NFTs — Beyond Artworks and Digital Collectibles
The Intelligent Insurer #14
To date, artwork and digital collectibles have dominated the non-fungible token (NFT) market. Record-breaking sales have been made in these categories and these NFT assets have naturally captured the lion’s share of attention.
However, the possibilities of NFT technology extend far wider. NFT is a blockchain-based token that is useful for issuing and tracing the provenance of digital items. These digital items can be tied to real-world items. For instance, certificates, wills, and tickets could all be issued as NFTs.
In the latest Intelligent Insurer, we explore the relevance of NFTs to various industries. We consider how the implementation of NFTs into industries beyond artwork and digital collectibles is likely to spur greater adoption. We also highlight the risks inherent in NFTs and how insurance solutions can help NFT owners minimize their downside risks.
No Boundaries For NFTs
The potential for NFT implementation is almost limitless. Wherever certificates are relevant, or anywhere that there is a need for provenance and verification, NFTs can be deployed. Licenses, identification documents, game tickets, and various other items that can exist in digital form are all compatible with the application of NFTs.
(Source: Tabuart.com)
NFTs have mainly reached mainstream attention through the issuance of unique digital content that has attracted huge sales. The market for digital content is undeniably huge with Delphi Digital analyst Piers Kicks estimating that the market will grow to over $300 billion.
However, it is important to note that NFT applications extend beyond the issuance and sale of digital content. In fact, some of the more subtle applications may be what truly integrates NFTs with mainstream technology. Use cases like wills, legal documents, photos would require NFTs to integrate more closely with everyday user technologies. In contrast, digital art can be sold and the associated NFT remains idle in a wallet thereafter with no need for interaction with non-blockchain technologies.
The Working-Class NFT Category
NFTs issued by widely recognized brands like Beeple, Pak, and Fewocious have been responsible for much of the hype surrounding the NFT market. However, other NFT implementations are also surfacing which are attracting less attention but adding significant liquidity and validity to the ecosystem.
Among this group, “sci-fi” digital products stand out with the highest average selling price, according to data from SuperRare. Next in line is “2d” products which are followed by contents with the tag “space”.
Data from Google Trends shows that global interest in NFT exploded at the beginning of 2021and understandably reached its peak in March during the record sale by Beeple. Digital content creators have found a way to attach value to their works, and also a method of selling on a global marketplace.
(Source: Trends.Google.com)
With the growing interest comes an influx of users, including those with little or no previous idea about cryptocurrencies. This is a situation that can easily expose such users to risks, some of which can be extreme.
Long Term Preservation Over Short Term Sales
Recent trends among NFT collectors give us some indication of where the market might be heading and what NFT investors hold important. Among the most coveted categories of NFTs are themes that focus on futuristic, retro and science fiction. It is also notable that these categories do not necessarily fall among the highly priced NFTs that have made headlines in recent times.
The average price of “sci fi” NFTs is roughly $7,400, while NFTs with “2d” tags are approximately $6,000. These two categories make up the most coveted set of NFTs in the market today. This may suggest that the majority of NFT collectors are more interested and motivated by the element of ownership and content preservation, rather than the short term satisfaction of big sales.
However, NFT owners need to be cautious of their downside risk. NFTs remain a nascent asset class that are underpinned by a fragmented market structure with disconnected exchanges. The Insured Finance NFT Vault is the only NFT storage solution that gives full coverage to NFT owners. NFT assets stored in the NFT Vault are fully insured at their market value and holders are fully compensated if an adverse event occurs. More details to be released soon.
About Insured Finance
Insured Finance is a decentralized, peer-to-peer insurance marketplace. Built on the Polkadot blockchain, Insured Finance users can request customized insurance on a wide variety of digital assets. Those that fulfill requests earn premiums and can earn a competitive return on their capital. Claims are fully collateralized and settled instantly.
