29 Jun Can NFTs be Used for Real-World Assets?
NFT are changing how we transfer the value of real-world assets. First off, anything that is ‘fungible’ clearly shows that it can be replaced by something of similar value. One fungible item has the same value as another fungible item. Thus, a fungible token like bitcoin or Ethereum can be exchanged with each other because they have similar values.
What is NFT?
NFTs or non-fungible tokens are cryptographic assets using applied blockchain systems with unique identification codes and metadata that make them different from fungible tokens. Because each NFT is unique and contains its own value, it cannot be traded or exchanged equivalently.
Non-fungible tokens are mainly a special type of token generated through cryptographic hashing methods and use blockchain technology to link with a unique digital asset that cannot be replicated. Each NFT contains smart contracts inside it that help store the unique and exclusive data that differentiate each NFT from other fungible tokens. NFTs are also indivisible. That is, it is not possible to send non-fungible tokens in smaller denominations like you can with other cryptocurrencies like bitcoin. So, it is not possible to send a portion of the value of a particular NFT to another person.
Thus, non-fungible tokens have a unique role to play in the whole blockchain landscape based on their very uniqueness. NFTs also have a larger significance within the context of the radical shift towards the next era of blockchain technology transformation. As industries and businesses slowly open up to the idea of blockchain and integrating applied blockchain into their operations, NFTs can now serve as real-world assets.
NFT for real-world assets
Since each NFT is:
- Considered unique. No two NFTs are even closely similar.
- Not replaceable with similar tokens of any value.
- Scarce, therefore, increases the NFTs value.
Therefore, each single NFT can be used for these use cases as real-world assets:
Digital Art – Each non-fungible token can tokenise world artworks to promote authenticity and offer ownership to the artist.
Fashion – NFTs can help verify the digital ownership information of luxury items and accessories to reduce counterfeits.
Licenses and Certifications – Tokenises licenses and certifications to authenticate and preserve the ownership of these documentations. This is particularly useful for such sectors as Agricultural land and Real Estate.
Collectibles – Tokens can offer various unique collectibles that feature unique algorithms and identities with added value.
Sports – Can offer tokenised game tickets issued on blockchain to prevent counterfeit tickets, scalping, and the selling of fake merchandise like authentic autographed jerseys.
Name Service and Domains – Offers crypto addresses as NFTs wherein users can sell or buy cryptocurrency services.
Virtual Worlds – This allows users to own, create, and monetise virtual land and various virtual world elements.
Gaming – Allows in-game elements or items to be tokenised and exchanged with other peers.
How NFTs can be used for real-estate
In reality, NFTs in applied blockchain SHOULD be applied to the real estate industry in the physical world, very soon if not now. This means that people will now be able to buy a home, building, or virtual rights to any physical space with very little effort.
Currently, the sale of any real estate property and the transfer of ownership that goes with every sale is extremely labour-intensive and expensive. Even just an equity line requires a considerable amount of paperwork. By tokenising everything from the sales, contracts, payments, to the property rights, and others, it will become easier to trade and manage any real estate property selling.
Try to imagine buying a house that is represented as an NFT. You, the buyer, can instantly borrow against the NFT using any cryptocurrency products with the usual 2-4% interest as mandated by law. This means you don’t need to go through the headache of months of negotiating with banks or other financial institutions for the loan to purchase the house.
Naturally, the real estate industry will need to adapt and make changes and adjustments depending on the type of real estate property such as commercial, housing, and land. There is also the adjustment of blockchain and NFTs to management details such as maintenance, payments, collection of rent, etc. But, remember that with blockchain and the application of NFTs, it is much easier to transfer the whole 100% property rights of a real estate asset and still keep within the bounds of securities law.
How does an NFT real estate sale work?
Again, using the previous example mentioned above:
- There is legal preparation for the sale of a property using NFT.
- The property is “minted” and this includes the descriptive and legal data about the property. This includes all videos, image files, reports, disclosures, and all paperwork, including payments and payment schedules.
- The NFT becomes the proof of ownership.
- Legally, whoever is named in the NFT and has possession of it, owns the property.
- The NFT is placed on a distributed ledger and then placed on an existing NFT marketplace for sale.
- A potential buyer selects that specific property and NFT pays for the property in cryptocurrency through a smart contract. After the funds are released to the seller, the NFT is transferred to a digital wallet controlled by the buyer.
- No physical “third parties” or banks were needed to constitute the legal processes of buying property, sparing many weeks and even months of exchanging paperwork.
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