Real-World Asset-Backed NFTs — What Does it Mean?

Blockchain and non-fungible tokens are expanding to more and more new business use cases. It’s an exciting new technology that holds many promises and can unlock the value of many assets in the physical world. The next wave of technology in the crypto space will be the merging of blockchains and real-world assets.

This holds true especially strongly for the luxury industry. For a long time, the sector has had to deal with forgeries, an illiquid market, supply-chain difficulties, and issues with verifying the authenticity of items in the secondary market. All these can be solved via the use of NFTs, but what does it actually mean to back a digital asset on the blockchain with a physical asset??

Why Back NFTs Using Physical Assets?

Most of us think of tokens as purely digital assets, even more so in the realm of NFTs. That is how these assets are so easy to trade and have become an entire global market on their own, but blockchains have very attractive properties for physical assets. First, blockchains are distributed ledgers that are tamper-proof. Once an entry has been recorded on the ledger, it is virtually impossible to erase or modify.

Blockchain was created to automatically solve conflicting transactions. The consensus algorithm used to ensure no double-spending can happen is perfect for supply-chain management. Anyone who has worked with them knows that ensuring all the entries in a log are correct is a major pain. Finally, a distributed ledger can be shared by different companies along a supply chain and not be in the control of any single one. Another major pain point is when you need to use the entries from a different entity, and trust that these are correct.

How can NFTs be Used for Luxury Assets?

Now, blockchain can be used for mass-produced items, but limited highly valuable assets are a more attractive market. In this case, an NFT is a perfect solution. NFTs are digital tokens that can be shown to be unique in a distributed ledger. Normally, these are associated with a digital artwork that is referenced in the NFT to be sold on a marketplace.

Instead of referencing a digital piece of art, an NFT can point to the barcode, or another identifier, of a physical asset. The process is known as tokenization and involves taking assets outside a blockchain and bringing them onto it. The physical luxury goods are now registered on the distributed ledger, so tracking it and verifying it becomes an easy thing to do.

This is already happening with many luxury goods such as wine. Special wine collections are easy to counterfeit because most people can’t tell wines apart just by the taste. In general, we have to rely on the vendor and price to judge if a wine is of high quality. Now using an NFT, the entire provenance of the wine bottle can be tracked, and forgeries eliminated.

The same is true for designer clothing, watches, shoes, and any luxury goods people want to purchase for their esthetic appeal and future value. All of them can be tokenized so they can be easily verified by anyone.

All NFTs on LuxFi’s platform are backed by real-world luxury assets. The real-world asset-backed NFTs enable users to either redeem the physical asset at any given time, or keep the NFT for investment purposes. If users decide to choose the latter route, the NFT can be kept on the platform to increase in value and be resold later.

LuxFi and the Tokenization of the Luxury Market

At the forefront of this revolution is LuxFi. The project aims to create a marketplace where luxury goods can be securely traded over the blockchain. Any luxury asset can be tokenized on the LuxFi platform. Luxury bags, jewellery, shoes and watches are just some of the examples of physical goods tied to their NFTs on the platform.

But LuxFi goes a step further. Luxury goods can also be used as a store of value, often placed as collateral when a person needs a loan. Now, this is a very illiquid market dominated by pawnshops that demand high-interest rates and undervalue items.

LuxFi’s NFT platform can be used to get loans with the tokenized luxury goods as collateral. A single loan can be sourced from many users, and payments are automatically distributed to all the initial contributors, unlocking the liquidity potential of the asset.

About LuxFi

LuxFi is the world’s first asset-backed NFT marketplace for luxury assets, where people can buy, sell and invest in luxury assets using cryptocurrencies and traditional payments. We eliminate counterfeiting while minting an NFT on a multi-chain blockchain network, with a focus on luxury assets that hold value well and have a high resale value. Leveraging our big data intelligence system and unique algorithm for automated data collecting and data processing, the value of each NFT on our platform is backed by real-world data.

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LuxFi Official

LuxFi Official

Bridging the gap between real-world luxury assets and NFTs.