NFTs are all the rage. These digital tokens—often associated with digital art and collectibles, songs, videos and designs—are everywhere, but they are more than novel art. In fact, NFTs may offer solutions, at least in part, to some of society’s challenges.
Simply put, an NFT (short for nonfungible token) is a unit of data stored on a blockchain—a database of transactions organized without the need for a central trusted authority. Because they rely on blockchain technology, NFTs have attributes that are attractive to buyers: The provenance of every token is tracked on the blockchain, which provides proof of the authenticity, as well as ownership, of the token. Moreover, blockchains make NFTs accessible—their code is freely available, and all people who have access to the internet can use the technology.
In recent years, NFTs have become popular in art, music, gaming, sports and entertainment. An NFT representing a piece of digital art by artist Beeple, “Everydays—the First 5000 Days,” sold at a Christie’s auction for a staggering $69 million last year.
But NFTs also can be used as a representation of physical assets such as gold or a watch, or documents like tickets, certificates and contracts. And it is in that digital representation of things beyond art and entertainment that NFTs have immense potential.
An education profile
Take education. Currently, diplomas and certificates are issued manually and often on physical paper. The storage, verification and transmission of these credentials is largely manual, too, making them easy to fake. Presenting a paper copy of one’s diploma to prospective employers can be cumbersome, and sending an academic transcript to a prospective employer usually involves submitting a request to the issuing institution and sometimes paying a fee.
To make this process easier, educational institutions could create NFTs linked to diplomas or certificates. The NFTs also could link to detailed information about the coursework completed by the student, as well as how the student performed, such as grades, reports and other achievements. With these new, digital credentials, potential employers could efficiently and securely verify the origin and authenticity of applicants’ credentials, greatly improving the employment application process.
This type of digital credential also could have an outsize effect on massive open online courses (MOOCs). Over the past few years, the MOOC industry has grown significantly. As the number of students increases, tracking and authenticating credentials earned through MOOCs has become more challenging. NFTs could be used to easily verify which courses a student has completed successfully. Instructors also could use digital tokens to demonstrate their own credentials, providing verification of their qualifications and transparency to students about the content offered.
A medical credential
Another industry where NFTs have potential is healthcare, especially in the area of patient data. Today, patient data is scattered across multiple platforms and can be difficult to access. As a result, some Americans undergo unnecessary or redundant treatments that stem from misdiagnosis due to poor patient-data management. NFTs could be used to create a secure, accurate and verifiable credential signifying ownership of certain medical records and data. This digital credential could link to a patient’s health history and health information that could be ported to various healthcare providers.
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To be sure, there are technical challenges and questions that would need to be addressed before NFTs could ever be used in education or healthcare—or any other application involving personal information. The issues go to the heart of when and how NFTs should be used—or even not used. A key challenge is privacy—most existing blockchains are public. So where should confidential data be stored, and how can users maintain both privacy and interoperability? Other challenges include intellectual property, as well as the carbon footprint of blockchain technologies, specifically the amount of electricity it takes to verify transactions. These and many other choices about implementation will affect the usability of the final product.
Meanwhile, however, let me offer one other application of NFTs that I believe has great potential: their use by nonprofits, universities and research organizations to fund missions and drive social change. Using NFTs, these entities can commemorate their research, create beautiful collectibles and raise awareness and money for various causes and initiatives. Adopting NFTs may allow them to attract a new donor base, one that is young, digitally savvy, mission-driven and has deep pockets. In fact, the use of NFTs to build community is important, and an often-underestimated benefit of the technology.
For example, a scientist who has unlocked secrets around environmental degradation could create an NFT of an imprint of their groundbreaking research and present it to a donor, who, in turn, supports mitigation efforts. Or medical researchers who invented a vaccine for an infectious disease could forever memorialize their eureka moment in an NFT of an invention document and sell it to raise money for ongoing exploration and analysis. A significant example of this was last summer’s $5.4 million NFT sale of 9,555 lines of original source code for the internet by inventor Sir
Tim Berners Lee
through Sotheby’s—with proceeds going to charity.
Another example of NFTs powering social impact was the philanthropic campaign by NFT4Good to #StopAsianHate. The campaign involved the creation of digital trading cards of 88 Asian American and Pacific Islander leaders across entertainment, sports, business, technology and community activism, such as
co-founder of Twitch, and Brandun Lee, professional boxer. Each NFT was bundled with a collectible card so purchasers could also own a physical representation of their NFT. The NFTs went on sale for a week, with funds going to nonprofits advocating for #StopAsianHate and #HateIsAVirus.
The potential of blockchain technology and NFTs to raise money and power social impact is remarkable, further enabling the scientist, the inventor, the professor, the artist and even the public servant, to leave their footprints on the world. While there are still complexities around NFTs that need to be resolved and much remains to be learned, the innovation of NFTs has led to a unique opportunity to unlock value in support of positive change.
Prof. Hammer is managing director of the Stevens Center for Innovation in Finance and senior director of the Harris Alternative Investments Program at the Wharton School of the University of Pennsylvania and an adjunct professor of law at the University of Pennsylvania Law School. She can be reached at [email protected]
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