The primary reason behind creating non-fungible tokens (NFTs) was to represent digital goods, but there is now increased potential to use them in the future to represent physical goods and experiences as well, according to a new report from Ripple ( XRP).
The report, titled “New Value Crypto Trends in Business and Beyond-2022” noted that as with all human activities, there is also an environmental cost associated with NFTs, and now both consumers and developers are thinking more about mining them for energy- efficient sustainable blockchains.
That said, not all blockchains are as harmful to the environment as some of the others, the report said.
The report also noted a common mindset that most people associate with NFTs.
It said most people think of NFTs as tokens that represent “ownership of something digital, like a graphic or an image or video clip. But in fact, NFTs can represent ownership of something physical, like a case of wine, or a pair of sneakers, or a plot of land.”
The report surveyed over 800 people in 22 countries in Asia Pacific (APAC), Latin America (LATAM), North America, Europe and the Middle East and Africa (MEA).
The findings showed that 75 percent of consumers globally prefer sustainable NFTs.
It said that as with all human activities, there is also an environmental cost associated with NFTs. “This is especially true for NFTs that are minted on a proof-of-work Blockchain, such as Ethereum (until the upcoming transition to proof-of-stake), where the majority of NFTs are currently minted.”
More than a quarter of respondents strongly preferred to buy sustainable NFTs, and while a fifth of people said they would only buy a sustainable NFT.
Regarding Blockchain developers, Ripple noted that two-thirds of all developers saw their organization as more likely to choose a sustainable Blockchain for NFT projects, adding that their customers also wanted them to choose a more sustainable Blockchain.
Furthermore, a fifth of developers said they would choose sustainability as a top-5 attribute for a cryptocurrency that they would use in their Blockchain application.
The report also shed some light on the amount of energy required to create NFTs on Ethereum. It has been estimated that minting a single NFT on the “Ethereum Blockchain consumes 231.31 kWh of energy, which is equivalent to more than what the average American household consumes in a week,” the report said.
Ramkumar Subramaniam, CEO and co-founder of Guardianlink, an NFT marketplace, said: “There are a couple of concerns regarding sustainability when it comes to blockchain. And addressing those concerns will make them more viable and practical. The first is regarding network fees, referred to as gas fees There are some cases where the gas fees are so exorbitant that they are more expensive than the actual transaction amount.
“Another concern regarding blockchain is the extent of the carbon footprint it leaves for each processed transaction. Many mainstream blockchains have come under heavy criticism because of this,” Subramaniam further added.
“But not all NFTs operate with huge carbon emissions. The carbon footprint is related to the type of consensus mechanism that drives the validation of the blockchain on which the NFT is minted and traded. There are other blockchains with much, much lower energy usage such as Solana, Flow and the XRP Ledger,” added the report.
What type of NFTs do consumers want?
The report recorded responses from consumers and asked them whether they would prefer digital, physical or experimental NFTs. It found that 25 percent of consumers preferred all three types of NFTs.
“Response rates were similar across regions, with only slightly less interested in NFTs representing experiences than those representing digital or physical assets, but in Europe relatively more interested in experiences than in digital and physical assets,” it said in the report.
The report further added that there is a huge opportunity in NFTs in the future since the vast majority of things in the world are non-fungible. It illustrated the concept with an example.
“An NFT can also represent something in terms of experience, like sitting in the front row at a concert, or the right to vote in a community. Or it may even represent a combination of digital, physical and experiential assets, the report says.
“The future of NFTs appears to be resilient. NFTs represent real-world assets such as artwork, games, collectibles and have been used to purchase tickets to online events, games, fashion and much more. Even celebrities and brands have launched unique NFT collectibles, making it a useful tool to drive engagement between customers and brands,” said Abhay Aggarwal, founder and CEO of Colexion, an NFT marketplace.
Future demand for NFTs
According to the report, NFTs representing digital goods are currently the area of focus, but in the future, NFTs representing physical goods and experiences will have good upside potential, as “people move more and more fluidly across the physical world and the Metaverse.”
“However, NFTs for digital goods will continue to be important – especially those that combine aspects of community, access and credentials,” the report added.
Future scope of NFTs for consumers
According to the report, the current complex and confusing knowledge surrounding NFTs will give way to greater simplicity and understanding. This will also clear the way for more individuals to feel more directly the emotional value of NFTs, the report says.
According to the report, as more creators join the trend of minting NFTs, and also as NFTs are more innovatively used by famous creators, the trend of NFTs will solidify and expand into a long-term way for consumers to engage in their passions, and for creators and consumers alike to realize and manage financial value from those engagements.”
“Consumers themselves are about equally divided when asked whether NFTs are a temporary fad, a medium-term trend or will be around for a long time. We believe that over the next two years, the number who say they want to be there for a long time will rise dramatically, the report says.
