back to consumers.

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A matter of privacy

Ten years ago, Web 2.0 was a social catalyst. Social media quickly became omnipresent, and with it, people lost their privacy. Platforms started giving the people services for free, but in exchange owned their data. This lack of privacy has been a catalyst in the rise of web3.0: a new generation that wants their privacy and independence back.

Recent technologies have brought the opportunity to transition from a world, where there might be an intermediary that is not acting in our best interest, to a new paradigm.

We observe a generational shift in thinking, where people want to keep ownership of their identity and brands will have to respect and adapt to this shift. We are moving towards a world where individuals or the end points, the seller, and the buyer, will have more power than the platform that connects them.  

The opportunity of blockchain is that people can keep their identity private, without foregoing trust in a transaction. No need to share personal information, or use facial recognition for example, to prove ownership.

Blockchain is the starting point of the concept of digital assets, the foundation on which this new ecosystem, made up of among other cryptocurrencies, stable coins and NFTs, is built.  

One digital asset that has made the headlines in recent times is NFT, but...

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What is an NFT?

NFT means “Non fungible token”. To understand this, let us start with explaining what a “fungible token” is.  

Fungible tokens are replaceable and interchangeable. An example of a fungible asset is Fiat currency, a government issued currency like the dollar, for instance.

NFTs are a special type of blockchain-based digital assets or token.

• They are unique (cannot be easily reproduced, they are identified by their hash code on the distributed ledger).
• They are non-interchangeable with other digital assets or tokens.
• They are rare, with a limited supply.
• Only the buyer can claim ownership, as they are a digital certificate of ownership. From an investment point of view, it's about true ownership within the digital space.

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The use cases of NFTs

We are in the initial stages of adoption of these use cases so they will be constantly evolving.  

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Digital art and collectibles

NFTs offer artists the possibility to showcase their art. They can interact with fans directly by cutting out the middleman, and at the end they have higher profits through royalties.

NFTs are possible as both digital twins and native tokens. You can own an NFT native to only the blockchain technology, i.e., available in the virtual world on your computer, or it can also be linked to a real-world art piece.  

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In-game assets

People can display their NFTs as virtual outfits (skins), avatars, and gadgets, in the metaverse (e.g., Decentraland, Sandbox, Axie Infinity) or in centralized games (e.g., Roblox, Fortnite).

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Creator Economy

Now content can be monetized, taking control from big tech firms, and controlling the monetization of a blog post or a news article on the blockchain. Also, as pointed out earlier, content creators can interact with their fan base directly.

It is about being in control of what you are going to sell and purchase, with total independence for the content creators. This massively changes the economy. It gives everyone the opportunity to sell and monetize their work without having to worry about intermediaries, creating an independent income for themselves.

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Ticketing

There is another interesting side to NFT´s: its utility as an access token, a token that gives you access to an exclusive membership club, to access things in the metaverse and in real life events, networking, and more. This can provide more return on an investment or allow you to be part of a community.

Sports companies are turning to original and unique online tickets, that can be sold as an NFT. This is a great tool for community and brand engagement.  

Another advantage is that artists or event organizers can participate in the resale of these tickets and potentially fight the issue of black markets. Today, if you buy a ticket on a secondary market, you run the risk of buying a counterfeited ticket, and as a result, not having access to the event.

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Metaverse

From ownership of land and parcels in the metaverse, avatars, to all kinds of digital collectibles. Digital twins, as virtual replicas of a real-world space or product, will be used to simulate a real-world shopping space and other real-world experiences.

In this virtual world, people will be able to socialize, play games, watch movies, attend events or work in collaboration. The metaverse has both decentralized players or platforms (like Decentraland and Sandbox) and centralized platforms like Microsoft, or Meta (former Facebook).  

Time will tell which model will really be prevalent. What we can see now is that platforms will become more decentralized and open. Their market share will be a little bit lower in a healthier ecosystem. NFTs and cryptocurrencies will be the heart of the open metaverse, used to prove ownership of digital assets and to trade.

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If you want to learn more about what is happening in the digital asset space and meet the most exciting emerging startups, join the F10 innovation ecosystem today.

Want to learn more about NFTs and their use cases? Watch our latest F10 Lunch & Learn: “What about those NFTs” with Cedric Ming and Marc Hauser:

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Stay tuned for our next chapter releases, that will cover "How can entrepreneurs thrive?" in the NFT space, and a "Deep dive into the metaverse" with several brand use cases.

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For more information on the business and legal aspects of NFTs, Metaverse, Digital Assets and Web 3 contact Cedric Ming at PwC Switzerland, Legal.

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Photo credits (in order of appereance)

Mo from Pexels

Jason Dent from Unsplash

Savvas Stavrinos from Pexels

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