The Trojan Cat
Mid Hype Clarity: 6 Non-Art Use Cases For NFTs
Happy Monday from Henderson, Nevada ☀️
While digital art is driving this recent NFT craze, cat JPEGs are far from the only interesting use of this new technology.
This week, I wrote about 6 non-art use cases for NFTs. I also briefly introduced the technology if you are new to this concept.
Enjoy!
Post Hype Clarity
Google Search Trends data from the past 12 months shows us just how quickly NFTs went from a neat use case of blockchains to entering the public vocabulary.
For a brief moment in April, NFTs were a bigger deal than Kim or Kanye.
Now that the hype cycle has entered a calmer phase, clearer heads can hopefully learn some lessons from this first blast of publicity.
But First, What Is An NFT? (extremely simple)
Don’t worry if you are bad with computers. With an example or two, NFTs are downright easy to understand.
N.F.T. stands for Non-fungible token. What does this mean?
Most currencies and commodities are fungible. If I replaced your bar of gold with another equally weighted bar of genuine gold, you wouldn’t notice or care. The individual unit does not have important unique qualities. One is no better than the other.
This also applies to dollar bills and bitcoin. If I sent you one bitcoin, and you send me one back, nothing happens.
Non-fungible tokens are the opposite. The individual unit does have specific, interesting, identifiable properties that separate it from other similar items. These differences give the individual piece different values, real or perceived.
Gold jewelry could be considered non-fungible. Whether it is sentimental (family history, occasion for receiving), function (cutlery, timepiece), or aesthetic, the individual piece possesses unique characteristics. Because of these unique attributes, the piece is worth more than its weight in gold.
Here is one more example.
Tickets to a concert are also non-fungible. If, while waiting in line, you traded your ticket with a random person, you’d run the risk of sitting separately from your friends. You also risk losing value if your seat was better. If you and a random person swapped dollar bills, nothing changes. The ticket is not fungible, the dollar is.
NFTs, therefore, are a way to acknowledge and digitally represent ownership of Non-Fungibile goods—whether its event tickets, artwork, or rights to a set of privileges.
Why Does This Matter?
The Trojan Cat
This year, NFT technology’s biggest headlines came from digital art sales.
For whatever reason, the internet is obsessed with cats. Unsurprisingly, this has lead to Crypto Kitties, a game based on unique digital cat artwork, being a top NFT use.
If you buy a Crypto Cat, you can use a digital art gallery to show off the cool digital art pieces you own.
While this is neat and does actually have interesting legitimate utility, million dollar photos of cats have caused many people not to take NFTs seriously. Mockingly, journalists ask “why are people paying 1000s of dollars for JPEGs?”
Besides greater-fool thinking (buying + hoping to resell), I don’t have any idea why people are buying expensive digital artwork.
But! It Doesn’t Matter
Whether or not it is logical to be buying expensive digital art is not important.
The media attention sparked by the perceived ridiculousness of obscenely priced digital goods caused three good things to happen.
NFTs became a mainstream concept (awareness, education, adoption)
The NFT community had an influx of capital (resources, validation)
NFT technology was vastly improved at an accelerated pace (infrastructure)
For that reason, Cat Art was a Trojan Horse to bring NFTs to the mainstream.
So, given the possibilities, what else might emerge?
6 Use Cases for NFTs (Excluding Digital Art)
1) Digital Ticketing & Rewarding Fans
Gary Vaynerchuck is using NFTs for digital ticketing for an upcoming in-person conference.
Each NFT has unique characteristics that determine what experiences you can access at the event. Some VIP tickets, some general admission, and others with special one-off privileges.
The ticket distribution on the blockchain also enables Gary (or any event host) to distribute benefits to their fans such as automatically entering each participant in a giveaway. Since each NFT is already associated with a crypto wallet, the prizes can be automatically distributed.
Furthermore, if Gary created any future events, he could reward his long-time supporters for their loyalty by offering a discount to anyone who holds an original VeeFriend conference ticket.
I’m confident that many event hosts are going to start capitalizing on these new possibilities.
2) DeFi Use Cases (Decentralized Finance)
Syncbond is using NFTs to provide liquidity for Uniswap users. On Uniswap, anyone can exchange one cryptocurrency for another. To achieve this, Uniswap users commit assets to pools of capital that allow for the facilitation of these swaps between types of cryptocurrencies.
The problem is that being a liquidity provider can lock up your funds for a period of time (similar to a CD in a traditional bank).
Now, with Syncbonds, you can create a bond that represents your committed capital and allows someone else to buy out your position. Syncbond’s software automatically generates artwork and allows you to list the bond on major NFT marketplaces.
Other DeFi platforms let you use NFTs as collateral. If you own a digital asset with a relatively low perceived volatility (or at worst, a predictable floor), you can potentially qualify for a DeFi loan using the NFT as your collateral.
For example, it is unlikely a VeeFriend will ever dip below $250 USD because it’s value (event access) is hard to dispute.
3) EcoSystem Perks
If you claim to own an NFT, it is a simple process to prove it. Because of this, NFTs could be used for ecosystem perks.
Imagine Gary V. creates a groupchat. If you own a VeeFriends ticket, you are automatically granted access. If you own a rare ticket, you are automatically granted moderation privileges.
If I was throwing a virtual chatroom in a Clubhouse-type software environment, I might give everyone with an authentic Crypto Kitty speaking privileges by default, but require everyone else to request microphone access.
If I had a software engineering help forum like Stack Overflow, I could write an algorithm that lets people who possess certain NFT developer credentials automatically rank higher in the answer.
In the future, ownership of different NFTs will govern the experience you have on certain platforms. They may even allow you to migrate social credibility from one platform to another—without having to build from scratch each time.
4) Real World Asset Ownership
One of the goals of Bitcoin was simplifying the process of transferring funds across the world. This has been achieved. Anyone with a basic computer can transfer bitcoin to any other bitcoin user within a few minutes.
Why can’t ownership of non-currency assets be the same?
In the future, the title to your car, the ownership of an LLC (which could own real estate), and other ownership documents could be turned into NFTs.
This could vastly simplify transferring ownership of real world goods.
For applications like this, the hurdles are regulatory and political, not technological.
5) Documents, Books, and Study Guides (Royalties)
NFTs can be programmed with embedded royalties for resales. The original owner might devise a scheme such that they are compensated 10% of the sale price everytime the NFT changes hands.
This presents an interesting opportunity for any digital media creator.
An author could issue their ebook as an NFT.
A student could publish study guides and self-designed sample problems as NFTs.
This model could dramatically reduce pirating and information theft since NFTs can’t be replicated the same way an unprotected PDF file can be.
This model also benefits the end buyer. When you buy a book from Amazon, you still depend on them to access it. If you own an NFT book, you own it outright. This could lead to creation of a secondary market. If you are willing to forfeit access to an ebook, you could sell it and recover some of your initial purchase value.
I think NFT documents will lead to new and improved markets emerging for any infoproduct creator.
6) Real World Perks
Denver Beer Co released an NFT called “Beer for Life.” There is only 1 in circulation .
The owner of this NFT has rights to as many as four free beers everyday at any of the participating locations.
Can you imagine the bidding war if Chipotle released a lifetime Burrito token?
Fun projects like this demonstrate what sort of neat things you can do when you can verify sole ownership of a digital asset.
Thank You For Reading!
Where else do you think NFTs could be useful?
Feedback, topic suggestions, and interesting banter are always welcome.
Enjoy the week,
Louis
The Hyperlinks
Two Quick Clicks
(1) 🎧 Stellar Interview 🎧: Danny Miranda x Tom Bilyeu
Tom Bilyeu is the co-founder of Quest Nutrition and Impact Theory. He’s a titan in the motivational entrepreneurship content space. This episode was very energizing.
Listen on YouTube. Listen on Apple Podcasts.
(2) 💻 Cool Website 💻: Reddit Related SubReddit Explorer
Extremely fascinating. Lookup any SubReddit and see the related ones based on metrics calculated by looking at "users who posted to this subreddit also post to...".
The builder of this site is also a great follow on Twitter.
Podcast Updates 🎧
LK #75 with Joel Runyon: Achieving IMPOSSIBLE Goals.
LK #74 with Rita Lewison Singer: Stories From A Motivational Speaker, Actress & Entrepreneur
LK #73 with Cole Schafer: Romance poetry and lucrative copywriting adventures
LK Content Coming Soon 📅
David Bailey and Brandon Green from Bitcoin Magazine and BTC 2021
Peter McCormack, Host of What Bitcoin Did & Nassim Taleb heckler
Scott Rieckens, Financial Independence, Retire Early filmmaker
Photo of the week — Almost $1B on OpenSea
In researching this post, I stumbled on the Total NFT transaction volume on OpenSea.
The site (one of many NFT marketplaces), has seen over 450,000 ETH worth of NFT transactions, just factoring in the top 5 projects. (There are over 300 on the site).
That is over $900,000,000 USD as of writing. These numbers blow my mind.