CryptoPunk #5822, a pixelated image of a man wearing a bandana that can be viewed and copied by anyone sold for the equivalent of $ 23.7 million on 12 February 2022. Sotheby's Metaverse tweeted on 26 October 2021 that BAYC #8817, a sleepy, bored looking ape wearing a spinner hat with a party horn sold for $ 3,4 million. Welcome to the world of NFTs! While these are undeniably astonishingly high sums of money paid for easily accessible digital artwork, it is by no means the most expensive. So, what precisely is an NFT and does it have any practical application beyond the hype?

NFT stands for “non-fungible token”. It is simply an asset that has been authenticated using blockchain technology. Britannica states that the idea of selling something that you can easily find, share, or reproduce on the Internet for free may seem pointless, especially if you consider that the NFT buyer is not necessarily “acquiring the copyright, trademark, or sole ownership.” Rather, the appeal of NFTs rests on authenticity, which has had a huge role in the art market for centuries.

Beyond the hype, NFTs potentially hold some real-world benefit in many fields including:

Halal Certification

Certificates on paper, or even digital certificates, are open to many points of failure. Servers can be jeopardised, and paper can be destroyed. Since NFTs are immutable, and non-fungible, yet can be transparently viewable to all, makes NFTs ideal for halal certification. On 29 April, Shariah Experts Ltd. Issued shariah compliance certificates on blockchain in the form of NFTs for Singapore-based gold crypto platform Cache.Gold. Supply chain based blockchains are primed for the development of halal certificates for a myriad of different foods which may increase efficiency, longevity and transparency within the halal certification sector.

Intellectual Property

When patents are tokenised on the blockchain they can be traded much easier than conventional methods. This will increase engagement, effectively improving innovation. In April last year IBM reported that IPwe, a company that enables IP transactions, partnered with IBM to represent “patents as non-fungible tokens (NFTs) or digital assets by working with IBM to create the infrastructure for representing patents as NFTs and storing the records on a blockchain network.”

Real Estate

One of the largest setbacks in real estate investments emerges in the form of property ownership transfers. A property owner could issue an NFT on a blockchain representing ownership of the physical asset. This would result in better efficiency, improved streamlining, mitigation of fraud and avoidance of paper or conventional digital certificates when attempting to sell or purchase property. It may also increase the scope, access and feasibility of sukuk if issued in this manner. There are real world examples of property sold using NFTs. As far back as 2017, an apartment was sold as an NFT via Propy. These types of transfers have to be considered from a legal perspective as well. Thankfully, many land registries are taking note. In 2019 HM Land Registry ran a demonstration of using blockchain to facilitate the transferal of property ownership. Hopefully, we shall get more clarity and support from land registries around the world in the near future.

Allah Knows Best