Non-fungible tokens (NFTs) are all the rage right now and justifiably so since these digital tokens basically provide owners with certificates of authenticity relating to just about anything one can think of — from things like artwork, music, collectibles, to real estate, and even precious metals.
To put it another way, NFTs can be viewed as digital files that make use of a blockchain platform for their distribution and owing to the fact that they are totally unique — and stored on a decentralized ledger — it is very easy to verify who their owner is.
Since the emergence of this technology, individual retailers, businesses, celebrities, artists have been able to sell their offerings directly without the need for any intermediaries who typically control all distribution and promotion related activities, in the process taking a huge cut of the total paycheck. But, non-fungible tokens could also have some very interesting applications in more mainstream commerce.
The way we do commerce right now is broken
Most people who have ever tried to buy a gift for their partner, friend or family member have at some point had to get an item exchanged — wrong brand, size, model — for some reason or the other. However, due to cases of return fraud rising over the past decade, proving ownership and sometimes even provenance is becoming increasingly more difficult for consumers.
A recent study revealed that over the course of 2020, a whopping $25.3 billion was lost to return fraud as a consequence of which a large number of retailers have become extremely stringent with their exchange policies, making the return process quite difficult, especially more tricky if one cannot produce a receipt for the item they are looking to replace or if the purchase was made using someone else’s debit card. Similarly, when it comes to dealing with the ownership/sale of second hand and classic cars, watches, antiques or mobile phones, things start to become quite complicated. If you think about the deeds to a house or the ownership documents for a car. These documents were designed as a means of verifying ownership in a pre-blockchain world, some of these are still paper-based documents. While they serve their purpose, they are often considered to be inefficient and create a reliance on a centralized entity to verify their authenticity. They can also be too easily forged these days.A properly designed NFT could be used to represent a physical car and subsequently its legal owner in the same way that an ownership document at the DVLA does today.
Enter NFTs and Digital IDs
Using NFTs, it becomes extremely easy to demonstrate ownership and provenance. Especially in any instance where ownership and possession of an asset are not inextricably intertwined. The technology enables users to obtain a complete breakdown of the supply chain history of the product they have purchased, i.e. from brand, model, make, colour and type through to the factory where it was made, the worker who made it, who signed off its quality checks, shipping and custom control checks, and even which warehouse it was shipped from and the courier that delivered it.
A key part of the provenance of a physical object is associating a digital NFT and associated IDs and information. This can be done with tamper proof labeling such as QR codes and NFC smart labels which can be intrinsically linked to them.
NFTs could also do wonders for secondary markets, like eBay and other resale stores.
By integrating the concept of NFTs with that of self-sovereign IDs, it can become possible to make the entire transaction life-cycle of a product completely traceable with the touch of a button. It also becomes possible to prove that you are the “authentic” owner of a piece of artwork, or a valuable antique when it is linked to your digital ID, enabling the transfer of ownership through purchase or gifting. In the example of artwork, NFTs typically contain a link to an internet address that displays a copy of the piece. But there is no easy way to establish whether the copy linked to the NFT is the authentic copy, or whether that is a copy of the original. But by having the NFT linked to your digital ID or the artists’ you can prove that your copy is authentic and original in the unfortunate situation if the artwork is cloned.
A key part of the provenance of a physical object is associating a digital NFT and associated IDs … [+] and information, which can be done with tamper proof labeling such as QR codes and NFC smart labels.Nuggets
NFTs are here to stay
The NFT market has continued to grow at a staggering rate, with conservative estimates suggesting that this space has already grown by more than 1700% since the start of 2021.
Right now the market is fascinated with NFT art and collectables, but behind the scenes, the commerce industry is paying attention. Moving into 2021 and beyond, it is highly plausible we will begin to see much more advanced, professional-grade implementation of this technology, and with it, a whole new world for consumers.