Beyond CryptoKitties and bragging rights: A look at the financial use cases of NFTs
- NFTs have potential applications that extend far beyond digital art and sports memorabilia.
- Financial use cases for this technology could potentially include NFT-backed loans, insurance, investments, ownership of rights, and debt management.

Whenever you hear the word NFT, you may instinctively think of a 10-year-old meme of an animated flying cat with a Pop-Tart body, or a digital art piece selling for $69 million for reasons that still aren’t quite clear to you. But in a few years, the word NFT may conjure up a completely different set of images in people’s heads.
That’s because tokenizing digital art and collectibles is just one of many possible applications for this novel technology. In simple terms, NFTs are digital certificates of authenticity. This means that any item that may benefit from being more easily verifiable and interoperable with the blockchain could eventually become an NFT.
This has implications for various industries including real estate, advertising, healthcare, fashion, and sports. Yet, finance is the sector that may benefit most from the emerging use cases of NFTs in the coming years. Everything from insurance and bonds to fraud prevention and debt management could end up being verified using blockchain-based NFTs.
Everett Kohl, founder of NFT marketplace Dbilia, says we will gradually see more people viewing NFTs as powerful tools for recording and verifying the provenance of business contracts, especially in finance. Consumers could use an NFT to confirm the existence of an insurance policy or a land title record to prove ownership of an asset. This would be especially useful in jurisdictions that rely too much on paper records or suffer from corruption. “Using an NFT to record ownership provides a proof that can’t be taken away, which gives an extra level of certainty,” said Kohl.
Existing use cases of NFTs are primarily found in the worlds of digital art and gaming, where NFTs represent ownership rights of the underlying asset. However, these can also be considered as financial use cases, according to Victor Zhang, founder and CEO of AlchemyNFT.
Zhang points out that we’re now seeing the fractionalization of expensive NFTs such as digital art pieces, which has turned individual NFTs into investable products. Fractionalization is the process of splitting up ownership of a single, high-value NFT, so that several people can simultaneously invest in it – kind of like buying shares in a company. Each fraction represents partial ownership of the NFT.
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New models are also emerging around gaming NFTs. Yield Guild Games is a community of blockchain enthusiasts who create NFTs representing digital assets, such as a virtual piece of land in a video game. An investor can buy this virtual property and rent it out or sell it to players who need to use the land for certain in-game missions and tasks. Millions of dollars have already been invested in these virtual properties.
Beyond these existing use cases, NFTs could represent or record any tradable and non-fungible rights in the future. They could be used to represent a variety of financial instruments, including loan agreements with banks, bonds, insurance policies, and asset packages.
Zhang adds that in the future, NFTs will offer widespread digital identity verification, which would enable real-time, one-to-one transactions between individuals, and eliminate traditional middlemen, including investment brokers, credit card companies, and banks. “I could make an offer directly to an NFT owner, who could then accept my bid without intermediaries,” he said. “This type of transparency and ease of use could be extended to other digital assets, which would disrupt the existing financial system.”
The most immediate future use case of NFTs that could potentially take off over the next few years is that of collateralization and lending, according to Sasha Fleyshman, portfolio manager at Arca, an investment management firm for digital assets. “Being able to post an NFT as collateral to take out a loan seems like a natural fit in the finance space,” he said.
Fleyshman adds that another potential use case will be the ability of business owners to digitize and split their revenue into separate categories. For example, restaurant owners could choose to separate the revenue earned on their alcohol sales from their food sales. This would also allow investors to get a more pointed exposure to the part of the business model they are most interested in.
Progress won’t happen overnight
There seems to be a lack of consensus on how long it would take for these financial use cases of NFTs to be implemented. Although some experts predict that NFTs will become commonplace across many industries including finance in the next 3 to 5 years, others believe it could take several decades before we see widespread adoption of NFTs for financial purposes.
Of course, the speed of adoption would vary with the type of use case. While we’re already seeing NFTs being sold or auctioned for the funding of new DeFi protocols, their large-scale use for debt, credit, and larger fundraising initiatives will take a considerable amount of time to materialize.
The use of NFTs in areas of finance such as bonds and insurance would be quite complicated, as it would require complex smart contracts that are interoperable across platforms. “You wouldn’t want a 100-year bond to be issued on a blockchain, only to have that blockchain go out of business before the bond matures,” said AlchemyNFT’s Zhang. “Deeper use cases for NFTs in finance will need more structure to handle these complexities, and to give the industry confidence to invest in these assets in the longer term.”
The rate of adoption of NFTs would also depend on how quickly governments are able to recognize their potential. Bill Sebell, director of ecosystem development at open-source blockchain platform XinFin, says that at this point, the limiting factor is not the technology itself, but rather the challenge of getting government agencies and established businesses onboard with this new technology.
“As soon as people recognize there is value, they will race to create the front-end UI, the strategy, and the marketing for this tech,” said Sebell. “The first mover race is still on, and whoever creates the best user experience for this technology will likely win market dominance.”
Mainstream adoption isn’t guaranteed
Although the NFT industry seems to be headed in the right direction, there’s still much ground to cover and many obstacles to overcome. There are a number of conditions that must be met for the real potential of financial NFTs to unfold. Perhaps the most important one concerns regulation.
The U.S. regulatory climate has created uncertainty around blockchain innovation, which could seriously impact NFT innovation as well. Regulatory bodies such as the IRS and the Federal Reserve need to consult the existing community of creators on how best to achieve balanced regulation that doesn’t cripple innovation.
“If we face the same stringent regulatory policies that China enacted, we will see a big impact on the NFT market,” said Anthony Georgiades, co-founder and COO of Pastel Network, a blockchain-based NFT platform. “The inherent decentralization in NFTs makes them a very useful solution for various applications in finance – but if we lose that decentralization, their advantages are seriously undercut.”
There’s also a need for a drastically improved user experience that increases the accessibility of NFTs for the average consumer who isn’t crypto-savvy. Tal Elyashiv, founder of blockchain-based venture capital firm Spice VC, says that creating an NFT currently involves a complex and lengthy process that mirrors today’s disjointed crypto experience.
“NFTs currently have a crypto-esque user experience, which is not always user-friendly, especially for those who are crypto-illiterate,” said Elyashiv. “This needs to evolve to an Apple or Amazon Prime type of experience, if widespread adoption is to take place.”
Another necessary condition is the provision of simple crypto onramps for users, so they can easily buy and sell NFTs. “The onboarding from fiat to crypto is a huge barrier right now that could benefit from a smoother process,” said Elizabeth Strickler, founding director of the Blockchain Lab at Georgia State University. “Most NFTs are held on the Ethereum blockchain, so there's a need for greater adoption of Ethereum by the average person.”
Closely tied to this are concerns around the environmental impact of NFTs, since each Ethereum transaction currently consumes a large amount of electricity. However, by the end of this year or early next year, Ethereum is expected to change its consensus mechanism from Proof-of-Work to Proof-of-Stake, which could help reduce its energy consumption by as much as 99.95%. Moreover, other blockchains that support NFTs – such as Solana and Tezos – are already much more energy-efficient.
The road ahead
At present, NFTs are static, and they mainly represent digital collectibles. Spice VC’s Elyashiv believes that the industry will eventually move to a point where NFTs become dynamic, evolving and updating in real time with the item they represent throughout its lifespan. The introduction of dynamic NFTs would allow developers to build a new class of auto-updating assets that are more fluid, accessible, and data-driven. This would expand their utility far beyond digital art and collectibles.
“NFTs are the safety deposit box of the 21st century,” said Elyashiv. “For decades, people have trusted banks to keep their most valuable items in an airtight box that requires a physical key or a code to enter. Instead, the NFT can act as a digital box that safely holds all of a person’s precious possessions, including wills, testaments, jewelry certification, and important financial documents.”
Provided that their growth is not handicapped by restrictive regulations, NFTs could have a major impact on finance and fintech by tokenizing a wide range of assets and connecting real-world finance origination to DeFi markets.
AlchemyNFT’s Zhang predicts a future where all tradable and non-fungible rights will be tokenized via NFTs, which would prevent them from being locked in a single platform. These tokenized rights could be traded on the market and integrated across systems, forming frictionless global markets that are effortlessly integrated. “While all this may sound a bit pie-in-the-sky, finance has always been one of the most creative industries when it comes to experimenting with assets, derivatives, and emerging markets,” said Zhang.
“There are certainly entrenched interests that may not see the benefit in these decentralized tools, but the writing’s on the wall. The momentum is building, and it’s only a matter of time before NFTs-as-utilities make inroads across even the most conservative corners of the finance industry.”