by Harald Eltvedt, SC Ventures
Web 3.0 protocols have spawned a plethora of new applications in the fields of decentralized finance (DeFi) and digital asset tokenization on blockchain. Non-fungible tokens (NFTs) are becoming more popular as a means of proving digital asset ownership and authenticity.
While NFTs are a huge opportunity for creators of all horizons to better monetize their work, misuse and abusive usage have risen, with fake copies circulating, people selling tokens where they do not own the rights or minting artworks they do not own… And the UK tax authority, HM Revenue & Customs, have even made their first seizure of non-fungible tokens in a crackdown “on suspected criminal activity to hide money”, according to Reuters last week.
So what is an NFT, again ?
NFT stands for non-fungible token, and is a unique unit code of data employing technology that allows digital content —from videos to text to images—to become logged and authenticated on cryptocurrency blockchains, primarily Ethereum. The main impact of NFTs is making it easy to own and sell digital content that has a virtual imprint and is certified as unique.
Thus the opportunity of NFTs is not solely for artists. All intellectual property owners can tokenize such assets, and monetize them. Many large companies, particularly those with significant intellectual property holdings, could be using digital assets, collectibles, content, and moments in the form of NFTs to create new experiences and products.
A report from Emergen Research projected that the global Non-Fungible Token market size reached USD 50.10 billion in 2021 and is expected to register a revenue CAGR of over 30% for the next 5 years. 2021 also recorded the 1st known NFT million dollar sale for Jack Dorsey’s first tweet. But the same sale had to be halted because people were selling tokens of content that did not belong to them…
In a fast-growing digital assets market, fakes are set to happen, causing a fundamental problem. Like in every market, there needs to be safety. Because they do not physically exist, NFTs deserve an even safer market. Safe like in the safe old custody place that banks made safe. Safe also for safe verification, safe certification, safe custody and of course safe trading and transacting.
Financial institutions, whose functions have been to create safety at all times, are the right ones to insure trust, to probe authenticity. They are the ones to safest record ownership, to verify actual property of the token as well as of the underlying item, to keep custody, to allow safe trading and transactions, or to certify unicity of the ownership.
This is what the market needs. Preventing misuse and abuse is an ongoing challenge, in the interest of the whole NFT market, and creators in the first place.
Wouldn’t Da Vinci, Picasso or Warhol have appreciated that no one be able to mint their work without owning it?