Beyond art: The rise of enterprise NFT use cases

NFTs also have disruptive potential in business use cases. So let’s put on our enterprise glasses and take a detailed analytical look.

Some time ago, we published a comprehensive article on NFTs on our digital innovation page. If you want to read more, you can find that article here: NFT – Digital Asset Representation on a blockchain

Abstract

“NFT” is an ownership-focused standard for smart contracts, just as e-mail is built on the “SMTP” e-mail communication standard. It is up to the users what they put into their respective envelopes. Whether subjectively valuable works of art – or objective important components of corporate processes. What are these use cases for companies for these novel envelopes?
Looking at the NFT use cases for those envelopes, a necessary building block to achieving the vision of an intelligent enterprise is the idea of hyperconnectivity, where business documents of companies should communicate with each other in a trustless and real-time way. Enterprise processes today are disconnected between companies, inefficient because of achieving only partial-automatization and trapped in enterprise data silos, so data becomes quickly out of sync. Accountable beside others is the lack of a single source of truth for their cross-company data.

Enterprise Hyperconnectivity
NFT enriched architectures powered by blockchain technology can enhance company processes by metaverse-ready, platform-independent “digital proofs of ownership” in form of NFTs. The rationale for leveraging NFTs is that they are always available on public infrastructure, easily verified by finger-tap, and peer-to-peer transferable between stakeholders , which is an essential building block for hyperconnected enterprises. Ownership and its history in the focus, they are a neutral and programmable playground for data integrity.

Three potential fields of application for NFTs for an enterprise:

  • New revenue streams and enhanced conservative business models
  • Supply Chain
  • Data sets with usage rights

 

New revenue streams and enhanced conservative business models

Basic words first: NFTs are not to be taken as a Swiss Army knife for all business activities. Many fell into the same trap during the last crypto hype cycle with the “blockchain technology for everything” approach. Whereas in reality, the term “blockchain” could often be interchanged with “database” without being noticed.

Now what has changed since then? If a certificate is to be publicly visible and accessible, with guaranteed verifiability and possibly programmed logic, then NFTs as a data structure are part of a solution architecture. Another key pro-argument for using an NFT is platform independence, which allows these certificates, or more accurately their ownership, to move freely between enterprise data silos in a peer-to-peer fashion. It is a freedom for data that did not exist before because “digital ownership” came new into the space: One can actually “own” data like the “property field” via an information-based private key, comparable to owning an actual physical thing in the real world. As you would expect, when you look at live implementations, data is usually out of sync between stakeholders. While this is not surprising, cross-enterprise processes lose significant efficiency and auditability as a result. The Metaverse vision of hyperconnected digital and physical assets requires a borderless data movement between networks which can be provided by NFTs.

Is there an ownership problem?

To establish the actual ownership of an item, certain physical documents are required. Like the bill of lading in the supply chain. But when seaplanes need to exchange proof of ownership on a cargo ship by air, when ownership and payment status change, it doesn’t take much analysis or foresight to see that there is room for digitization to increase process efficiency. While in the past files could be copied at will, clearly assigning ownership of who owns an inflatable pdf document or the like was not possible, the possibilities have changed.
Blockchain technology gives digital objects in cyberspace a new property: digital ownership. This literally means that one can “own” public information such as a public identifier by owning a large secret, untraceable number that can be used at will to verify ownership of that public number without revealing the secret associated with it to simulate ownership in cyberspace. You can own information. You can assign a unique owner to a digital asset. NFTs in the form of ERC721 provide a standard for this ownership status, along with an infrastructure already established, tested, and running.

Ownership status and ownership history are central components of the NFT standard. A digital twin is only as valuable as its ability to reflect its history over time in a secure manner. While in practice they cannot be forged, but can be easily verified, they are guaranteed to remain unique on a suitable blockchain infrastructure and there is no second unauthorized copy. When working with an NFT standard, ownership is “enforced” and is always unique. Programmability also brings several desirable options waiting to be implemented. License fees or “royalties” are such feature that can be easily implemented in a programmable environment. Those royalties allow companies to tap into a market that is normally closed to them: the secondary market. As NFTs move with their respective physical goods, or even completely virtually, royalties will open up new revenue streams by directly participating in any post-market sales activity.

Reliable and tamper-proof timestamps are another strong argument for using NFTs. This is the simplest way of leveraging NFT data structures. Under each NFT will run a blockchain that inherits its properties to all NFTs built on top of it. Enhanced tradability on the neutral blockchain environment is one those benefits. The value-cost threshold for an NFT determines the cost-effectiveness of a deployment of NFT technology. We will explore more advanced approaches than reliable stamp services, which may even be disruptive to existing markets.

Evolving beyond digital art, the following use cases and underlying NFT-specific mechanisms should be explored by experienced industry experts to identify potential synergies and symbioses and build appropriate architectures that add value:

 

Supply Chain use cases for NFTs

As the complexity of businesses and process chains increases daily, valuable data can be obtained to provide answers to unplanned disruptions. To succeed in environments that change daily, one solution approach is to architect more transparent environments. These are based on blockchain technology and use most common standards like ERC standards.

Earlier supply chain use cases with blockchain mostly just provided a decentralized, certified timestamp for data and directed the recipient to a .json type file that contained all the data provided. Proof of Existence (PoE), which simply proved that the data existed at a particular point in time, was not even represented in a standardized way or on publicly available networks. Companies created their own definitions of ownership, similar to companies building their own container individual container format for shipping. The lack of a standard.
If Stakeholder A in the supply chain records a sending transaction and Stakeholder B records a transaction in the blockchain, that quickly gets out of sync in terms of information and it is word against word, if it can be read at all by the counterparty.
Comparable to the U.S. CMR standard for paper-based transactions, standards for digital assets on the Ethereum Blockchain have evolved with the ERC721 standard, for example.
ERC721 focuses on the “ownership” of an asset. Who owns it right now? Who owned it before? Who consented to the change in ownership? The “hot potato” as a digital version, the perfect supply chain tool. Clear assignment of responsibility at a given moment. Therefore, “acceptance” of the hot potato, which is an advanced NFT implementation, can be added as a dimension. Stakeholders could obviously actively seek consensus first before adopting a multi-step process step.

NFTs for proof of existence without ownership status

Data protection is often a problem when working with blockchains. Certificates, invoices, factoring or a bill of lading can be handled pseudonymously, with only the actors involved knowing which company is behind the respective public key. The corresponding transaction data can also be held locally, with only a hash representation with the current owner’s information held on the blockchain as a minimum. While privacy and discretion are certainly kept at a maximum level, while the secure blockchain timestamping and ownership status are still present, there remains a great deal of automation and efficiency gains with this approach. From this perspective, privacy is a top priority.

NFTs Item level traceability

Transparency can sometimes also be very welcome in scenarios such as those that sustainability even requires. When the property of transparency is used as an advantage rather than a burden, new approaches to solving unsolved problems emerge. Item-level traceability, which can be used by customers and consumers according to the sustainability of the item’s origin, could be one of these examples. NFTs can represent batches of raw materials such as iron or rubber at the producer level, batches of product components such as car tires, and end products such as cars with these tires. By linking these three NFTs as a public data web that shows the origin of the car down to its component parts, such as the tires and raw materials, a carbon footprint calculation can be made specifically for that exact car and model, giving the manufacturer the ability to demonstrate the exact sustainability for each car. But it is not just in terms of government regulations that a sustainability assessment can be performed at the item level, but also for the customer. Thus, eliminating discretion can lead to clear benefits and should be seen as a compromise.

Applying NFTs to enable Autonomous supply chains

If you take it to the extreme and examine what can be achieved by making as much information as possible publicly available, you quickly arrive at the intelligent autonomous supply chain.
A large transparent marketplace whose data lives as an NFT mesh on a blockchain. Adding as much information as an automated market participant needs to make a buying decision, based solely on the information provided by the available asset represented as an NFT, allows hand-over processes in supply chains to be fully automated as proposals, with only humans signing off.

Such information would provide full transparency on batch availability such as price, quantity, type, volume discount, delivery date, etc. Partial privacy protection could be achieved in the near future through technologies such as homomorphic encryption to still maintain strengths such as traceability, transparency and emerging automation.

AI technology is the key that will help make this huge increase in complexity transparent and processable again through decision automation and AI-driven decision proposals at the point. Intelligent AI-driven networks could compare, evaluate and compile their planning on material orders based on their information on the blockchain. Culture, experience, context, and gut instinct will still be valuable while machines are tasked with processing the vast amounts of data collected on open networks, but often according to AI-produced decision options like:

Routing Option 1: +13,1% relevant production cost, production volume monthly average -+0,1%, sustainability 0%

Routing Option 2: +13,9% relevant production cost, production volume monthly average –        +1,3%, sustainability -4%

Routing Option 3:       0% relevant production cost, production volume monthly average –        -1,7%, sustainability -6,5%

Giving up privacy and discretion over your inventory and discount structure would result in a resilient and composable supply chain that is able to respond quickly and individually to changes in the market and its environment. Agility, traceability, and responsiveness are the benefits of using NFTs in open, networked environments that are full of valuable insights just waiting to be discovered. This is the logical consequence of providing an information-rich single source of truth.
Worst-case scenarios can be predicted and be limited in their impact.

Hyperconnectivity in smart spaces will be a key enterprise strategy in the future, trading privacy for automation and efficiency. NFTs provide neutral, non-falsifiable data as a building block.

Roadmap and Requirements

As visualized in the upper representation, the road to an autonomous intelligent supply chain demands for unseen transparency in terms of data sharing in exchange for new automation evolution in supply chains.

Step 1: Blockchain Business Bridge

The foundation of it all is to be able to talk to each other. As a “neutral playground” for companies in a supply chain to share data with each other, blockchain infrastructure must first be connected to it in order to interact with it on a individual company basis. Just as a browser should do to connect to the Internet.
Standardized business connectors come into play to connect a company’s data structure, such as ERPs, to public blockchain infrastructures, such as open EVM chains. These public infrastructures already exist and are active. More importantly, these environments are already driving their own defined standards, which is typically a difficult challenge to overcome with new infrastructures like blockchains.

These business bridges offer low-code/no-code approaches to implement existing processes with additional smart contract probabilities in a standardized way through business events.

  • Enabling enterprise data structures communication with blockchain infrastructures
  • Enabling writing parts of processes as standardized smart contracts on the blockchain
  • Providing low-code/no-code user-friendly interaction

Step 2: Public Blockchain Analytics

Knowing what’s going on this new data pool. Interacting with public blockchain infrastructure is not a dead end: data states and changes on the blockchain represent a valuable new source of data that can be integrated into any organization’s data set to provide new, unique insights and drive agile decision options. “Data-to-action-to-insights” will be even more powerful with an improved data foundation for business decision making.

Public blockchain analytics is the use of blockchain resources to analyse enriched enterprise data on demand for maximum value.

  • Enabling strategical analysis of blockchain data to learn about processes and customers
  • Clear visualization by a decision-driving Dashboard

Step 3: Blockchain Process integration

Existing processes need to be improved by replacing obsolete paper components such as ownership certificates with their digital counterparts. Existing standards such as ERC721 help with the format when it comes to clear, non-debatable ownership status.

Payments should also be processed in the blockchain environment to achieve an “atomic exchange structure.” You only get the ownership status of something when the payment is successfully made, but automated without the involvement of a third party.

  • Enabling neutral “single source of truth”
  • Enabling “atomic swaps” without 3rd parties

Step 4: AI-guided decisions

Innovative technologies such as machine learning and artificial intelligence (AI) will be necessary building blocks on the path to an autonomous intelligent supply chain. To gain a better understanding of current supply, sourcing options, and selling options, these technologies will help determine the best route selection and purchasing decisions. The AI-driven decisions are presented to a human decision maker.

  • Enabling best path-finding for supply chain interactions like purchases and transfers

Step 5: Transparency for autonomous interactions

The final building block in this context would be a governance model with complete transparency. This is not about a specific technology, but about the willingness of participants to share the most important data points for potential customers or vendors. Data such as selling prices, volume discounts, and specific inventory numbers in addition to product description in quality and function can provide algorithms with enough data points to decide if a purchase and which purchase may make sense and lead to a whole chain of purchases from raw material to final product.

The loss of privacy, but the ability for customers to fully automate the supply chain, will create new revenue streams that incentivize this behaviour. Human actors will approve the routes proposed by AI in supply chains and also modify proposals.

  • Enables autonomous routings and re-routings in supply chain scenarios with an AI-driven decision pool as ouput for human decision-makers

Another b2b NFT use case besides supply chain: data sets with usage rights

Companies looking for commercial data sets to free themselves from costly and cumbersome ETL and related data entry processes should consider a new market: the emerging and increasingly relevant data marketplaces. Data can be traded for money.

These data access rights to retrieve current, managed and shared datasets from other companies and publishers can also be represented by an NFT, equipped with a royalty model.

By reselling these valuable and useful NFT data accesses to third parties, a new dynamic is created. The acquired datasets can be enhanced with the company’s own enriched insights and data points. The further enriched dataset now no longer remains with the original acquiring company but can be resold on a data marketplace. This iterative process of buying, enriching, and selling would create datasets of a new quality over time.

Conclusion

As it turns out, NFT-enriched architectures based on blockchain technology can improve enterprise processes by providing neutral, platform-independent “digital proofs of ownership,” especially in the supply chain space, which seems predestined for the use of intermediaryless blockchain technologies. Similar to SMTP, which provides a defined standard for email communication, standardized NFTs provide a ready-to-use definition for how to identify disparate entities such as invoices, stacks of materials such as tires, or complex end products such as cars. With this new single source of truth, it’s only a matter of time before the first companies plug into self-proven blockchain environments and take advantage of these process benefits for themselves.

What are your experiences and ideas regarding NFT technology for companies?
Do you see digitization at this next level or are you still undecided?

ICN Blockchain Walldorf

Contact at blockchain@sap.com

Learn more:
NFT – Digital Asset Representation on a blockchain
NFTs: Join SAP in Reinventing Business Models and Deepening Customer Relationships
Demystifying NFTs – a technical view
NFT Smart Contract Development – Road to OpenSea (Part 1)