We’ve heard a lot about NFTs this past year. Too much even. That if an image has been sold for thousands of euros, that if the first tweet has been sold for 2 million dollars, that if a collage of digital images is worth 70 million, that the NBA sells videos for real barbarities. And although NFTs obviously have a strong speculative component associated with them for the moment, it is important to bear in mind the enormous potential they represent.
For the first time we can own a file. A pdf, an image, a video, whatever. But we can own a digital asset.
Potential and applications of NFTs
But the one that for the moment, very few have not seen is the potential that has the application of these crypto assets as a tool for certification of authenticity, authorship or ownership of a physical object.
There are already some who have started to use NFTs as a certificate of ownership of a physical object, associating the NFT with it. This seemingly simple practice is called digital twin.
A very interesting example is that of the French brandy producer Hennessy. It created a collection of NFTs that were associated with screen-printed Cognac bottles, very limited (about 200 worldwide) and of high value (the cognac was about 20 years old and is one of the most precious distillates in the world). In this case the NFTs are a certificate of ownership that recognizes you as the owner of the actual bottle. The bottle is guarded by Hennessy in its high security warehouse, under optimal conditions. If you decide to consume this high-value bottle, you burn the NFT and it loses its value. Or you can choose to keep the NFT, let Hennessy keep the bottle and use it as an investment asset that can appreciate in value over time.
A simple example to apply but very attractive for both consumers and investors. But even more so for Hennessy. Because not only can they sell these assets while keeping custody of them, but they can set up an investment model with their stored bottles, obtain a return and make their consumers also obtain it by increasing customer loyalty. In addition, as a marketing action, it boosts their innovative image and increases their exposure. A win – win.
Another example where an NFT has also been used was in the certification of a Picasso. Sotheby’s auction house certified a work by one of the most famous painters of all time using a non-fungible token. But the way of associating the work with the token was not only effective, but also highly original.
The digital file associated with the NFT is a text file containing the “genetic code” of the work. To obtain it, a Looking Glass scanner from the startup Mira Imaging was used. This is composed of a microscope, AI and robotics to scan “every micron” of the surface of the painting to create a “unique encrypted signature” that is uniquely and exclusively of that work. As realistic as a copy may look, this code will not be the same, as it not only looks at the appearance, but the state of every micron of every stroke, the density of the paint and many other variables…
The NFT can be used to confirm the authenticity of the painting (if you have the Looking Glass scanner handy). Sotheby’s claims that the object can be scanned in a few minutes and that the process is no more invasive than taking a photograph. The physical object can then be re-identified with a very small probability of error: one in “many” billions, Sotheby’s says.
So, simply by associating this unique attribute of the physical work to the NFT (in numerical form) we can guarantee the authenticity of the work. And not only that. We can also guarantee the ownership of the work and the NFT since, being unique and associated, whoever owns one is the owner of the other.
The future of NFTs
It should be noted that currently the legal framework is not sufficiently clear and does not yet regulate NFTs as assets, so we could currently find ourselves in the situation where someone with an NFT claims ownership rights over a physical object and it is not legally binding. But it will be. Not in the short term, but in the medium to long term it will be.
Its applications will be endless. From certificates of ownership of an electronic product purchased by Amazon, to our house or car. All the ownership certificates and associated documentation that recognize us as the owners of this asset will be an NFT. And we won’t even know it. But it will be.
In the future, when we buy a house we will receive an NFT (associated with a binding document, obviously) that will be in our possession, i.e. in our wallet. And when we make a sale we will transfer the property to the wallet of the new owner. And all events of value and that have affected this asset (such as renovations, fires in the case of a house, or claims or theft in the case of a car) will be recorded in the blockchain and associated with it forever.
This is the great potential of this technology. We can not only certify the ownership of digital assets. But we can also move the documentation that gives us and recognizes a property (remember that what gives us the ownership of a physical asset and its use is not the house, is its paper certificate) from paper format, to digital format and move it to the web 3 world, to avoid its forgery and empower its new owner.