The benefits of using NFTs has moved far beyond just being collectible tokens, the value of which exists only in the virtual world. Currently, NFTs are being used to connect the physical and online space in several ways. It has now become the norm to use these digital tokens to determine the value of and manage real world assets.
Let’s take a closer look at how it works.
The linking of real-world assets to NFTs
Building a link between a physical asset and an NFT is becoming common thanks to the advantages of doing so. A real-world product is assigned a digital twin, which is an NFT.
It works like a mirror that mimics each and every transaction that happens in association with the physical product, and creates an immutable record of the same in the digital space.
Real-world benefits and opportunities using product NFTs
- The advent of NFTs into the world of physical asset management has so far been positive. The following are the major benefits of this transformation.
- It is helping product owners establish the authenticity of their products and avoid concerns about the provenance of their valuable purchases.
- There is a secure and easily accessible record of all the past transactions and other details of the physical asset available online, which makes it more convenient to manage the data.
- It has become highly simple to establish proof of ownership of each real world asset. This minimizes the chances of disputes later on, and makes it easier to transfer ownership if required.
- There is now minimal need to involve a centralized system in asset management. Through centralized systems, transactions are processed slower, there is high scrutiny, and data privacy is often minimal. Managing physical assets using NFTs in the decentralized blockchain space is a solution to all these issues. This does not mean, however, that it is not safe to do so. In fact, the system is quite resilient against fraudsters, and your sensitive product information remains secure at all times.
- There is higher ease in managing contracts through a digitalized system. You can handle all the contracts related to your physical asset online without worrying about safety or privacy issues.
- There is higher security and reliability in dealing with real asset data with NFTs. With paper-based documents, the chances of data getting manipulated, duplicated or stolen is quite high. Plus, such documents are not that convenient to store or manage. With NFTs, it becomes simple to manage the information online in a safe setting.
Transforming the DeFi space with NFTs
DeFi refers to the use of various financial services through the blockchain platform. Earlier, it was unimaginable for many to handle large financial processes through the online space, particularly blockchain. But with the development of NFT technology, DeFi is positively impacting the lives of people, and introducing new monetary opportunities.
The intrusion of NFTs in the DEFi space is bringing the following changes.
- It is now possible to use rare and valuable NFT collectibles as collateral while applying for loans in the DeFi space.
- There are now staking pools that only the owners of certain NFTs can access. This is bringing exclusivity in the DeFi space, and introducing new ways for people to unlock financial benefits.
- There are now experiments going on in which NFT wonders are gaining voting rights based on the number of digital assets they own. This might end up centralizing some DeFi processes, which some users are not keen about. Therefore, updates are still underway in this area.
Final thoughts : How NFTs and the metaverse are shaping the future
All in all, NFTs are bringing in a new era of managing physical assets and impacting the DeFi space in unexpected ways. With new development under way, it is safe to say that we have not yet seen the last of NFTs potential. What started off as a fad is now defining how real-world assets work, and how people manage their finances online. To sum up, NFTs have many positive changes to bring to the physical world.