If 2021 was the year NFTs first burst into mainstream and 2022 was the year of exploration of new use cases, then one could feel that 2023 should be the year in which we get a rough sense of what works and what does not. From the proliferation of new profile picture (PFP) collections, to the penetration of the entertainment industry, we have seen countless of successes, failures, and not forgetting the false promises of projects that resulted in rug pulls.

Starting off with what we feel doesn’t seem to be working: physical-backed NFTs. In theory, the idea of having a digital asset that is linked to a specific, real-life physical object sounds interesting and something that could catch the attention of the mainstream. However, when you evaluate such a project from a business and unit economics standpoint, this is where things get a little blurry. The key here is to factor in logistics. Typically, how a physical-backed NFT business works would be for either the consumer to receive a physical version of their newly purchased NFT or the consumer to send their physical object to the business for it to be digitized and authenticated. For the latter, the business would require you to store the physical object with them as collateral to the NFT and for safeguarding in most cases, if not all.

Can you see where we are going with this? Such businesses will incur storage and transportation costs, both of which are almost negligeable compared to its truly tech oriented blockchain competitors. To make things more complicated, the business would also have to figure out their pricing strategy for transportation, insurance in case the physical goods are damaged, and where does the liability start and end for their customers. Further, when it comes to rare collectibles, collectors frequently want to display their prized assets at their own homes where they invite friends and family to show off their collection. This is another hurdle businesses operating in this space have to overcome. One could argue that the business could build up a in-store gallery of sorts but this would then again lead to higher operation costs in the form of storage. Of course, what doesn’t seem to work now does not mean that it cannot work in the future. We are merely reflecting what we are currently seeing in terms of available solutions to existing problems.

Now, what we feel seems to be working: PFPs (profile picture). Yes, you read that right, PFPs. However, not just your standard PFPs, but PFPs that have a roadmap to something greater than just remaining as PFPs. Take for instance Yuga Labs, the founders of Bored Ape Yatch Club (BAYC). What started off as just NFT PFPs have now grown into a metaverse, a video game, a merchandise collection, and the launch of their native token Ape Coin. According to the project’s roadmap, they are also in the works to build out its own SDK that allows creators to build out NFT collections of their own and possibly being interoperable within the BAYC universe. Another great example would be Dust Labs, who brought us the DeGods and y00ts collection. We see this as an intellectual property play, where such projects could truly go on to become the Disney of the web3 space. There’s just an endless possibility of revenue streams a project could generate from such a model, with tv and streaming rights being a huge cash revenue generator.

If we were to talk about practical use cases for NFTs that could disrupt traditional industries, we would have to say ticketing. We believe NFT tickets are the way forward when it comes to live and online events as it would solve a multitude of issues plaguing the traditional system such as ticket scalping, forgery/duplication, and ownership. NFT ticketing would also enable greater consumer customization, adaptability, and engagement between audiences. For instance, event planners may issue a non-transferrable NFT ticket linked to a wallet ID to prevent profiteering or to make sure only true fans of the event purchase the tickets. They could also provide VIP holders access to premium content pre and post event.

Overall, we feel that the future for NFTs is one of the shiniest spots in the blockchain revolution. We have seen a rise in projects leveraging NFTs to solve real world issues such as climate change, carbon emissions, health and fitness, identity theft, and we look forward to more innovative use cases, especially the ones that tackle real world problems.