NFTs Are So Much More Than JPEGs; Here’s Why
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Dec. 7, 2021
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While both traditional and social media have hyped NFTs as overpriced immutable digital representations of physical assets, they have mostly overlooked the actual potential of NFTs.

Non-fungible tokens, better known as NFTs, have enormous potential to revolutionize the concept of "ownership" across every aspect of our lives. The NFT ecosystem has snowballed over 2021, cementing itself as a futuristic technology that delivers a radical shift across both blockchain and traditional ecosystems.

NFTs and Real-World Assets Make the Perfect Match

Gone are the days when NFTs were solely limited to ownership of digital art. Thanks to the advancement of blockchain technology, almost anything can now be minted as an NFT. Whether sports, influencers, media, entertainment, gaming or real estate, many mainstream industries have already embraced NFTs with open arms.

Why so?

Well, NFTs come with three built-in features:

  • Each NFT is unique.
  • NFTs can be replaced with similar tokens of value.
  • Scarce (which is the reason why they gain so much value within short periods).

The appeal of NFTs lies in the features offered by the underlying blockchain technology. Since each transaction on a blockchain network is recorded on an immutable distributed ledger, it isn’t possible to copy, destroy or delete any records related to the NFTs. The transparent record-keeping allows NFTs to be traced back to their original owners, thus eliminating the need for labor-intensive and expensive third-party verifications.

Furthermore, the blockchain network also offers military-grade security while giving the NFT owner exclusive rights (ownership) to use the asset as they want. Accordingly, even the original creator of an NFT cannot copy or transfer the NFT without its owner’s permission.

Owing to these reasons, anyone can make an NFT of anything, even physical real-world assets. In essence, as an evolving financial instrument, NFTs have quickly established themselves as an efficient way of verifying the authenticity of physical assets on the blockchain and monetizing intellectual property that exists in the outside world.

Bringing Real-World Assets into the DeFi Ecosystem

As more and more blockchain projects introduce newer (and easier) ways of tokenization, the decentralized finance (DeFi) ecosystem will gradually tap into the trillion-dollar real-world assets (RWA) market, thus bringing more liquidity into the nascent DeFi sector.

Centrifuge is one such platform that aims to bridge the gap between real-world assets and the DeFi ecosystem. It is the first decentralized protocol that unlocks economic opportunities for all by providing the infrastructure that connects lenders and borrowers in a fully decentralized, transparent and cost-effective manner.

The platform’s privacy-enabled NFTs are tokenized representations of individual assets, keeping some attributes of the assets private via a peer-to-peer (p2p) network. At the same time, Centrifuge Chain tracks the assets' ownership. This structure allows them to add a totally new feature for the growing DeFi market.

Founded in 2017, Centrifuge serves as a decentralized asset financing protocol that allows anyone to tokenize their real-world assets like real estate, royalties and invoices, among other assets. Once tokenized, these can be used as collateral to access financing through Centrifuge’s asset-backed lending dApp Tinlake. By merging NFTs with real-world assets, Centrifuge empowers the DeFi ecosystem to tap into a trillion-dollar market while also reducing the inefficacies and limitations of traditional finance (TradFi).

While Centrifuge leverages the speed, scalability and cost-efficiency of the Polkadot network, its dApp Tinlake benefits from Ethereum’s liquidity. The platform also plans to bring its infrastructure to AAVE and MakerDAO’s DAI, aligning with its goal of revolutionizing how people worldwide interact with financial services.

The Bottom Line

As the popularity of NFTs continues to grow, NFTs will play a key role in bringing a paradigm shift in existing financial services. And with platforms like Centrifuge making it easier for everyone to access financing by bridging DeFi with real-world assets, it is no hyperbole to claim that NFTs aren’t just another "seasonal trend" that will fade away soon.

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