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  • Writer's pictureDelphine Bos

"NFT use cases: technology opens new opportunities for the insurance industry"

Updated: Sep 6, 2023

Non-Fungible Tokens (NFTs) revolutionize ownership authentication in the digital realm by transforming digital assets into unique, verifiable, and tradable entities. As this groundbreaking technology continues to evolve, new opportunities for insurers to step in and provide coverage for these novel assets appear. By bridging the gap between insurance and the growing market of NFTs, Avata is pioneering in bringing peace of mind to a new generation of digital asset owners.

A paradigm shift in ownership

NFTs are digital tokens that represent ownership of a unique item or piece of content on a blockchain. This technology has unlocked new frontiers of ownership in the digital world, allowing artists, gamers, collectors, and creators to monetize their creations in unprecedented ways. From rare digital art pieces, to travel tickets, concert admissions, in-game assets, NFTs have shown their versatility in both digital and real-world utility.

This paradigm shift is driven by the ability to prove the uniqueness, provenance, and scarcity of digital objects, setting them apart from the infinitely replicable content that was available digitally so far. As the use cases for NFTs continue to expand, from virtual event access tools to digital twins of physical goods, their integration into various aspects of our lives becomes more tangible than ever before.

Tangible use cases show potential for mass adoption

As we step into this new era of digital ownership, the opportunities to leverage NFTs become boundless. Here are a few promising avenues that highlight the potential of digital assets, and how insurance could help the equation:

1. The Rise of Digital Art and Collectibles:

The art world has been transformed by NFTs, enabling artists to connect directly to their audience and bypass intermediaries and the fees they come with. This also allows them to build a community and further expand interactions with NFT embedded features.

The tokenization of both digital and physical art removes geographical, social, and administrative entry barriers for people to engage with art. The market is now expanded to anyone around the world with an internet connection; transfers and transactions are now instantaneous.

By offering coverage for NFT art collections, insurers can provide peace of mind to artists and collectors, ensuring that the value of their digital (or physical) masterpieces are protected. Given that the NFT is an immutable record of all the trade of its own property, it can even be traced and protected in the 2nd hand market, which has considerable applications, both in the digital and physical high-value art market. This system will also considerably reduce fraud in the art market thanks to identification mechanisms and transparency of the network.

2. Gaming's Evolution with NFTs:

The gaming industry is embracing NFTs, allowing players to own and trade in-game assets. By turning in-game assets (skins, avatars, champions, weapons, cosmetics, etc.) into unique identifiable tokens with a clear owner, this upgrades their value tremendously. Now game assets are no longer only a line of code that acts in one game, but an actual asset that can travel from game to game when integrated, retaining its ownership status across platforms. Now dedicated gamers who invest time and effort can be rewarded in a much more tangible way that won’t lose their value over time.

Another advantage that comes with the blockchain activation of the gaming industry is the financial mechanics that games employ to supplement their business models with revenue or generate interesting financial incentives for their players. Given that the blockchain comes with its own currency, play-to-earn mechanics can be significantly easier to deploy and rewarding for the consumer who can leverage the earned currency much easier across the blockchain, instead of receiving a 10 euro amazon gift card (which many play-to-earn programs still use).

With virtual gaming assets now having more intrinsic value than ever, hackers and thieves now have more and more reason to try and break these systems to steal value in the form of NFT assets. Insurers can play a pivotal role by protecting these valuable virtual possessions from loss, damage, theft, or unauthorized access; The insurance product can be applied to the NFT directly, which means that the asset will be protected regardless of what blockchain it is on, or what wallet it is in. This can open up an entire revenue opportunity previously unavailable to the insurance industry.

3. NFT Passports for Physical Assets:

By attaching a digital "twin" to a physical luxury asset and storing the product’s unique serial number as an NFT, all the information about this physical good is captured in an immutable way on the blockchain. This has many advantages, the first being the traceability and visibility that the NFT provides. It records all interactions with the physical good onto its digital twin (NFT), which makes value appraisal significantly easier and counterfeiting almost impossible.

This one-to-one link between the digital twin and the physical item acts as a layer of security which benefits both the seller and the buyer on second hand marketplaces. The buyer can identify which products are authentic (supported by valid NFT unique product information), which allows the seller to prove the authenticity of the product.

From the brand perspective, there is an even greater advantage to NFT digital twins. It provides visibility over the entire life-cycle of any given product. This allows brands to control the quality of their product experience over the span of the product’s future sales in second hand markets.

Connecting Insurance to a promising new market

As the NFT landscape continues to evolve and mature, Avata is committed to enabling insurance companies to adapt and innovate. Our mission is to bridge the gap between the cutting-edge world of NFTs and the established world of insurance, ensuring that the digital assets of today become the insured valuables of tomorrow.

In conclusion, NFTs are more than just a trend; they are a transformative force with boundless potential. By embracing the opportunities to insure digital assets, insurance companies can play a pivotal role in accelerating mass adoption. At Avata, we believe that the fusion of NFTs and insurance will not only secure the future of digital ownership but also drive the broader acceptance of this revolutionary technology. The digital era is here, and we're here to make it safer, smarter, and more accessible than ever before.

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