Navigating the NFT space and the future of tokenized assets

In a nutshell, NFT stands for non-fungible token. These digital tokens are created using the same programming process that generates cryptocurrency. An NFT can be any number of things, such as a car, a property or digital art.

Property tokenization converts the value of property into a token. The token is then stored on a blockchain, enabling digital ownership and transfer. These divisible symbols each represent a fraction of the ownership interest in that property.

In practical terms, the owner could open an account with a blockchain trading platform, and then create his NFT by verifying ownership of the asset.

These details will be stored on the blockchain, until someone decided to make an offer for NFT – or ownership of NFT.

While buying and selling property as NFTs on the public blockchain is very embryonic, the potential for such a service is huge. The unwieldy, international real estate market, which is ripe for reinvention, will greatly benefit from the opportunities the NFT market will provide.

NFTs and the crypto winter

However, the current global economic downturn has had a strong impact on the NFT market. Sales go down, along with the price. So what do the experts predict for this dynamic, transactional space?

Wes Levitt is Chief Strategy Officer of Theta Labs, a leading provider of blockchain infrastructure for Web3 media and entertainment. Theta Labs recently partnered with the World of Women NTF to stream the WoW Miami Gala through the ThetaDrop Video Portal for all WoW NFT holders.

He says: “The NFT market today contains some cutting-edge projects that deliver innovation and value to users and token holders. However, there are also many low-stakes projects looking to cash in on the NFT hype.”

Levitt is right. According to EarthWeb, an estimated 3,200 NFTs were sold daily, throughout 2022. And NFT trends can skyrocket. Take the recent gold rush that occurred when Cristiano Ronaldo left Manchester United FC on November 15, 2022.

Analysis of Google search data revealed that online searches for ‘Ronaldo NFT’ exploded 206% worldwide on November 15, when news broke that the footballer had launched his first NFT collection, in partnership with Binance Marketplace.

What can become an NFT?

Anything can be symbolized in theory, Levitt confirms, as long as scarcity is a meaningful part of the asset’s value in the first place. “Of course, demographic adoption is a barrier – assets like CS:GO skins that already have a young and tech-savvy demo are more likely to see early adoption than assets like real estate that are typically owned by institutions.”

Sallyann Della Casa is the founder of GLEAC, an educational NFT and cryptofintech marketplace that enables knowledge sharing between industry experts, says suitability for tokenization depends on the asset.

“I think the real question is what is worth tokenizing. Do you want a permanent tokenization of your shoe collection – probably not. Do you want one of your driving licences, passports, titles to homes, cars, etc.? Probably yes.”

NFT regulatory practice is also embryonic

But as the trends peak, so do incidents of fraud. And because the space is so new, there is little in the way of protection when it comes to NFT scammers. Della Casa believes the current decline is a positive thing because there is an opportunity for a course correction.

“The flippers will hopefully get bored and go away,” she says, referring to a group of NFT market watchers who buy assets and sell them quickly for a quick profit. The practice during trending tops falsely inflates the prices of many NFTs, resulting in clients seeing their assets quickly devalue as the bubble has burst.

These activities, and scammers, have resulted in the NFT space amassing a somewhat renegade reputation. Della Casa explains: “We’ve had inflated NFTS for the last 12-18 months and every bubble is popping. Another thing wrong with the market is the amount of fraudulent NFTS floating around. Something like 80% of Opensea NFTs are fake. It’s sensational. The worst part is finding out the identity of these fraudsters. No one has a clue who they are.”

Della Casa also questions the regulatory procedures of certain NFT platforms that do not take action when complaints come from users. “Who polices Opensea? I would like to know as I have reported the fake NFTS to my collection hundreds of times and nothing happened.”

Levitt agrees, but says the issues affecting NFTs are similar to those across the crypto space. “The usability of wallets needs to be improved and the user experience, in general, is not always up to the standard that regular users expect from collectibles and apps in general,” he says.

But he points out that this is not something that will hold up the maturation of the industry too much. The metaverse, says Levitt, will play an important role in driving the NFT space forward. “Digital assets are a natural fit for digital worlds, which need native assets to transfer value seamlessly. We see NFT use cases like gating access to certain worlds or areas, or representing unique objects, as obvious uses for NFTs that should be built into metaverses from the ground up.”