Token market. Will NFT change our banking?

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One of the most popular technology slogans in recent months has been the term NFT (short for non-fungible token), which translates as “non-exchangeable token”. Apparently, this is not a new solution, because it uses blockchain, a long-known security method in the creation and trading of cryptocurrencies. More figuratively speaking, NFT is a digital file, for example, a graphic (but it can be any other file type), which has a designated certificate confirming the authenticity and uniqueness of this particular file. NFT tokens can be traded on cryptocurrency exchanges or on specialized platforms.

– NFT is a virtual crypto asset sold using blockchain technology. They can be compared to digital certificates confirming the authenticity of some goods. Each such token has a unique value, so it cannot be edited or counterfeited. It may not be transferred to another person without the consent of the current owner. Therefore, the verses serve as proof of authenticity, explains David Stankiewicz, a business consultant at Comarch.

The NFT token, a digital photo collage of Mike Winkelmann’s “Everydays: The First 5000 Days,” known as Beeple, appeared at an auction at Christie’s a year ago in the art and collector market. The transaction, which cost $ 69.3 million, brought huge publicity to NFT’s work, and digital tokens began to seep into a wider core consciousness.

The first NFT action in Poland took place in late November 2021 during the 18th Warsaw Art Exhibition. A digital 3D model based on the original “Fortune” statue of the famous artist Tomas Gornichki has been put up for auction. The starting price was violated 62 times – the auction started from 5,000. PLN and ended with 265 thousand. Giving 312.7 thousand PLN at auction price. zloty. – The struggle was extremely intense and there were many people who wanted to participate in the auction: 79 bids were submitted during the auction – said the organizers of the auction.

The fact that investors are increasingly interested in NFT can be confirmed by the study “Investment Topics 2022” presented in December 2021 by the Broker House of BNP Paribas Bank. Experts have selected a number of investment topics that investors can prefer in difficult times of high inflation – one of which is NFT. – With the development of technology, there is more and more talk about the deeper penetration of the real and virtual worlds. The crown jewel of this process will be the creation of the so-called “metaversum”, ie a set of virtual worlds created in three-dimensional graphics, fully interactive, immersive and allowing interaction with other users. The analysis emphasizes that the race for a leading position in this area has already begun.

Experts from BM BNP Paribas see this as an opportunity for game developers, companies in the cybersecurity sector, providers of electronic payments, tokenization, blockchain (NFT), high-speed networking, e-commerce and major entertainment platforms. Not surprisingly, at that time, not only artists and art galleries, but also representatives of other industries began to think about how to make money from NFT. For example, in early February, the Polish gaming company RedDeer.Games announced the creation of a special NFT department, and the introduction of NFT tokens in studio games is another strategic goal of the company.

What about the financial sector? In January of this year, Mastercard announced that it was partnering with the cryptocurrency exchange Coinbase to make non-convertible (NFT) tokens more accessible. Users will be able to use Mastercard to make purchases in the NFT Coinbase market. Will other financial institutions or banks go in a similar direction?

– Although the first NFTs were created about a decade ago, the real boom for them began in 2021. Today, they are mainly used in markets for the purchase and sale of digital art. They often ensure the authenticity of files by adding pictures, photos, movies, music or computer games. However, keep in mind that the NFT market today is largely speculative, so it can be very risky and volatile. More because it is based on cryptocurrencies whose rates fluctuate dynamically. This may discourage banks from investing in such technologies, says David Stankiewicz of Comarch.

However, he adds that despite everything, financial institutions are aware of the growing popularity of NFT and are closely monitoring the market, looking for opportunities in tokens to make their offers more attractive. For example, he notes that the world’s largest custodial banks have been creating systems for storing and trading cryptocurrencies for some time. They mostly talk about virtual currencies like bitcoin or CDBC, but there is also information about NFT.

– It seems that global banks can also provide trust services to alternative funds investing in crypto-assets, as they have classic financial instruments such as stocks, bonds or derivatives. So far, Polish banks only observe this market and analyze trends. There is no press release that any of the major or smaller players in Polish banking are already using the potential of NFT in their activities, says Dawid Stankiewicz.

Representatives of Polish banks such as Millennium and BNP Paribas confirm their knowledge of NFT technology and consider its possible application in banking in the future.

Piotr Łukasiński, an information scientist at Santander Bank Polska, notes that NFT tokens have emerged as a solution to the problem of uniqueness in the digital world. However, according to him, the impact of this technology goes beyond the world of art and spreads to the world of music, sports, social media and popular brands.

– Provides new opportunities for artists, bloggers and celebrities to earn NFT and connect with their fans. Instead of printed shirts or gadgets, they can sell photos of their programs, posts, or recorded performances to NFT fans. They do not transfer copyright to this content. Fans emphasize that this is a solution that will revolutionize the trade in art, rare items and allow for other innovations. The dynamic development of online commerce in the 1990s was made possible by the rapidly evolving payment infrastructure. In the case of NFT, payments are often made in cryptocurrencies, but more and more platforms offer a choice of standard payments. Thus, depending on how the oil market will develop and how it will be regulated, the role of financial institutions may be mainly to manage operations, says Piotr Lukasiński.

– NFT tokens are one of the most popular trends in the use of blockchain technology. They often play the role of digital objects with special properties that can be used in emerging virtual worlds (metaverse). With the co-existing Gaming NFT trend and the availability of decentralized financial products (DeFi), tokens are gaining new opportunities for their use. Having NFT tokens may allow you to gain exclusive access to special terms related to financial products, for example, in the future. Undoubtedly, the banking sector can be a leader in creating innovative financial products related to NFT tokens. However, it is important to keep in mind that this is a very early technology, meaning that it takes several years to develop an appropriate approach to its use, says Pavel Wierciński, an expert in PKO BP’s Corporate Communications Department.

A large area for NFT applications in the financial sector is noted by Adam Wdowczyk, General Manager of Technology Consulting, Accenture Consulting, Poland.

“Showing what NFT is all about will help you understand the potential of tokens that cannot be changed in the financial sector.” Any user can add a smart contract to the blockchain that creates and manages new NFTs. These tokens will be recognized by the entire ecosystem of a particular chain as objects that can be transferred between wallets or used by other applications. As with cryptocurrencies, the owner of the token is always the owner of the destination. Once a token is sent, it cannot be restored and tokens sent to the wrong address are irretrievably lost, Adam Wdowczyk notes.

Emphasizes that each token is unique and indivisible, unlike cryptocurrencies. It is also not only used to store data, as the token’s smart contract can contain any logic in addition. However, as he points out, the most important feature that colonized values ​​can replace or replace is the ability to create new products and services independently of them. Every day, protocols are created that create new tokens or use existing ones, which is comparable to building with bricks.

– In the material world, tokenization initiatives are more demanding than the widespread use of NFT in the virtual world, ie identification and verification of information about the material property rights of individuals, objects or real estate, vaccination certificates and various types of documents. There are initial attempts to tokenize products and assets in the financial sector.

For example, debt securities issued as NFT contain all the required parameters of debt, and NFT itself can be sold later. For example, when using the personal version of Ethereum, tokens are traded by Finledger. In the future, NFTs can be used as an access key to assets, financial products or property documents and transferred to customers through a blockchain. For example, the startup deals with invoicing invoices, property rights and copyrights – it lists an expert from Accenture.

He noted that while NFTs, which are currently popular, are usually very simple in terms of technology and functionality, today the development of their usability is the subject of intense work of the Web 3.0 community.

– The real application of NFTs will depend on the speed of harmonization of legal regulations of individual sectors, the value offered by the created solutions and their ease of adoption – Adam Wdowczyk expects.

Dawid Stankiewicz agrees that NFT is still in its early stages of development and that banks have no idea how to use them (perhaps with the exception of trust services and cryptocurrency exchange platforms). They are mainly used in the non-financial field, ie in the trade of graphics and music files. However, he rightly notes that twelve years ago, almost no one thought seriously about bitcoin, and today the world’s largest financial institutions are realizing its potential. Maybe it will be the same with NFT?

Marek Yaslan

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