Nft Future Application of NFT and Its Challenges
Written by: Anindya Zahra
By the end of 2020 until now, the Internet has been bombarded by a thing called Non Fungible Tokens (NFT). People around the world with various backgrounds are investing in this piece of digital content that is linked to the blockchain. As it becomes popular everywhere, the NFT market keeps growing exponentially, with millions of transactions happening everyday and new collectors keep increasing each day. The existing situation of the global NFT market and its trends draw a favourable picture for the future of NFTs. Therefore, here are the list of how NFTs will conquer the future:
- Streamline the supply chain and logistic process
The unique blockchain protocols in NFT can streamline the logistic process because of their immutability and transparency, which keeps supply chain data authentic and reliable. Moreover, NFTs can eliminate counterfeiting, help trace the movement of goods along the supply chain and ensure uniqueness. This would be applicable for supply chains in luxury fashion brands. For businesses like the auto industry, NFTs can also provide information regarding each material and component in a particular product which may help the industry with their cost control.
2. Act as the document storage and ownership
Storage of documents securely is a promising factor for boosting future NFT applications. The use of private keys that act as a proof-of-ownership of the original will secure the ownership of each document stored in NFT. Land certificate is one of some documents that is possibly stored in NFT because of the unique and secure blockchain system which may avoid land mafia to do their crime.
3. Future of ticketing system
Many event organizers have been looted around millions of dollars every year because of ticket fraud and black-market resales. Approximately US$15,2 billion that are generated from illegal ticket sales has not supported the music industry, live performance or sport sectors, and even the buyers itself. Complex yet unique blockchain system of NFTs can be a solution for that problem. Any NFT transaction will immutably store on the blockchain and easily verified by the host of the event. Besides, if there is any unauthorized ticket sales, it can be identified easily by the event host.
While NFT may clearly paint a promising picture for their future, it also confronted with various challenges and risks which may appear in the future, this includes but not limited to:
4.Legal and regulatory
Real evidence of NFT’s technology advancement is that there should be an official legal and regulatory system about NFT as well as its risks. As NFTs grow and expand into different use cases, the laws and regulations should be able to adapt. Nowadays, existing laws in some countries are stuck on setting the ideal definition for NFTs. Besides, because of the increasing variety and number of NFTs, it is pretty difficult to find a basic ground for compliance in NFTs.
5. Cyber security and fraud
The advancement of technology combined with increasing popularity of NFTs may result in some cybersecurity and fraud risks. Cybercriminals had gained advantages in creating fake NFT stores with the capabilities to mirror the logo and contents of the original NFT store. This cyber crime may lead to people buying fake NFTs, thus facing copyright issues. One case regarding cybercriminals in NFT is when some users in Nifty Gateway, one of the biggest NFT marketplace, got stolen thousands of dollars worth of NFTs because some hackers successfully took over their account. The company said that it’s all because users have not activated two factor authorization (2FA) while accessing Nifty’s website. 2FA system may be the solution to this problem but the data is still likely vulnerable to be accessed. Moreover, other NFT challenges related to cyber security include copyright theft, replication of popular NFTs, and some social media scams that promote NFT.
6.Environmental impact
According to the Digiconomist website, one type of cryptocurrencies that support NFT transactions, Ethereum, has more than 133 kilowatt hours, enough to power one US household for 4.5 days. This is equivalent to the carbon footprint of about 64 kilograms of carbon dioxide (CO2). The explosion in the popularity of NFTs which will increase the application of Ethereum blockchain might increase electricity consumption that may lead to increased carbon footprint.
The NFT trend will have its advantages and challenges in the future. Hopefully, as the marketplace and demand continues to develop for NFTs, solutions for the above risks will be implemented to minimize them.
References:
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The Fintech Times. (2021, November 17). Applied Blockchain: The Future of NFTs. The Fintech Times. https://thefintechtimes.com/applied-blockchain-the-future-of-nfts/
Bernstein, C. (2021, July 27). 5 business use cases for NFTs. What is Tech Target. https://whatis.techtarget.com/feature/5-business-use-cases-for-NFTs
Ethereum. (n.d.). Non Fungible Tokens (NFT). Ethereum. https://ethereum.org/en/nft/
101 Blockchains. (2021, September 14). Non-Fungible Tokens — Risks and Challenges. 101 Blockchains. https://101blockchains.com/nft-risks-and-challenges/
Barhat, V. (2021, September 28). Why NFT investors should help offset climate concerns when they buy digital art. The National News. https://www.thenationalnews.com/business/money/2021/09/28/why-nft-investors-should-help-offset-climate-concerns-when-they-buy-digital-art/
E-spin Corp. (n.d.). What are the cyber risk challenges associated with NFTs?. E-spin Corp. https://www.e-spincorp.com/what-are-the-cyber-risk-challenges-associated-with-nfts/
Prentis, N. (2021, September 17). The NFT market–The future of trading and collecting. Bakertilly.https://www.bakertilly.com/insights/the-nft-market-the-future-of-trading-and-collecting
Powers, B. (2021, March 17). Lessons From the Nifty Gateway NFT Heist: Not Your Keys, Not Your Art. CoinDesk. https://www.coindesk.com/tech/2021/03/17/lessons-from-the-nifty-gateway-nft-heist-not-your-keys-not-your-art/
Peters, J. (2021, March 15). Hackers stole NFTs from Nifty Gateway users. The Verge. https://www.theverge.com/2021/3/15/22331818/nifty-gateway-hack-steal-nfts-credit-card
