Why invest in asset-backed NFTs?

Blockchain and NFTs are being used in a growing number of new business use cases. It is an innovative cutting-edge technology that has enormous potential by introducing asset-backed NFTs and can revive the value of many tangible assets. The next technological advancement in the cryptocurrency sector will be the combination of blockchains and real-world assets.

This is especially true in the world of the luxury industry. Since its inception, the industry has been plagued by counterfeiting, an unstable market, supply chain issues, and problems validating the legitimacy of products on the secondary market. All these problems can be solved by using NFTs, but what does it mean to back up a digital asset on the blockchain with a physical asset?

How can NFTs be used for premium assets?

Historically, luxury assets have been associated with high barriers to entry, with only the wealthy and privileged able to afford them. NFTs change this traditional model by enabling a wider range of investors to acquire a stake in these popular items.

Now, blockchain technology can be used for mass-produced goods, but the market for limited, extremely valuable assets is more lucrative. In this situation, an NFT is the optimal solution. Asset-backed NFTs are digital tokens that can be demonstrated to be unique on a distributed ledger and are backed by real-world assets. Typically these are associated with a digital artwork, referred to in NFT, for sale on a marketplace.

An NFT may refer to the barcode or other identifier of a physical asset as opposed to a digital artwork. The process of transferring non-blockchain-based assets to a blockchain is known as tokenization. Now that the physical luxury products are recorded in the distributed ledger, it is easy to track and verify them.

The same is true of designer clothing, watches and shoes, as well as any other luxury items that consumers desire for their aesthetic appeal and long-term value. They can all be tokenized so they can be easily verified by anyone.

For example, luxury watchmaker Franck Muller recently partnered with a blockchain company to develop an NFT-backed watch. The watch is a physical object, but ownership is represented by a blockchain-based NFT that can be transferred. By symbolizing the ownership of the watch, Franck Muller is able to make ownership accessible to a wider audience while ensuring that the watch’s provenance and authenticity can be easily verified.

The widespread use of asset-backed NFTs is not limited to a specific industry; the tokenized real estate market is expected to reach $2.2 billion by 2025. The most expensive NFT sale to date occurred in 2021, when a luxury condominium in Miami sold for $22.5 million.