What emotion does the image above invoke? For many, it’s confusion or sheer anger. Neither response is particularly positive. This widespread frustration often stems from a lack of understanding of the novel concept of NFTs. Like many, I despise the overhyped monkey JPEGs, but I want to explore the untapped potential of NFTs as a transformative technology with real-world applications.
What are NFTs?
According to Wikipedia:
Non-fungible tokens are a financial security consisting of digital data stored in a blockchain, a form of distributed ledger. The ownership of an NFT is recorded in the blockchain and can be transferred by the owner, allowing NFTs to be sold and traded. NFTs can be created by anybody, requiring few or no coding skills. NFTs typically contain references to digital files such as photos, videos, and audio. Because NFTs are uniquely identifiable assets, they differ from cryptocurrencies, which are fungible.
The term “fungible” may seem daunting, but it simply means interchangeable. For example, 1 USD equals 1 USD, and 1 ETH equals 1 ETH. In contrast, NFTs are unique and not of equal value to one another.
This concept is straightforward. After all, we encounter non-fungible items in our daily lives—identity cards, land deeds, insurance documents, artwork, and more. These items are unique and often hold significant value. Importantly, not all NFTs must have monetary worth; some can serve as immutable records.
A Tangible Use Case
Now, let’s delve into a practical application of NFTs. From the moment I first learned about NFTs, I couldn’t stop thinking about their potential for storing and securing unique documents like identity cards, certificates, and real estate records.
Real Estate in India
In India, land deeds often look like this:
While there’s been significant progress toward digitization, such as government-led initiatives like DigiLocker, challenges remain.
Problems with Current Systems:
- Physical Documents: Hard copies are vulnerable to theft or damage.
- Digital Vulnerabilities: Platforms like DigiLocker, though useful, have faced security issues, including breaches that exposed millions of sensitive records (source).
The Role of NFTs
Imagine this improved process for real estate documentation:
- Purchase: A person buys land.
- NFT Issuance: The land deed is encrypted and stored on IPFS, generating a unique hash.
- Proof of Ownership: The hash is minted as an NFT on the blockchain.
Benefits:
- Immutable Ownership Records: No one can manipulate the ownership record without access to the blockchain. This ensures disputes over ownership are minimized.
- Privacy and Security: The document can be encrypted using standards like AES, and the decryption key can be shared with authorities only when verification is required.
By leveraging blockchain technology and NFTs, both hard and soft copies of vital documents are rendered nearly tamper-proof, drastically reducing the risks of theft, forgery, or accidental loss.
Demonstrating the Concept
To showcase this concept, I created a simple demo NFT available here. It’s an encrypted image of the land deed above, minted on the Rinkeby testnet via OpenSea.
For simplicity, I skipped steps like IPFS storage and AES encryption in this demo, but the underlying idea remains: NFTs can revolutionize document storage and ownership verification.
Conclusion
While monkey JPEGs have monopolized the conversation around NFTs, their true potential lies in applications like secure document management, immutable ownership records, and streamlined verification processes. By addressing real-world problems, NFTs can transcend the hype and become a force for good in the digital era.