Navigating the NFT space and the future of tokenized assets

Have you ever wondered what NFTs are and why they exist? Are they worth investing in? We spoke to experts to get a deeper understanding of this emerging market.

NFTs, or non-fungible tokens, have become increasingly popular among Gen Z investors, encompassing various forms of digital assets such as artwork, music, videos, and even traditional assets. The market has witnessed the rise of numerous NFT trading platforms, facilitating buying, selling, and trading of these unique digital tokens.

But what exactly are NFTs? In simple terms, NFTs are digital tokens created using blockchain technology, similar to cryptocurrencies. They can represent a wide range of assets, including cars, real estate, or digital artwork. Real estate tokenization, for example, involves converting the value of real estate into tokens, stored securely on a blockchain. This enables digital ownership and transfer, with each token representing a fractional share of the underlying asset.

While the concept of buying and selling real estate as NFTs is still in its early stages, the potential for this market is immense. The traditional property market, ripe for reinvention, could greatly benefit from the opportunities provided by NFTs.

However, the current global economic downturn has impacted the NFT market, leading to a decline in sales and prices. So, what do experts predict for the future of this dynamic and transactional space?

Wes Levitt, Head of Strategy at Theta Labs, a blockchain infrastructure provider for Web3 media and entertainment, highlights the presence of groundbreaking NFT projects that deliver innovation and value to users and tokenholders. But he also acknowledges the existence of low-effort projects seeking to capitalize on the NFT hype.

The popularity of NFTs can skyrocket based on trends. For example, when Cristiano Ronaldo launched his first NFT collection in collaboration with the Binance Marketplace, online searches for "Ronaldo NFT" surged worldwide, illustrating the potential frenzy surrounding NFTs.

In theory, almost anything can be tokenized as long as scarcity plays a meaningful role in the asset's value. Assets like CS: GO skins, already popular among young and tech-savvy demographics, are more likely to see early adoption compared to traditional assets like real estate, typically owned by institutions.

Sallyann Della Casa, Founder of GLEAC, an educational NFT and crypto fintech marketplace, believes the suitability of tokenization depends on the asset itself. While permanent tokenization of shoe collections may not hold much value, assets like driver's licenses, passports, and property titles have greater potential for tokenization.

Regulatory practices in the NFT space are still in their infancy, leading to incidents of fraud. The lack of protection against scammers is a concern, and the current downturn may provide an opportunity for course correction. Della Casa hopes that "flippers" who buy and quickly sell assets for profit will eventually fade away, allowing for a more stable and sustainable market.

Levitt and Della Casa agree that improving wallet usability and overall user experience is crucial for the maturation of the NFT industry. However, Levitt believes that these issues won't hinder the industry's progress significantly. The metaverse, a virtual shared space, is expected to play a significant role in driving the NFT space forward. Digital assets naturally fit within digital worlds, facilitating seamless value transfer. NFTs can be used to gate access to specific areas or represent unique items within metaverses.

Della Casa, on the other hand, believes that NFTs will develop faster than the metaverse platform, Meta. While the metaverse is still years away from scalability, NFTs are already solid and scalable technology. Major brands have already embraced NFTs, indicating their potential. Distinguishing between NFT and metaverse projects is essential, as many metaverse projects are, in fact, NFT projects.

Looking ahead, experts envision NFTs becoming an integral part of the financial economy. Levitt foresees a future where NFTs have more utility-based applications, seamlessly integrated into various apps and experiences. Digital collectibles will also have their place, but the most exciting use cases lie in video/media, metaverse, and gaming.

Della Casa takes it a step further, asserting that NFTs have the potential to be world-changing. They are here to stay and can help address some of the world's biggest problems. NFT technology can contribute to achieving carbon neutrality by enabling machine-to-machine communication on the blockchain, allowing appliances to optimize power consumption. It can also facilitate automated vehicle communication and decentralized SEO practices, transforming various aspects of our lives in a decentralized manner.

The future of NFTs is promising, with ongoing developments and advancements that will shape the landscape of tokenized assets and their impact on different industries.

Thursday, 07 December 2023