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NFT for Physical Assets | Can NFT Be Used With Physical Assets like Property, Arts, Painting?

This Blog will help you understand how NFTs for Physical Assets are helping to strengthen Asset-backed Securities and what all is covered...

Written by Niel Patel · 6 min read >
NFT for physical asset

NFT tokens are a great way to transfer that value and certified proof of authenticity on the blockchain. Unfortunately, many people are confused by NFTS and don’t get them because there’s no connection between a nonfungible token and real-world assets. NFT for physical assets like painting, arts, and real estate is a bridge that allows you to convert an NFT into actual physical, tangible objects.

 NFT marketplace for Physical Assets
NFT marketplace for Physical Assets

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This article will discuss the first bridge between NFTS and physical products. So I want to go into a little bit of the issue here and the background. We know that nonfungible tokens are a great way of transferring value on the blockchain.

  • It allows us to verify a certain mintage.
  • It allows us to clarify the ownership.
  • It allows us to show the transaction history of a digital asset.

However, many people are confused and ask why I would pay all this money for an image on a computer screen?

What If allows you to transform a nonfungible token into an actual physical asset. On the flip side, it’s also planned with the feature to allow you to transform a physical asset into a nonfungible token. So it’s a two-way bridge between physical assets and NFTS with uniquely sitting in the middle and facilitating that transition between the digital.

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Non Fungible Tokens– NFTs have usually been considered only Digital tokens, but A Digital token that takes up the custody of any Physical object is called an NFT for Physical Assets. Therefore, an NFT can be both Physical as well as Digital. The more common one, however, is the Digital format of NFTs. These Non Fungible Tokens are strengthening the Asset-Backed Securities. 

An NFT is a Unique token and is a scarce token compared to a Bitcoin that it is usually confused with. Therefore an NFT creates Digital Scarcity, and everybody knows how many are available since these are distinguishable. 

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Let’s See How NFTs for Physical Assets are Helping to Strengthen Assets.

Up until recently, this particular format did not have a backing, and thus people were not aware of this, then with the launch of ERC721 in 2017 allowed the creation of Non-Fungible Tokens for Digital Collectibles. 

Non Fungible Tokens become a unique form of Investment when tied to a Physical Asset. Since the launch of NFTs, the digital space has been flooded with Digital Art, and thus the demand for Digital NFTs has been negligible as compared to the supply of “Digital Art”. Therefore, to stand out of this crowd, opting in for a Physical Asset through NFTs is a Sound Investment. These Physical Asset NFTs have already existed in an Ecosystem that gives them an association to an actual value. For Example, items like; Shoes, Wine or Artwork. 

The Tokenization or NFTs for Physical Assets gives the Investors a chance to expand their Portfolio and to an owner, it gives a chance to liquidate their Assets. 

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Let’s understand NFT with Physical Asset Through an Example;

Let’s say someone passed away and left behind 1 asset to be split between multiple people in the will, one would think that people would sell it and split the revenue amongst them, but what if this particular asset is an appreciating one and every stakeholder decides to hold onto it till it reaches a high value and then get the benefits from it.

In such a situation, they can Tokenize it instead of storing somewhere or leaving it unattended; this tokenization will give every person Individual ownership of the asset till it is sold. Now, if the asset owner decides to liquidate a few of these “Shares”, he/she can sell a part of the tokens and still keep the Physical Asset with themselves. In this manner, the Owners/Shares of the Assets would increase, but the Physical Ownership of the Asset would stay the same. Thus, creating Flexibility in Investing and owning Assets. 

It is, however, important to note that every NFT for Physical Asset cannot be shared similarly; the restrictions on every token/ownership, for that matter.

  • Some Tokens might only be giving you access to the Physical Asset, whereas some Tokens might be giving you the ability to restrict ownership.
  • This Classification of the Tokens of the Physical Assets is more or less similar to the Classes that you see in Stock Trading.
  • The level of Investment affects the level of Ownership shared by a Stakeholder. 

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Let’s understand the “Classes of Tokenization” with an Example.

If a Public Office, like a Museum, lets people invest in it as they need to buy something new for the Museum. Now, this would not mean that people can practice direct ownership over the bought piece or the entire Museum itself; this will just give them access to invest in the Museum and reap the benefits of the ownership as and when it matures. The scope for Tokenizing Physical Assets for NFTs varies from situation to situation.

Nothing and everything can be listed as even though you might ‘Tokenize’ it, people will not be interested in investing if there is no tangible benefit. For example, the chances of investing for ownership of a Shoe Manufacturing Unit are more likely than a pair of shoes any day. 

Therefore, whenever you are planning to invest or even planning to list something for NFT, do consider the sustainability and acceptability of the Ecosystem created towards your particular Physical Asset or the scope of creating an Ecosystem towards your Physical Asset. 

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Chronicled and BlockChain Art Creatives are a few examples of companies that have successfully created Ecosystems and are thriving with Digital and Physical Assets with NFTs. 

  • The main understanding that needs to be to ensure gains from Physical Asset NFTs is to be aware.
  • Aware of the Ecosystem, of the demand, of the supply even.
  • The Rule is simple, people will always go in for things high in Demand, and the Demand can be maintained if the Supply is kept in check.
  • More the Demand, less the Supply will ultimately make the Asset all the more Valuable as the Scarcity of it, will give it the Premium Positioning that boosts the Need for Ownership by an Individual. 

This concept of Physical Asset NFT has also opened up huge potential for every investor and asset owner. The ability to share a Non Fungible Token for the same value as for the Physical Asset without losing out on the Physical Asset itself makes loads and loads of investors and asset owners to hop on to this format and begin with their trading. 

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You must remember that Non Fungible Tokens can be anything that has been recorded in the Blockchain ledger, such as Ethereum or any other Cryptocurrency for that matter. The Digital NFTs are obviously more vulnerable to scams, and there are plenty of fraudsters online that are replicating Digital NFTs, in this regard, an NFT with Physical Asset automatically becomes a much safer and better option to list and invest in. 

Creative work, Music, Films, Jewelry Design, Real Estate, everything, and anything can become a Physical Asset to NFT. It all depends on what research you are putting in for these Assets. 

The transparency that comes with a Physical Asset NFT as well as the Blockchain that helps track it all, this type helps and directs a sound investment. Apart from this one benefit, an NFT for Physical Asset is helping you invest and create in a Real-world instead of a ‘Digital World’, where there is no Tangibility of things you are trading in.

A Physical Asset NFT helps in Decentralisation; as the middleman gets removed from the transaction entirely, the Transparency increases since the users/owners can see in reality what is happening to and with the Asset and a Blockchain further helps in guarding a Physical Asset NFT as every move gets logged in here thus removing the scope of fraud and uncertainty with the Asset. 

The Ecosystem for NFTs has been growing and becoming more and more relevant as we speak about it, but we need to understand its good and bad aspects. Investing wisely is extremely important since the Digital World is growing and evolving second by second and NFT is another step towards a holistic digitalization of our usual processes.

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NFT with Physical Asset – In Conclusion,

A Physical NFT is a sound and safe investment. It gives you ownership of something more Tangible and becomes a Transaction that is more Transparent to you since you can Physically view the Asset in your Real Life and be away from the fear of Fraud and Scams since every transaction is getting recorded into the Blockchain.

A Physical Asset NFT investment will give your Portfolio much more expansion and open up opportunities to invest in things that you might not be able to before. It will make your Portfolio diverse and much more flexible, thus making you a sound and safe Investor. Imagine owning a piece of Artwork or some Real Estate that you are 1000% sure will keep appreciating; you will reap plenty of benefits from it even if you’re not the original owner of the piece.

This is how vast the scope of Physical Asset NFTs is and how easy it has become for you to invest and own things.

As for those listing their Physical Assets for NFTs, this format gives you the freedom to share your Assets digitally and keep the Physical Asset with you for as long as possible. The share in ownership helps you look at multiple aspects that you might not be able to before due to the sole responsibility, say, maintenance of a Piece of land or a piece of art. Imagine you have got this one piece of art that is highly appreciated now but is bound to gain all the more value a few decades down the line.

Would you be willing to sell it before that happens? Of course not, you would want to keep it for your Children or your Spouse or your Sibling; A Physical Asset, a Non-Fungible Token, is all it takes for you to keep an exquisite Piece of Art for you as long as you want and further on, share it across your people when you decide and yet maintain the Real Asset with you or with the legacy of your Family. This is how easy it has become and how convenience has kicked in to cater to your needs. 

Which Physical thing can be NFT tokenized with Blockchain technology?

Creative work, Music, Films, Jewelry Design, Real Estate, everything, and anything can become a Physical Asset to NFT. It all depends on what research you are putting in for these Assets. 

Can I sell physical items as NFT in 2022?

Yes, many platforms are available that provide real assets tokenization.

Why NFTs Are Valuable For Physical Assets

There are lots of problems to be solved with digital transportation. Hence, the blockchain and NFTs have the potential to solve many of, especially ownership transportation.

What are Physical Assets?

A physical asset is anything we observe in the physical world. A house, a painting, jewelry, clothes, shoes, food, or anything. Because it has monetary value, it is considered an asset.

Can NFT be used for real estate?

It’s too early to state that world can efficiently use NFT functionality for real estate.

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