Source: news.google.com
While the era of NFTs trading hands for expensive fees now seems like a different time, NFT technology has always been attractive for more than one reason.
NFTs are cryptographic assets that contain metadata and identification codes housed on a blockchain. Unlike fungible tokens, NFTs cannot be traded or used for commercial transactions and cannot be replicated.
As such, NFTs can represent anything from the physical world to the blockchain, with examples such as individual identity, property rights, works of art, and real estate.
However, aside from trading and speculation, the NFT sector remains a promising sector experiencing a wave of innovation from all corners of the world.
The idea lends itself to many interesting use cases:
NFT in raising capital funds
One of the main innovations when it comes to non-fungible tokens (NFTs) is the use of buying shares in companies, or in the same way, venture capitalists buy shares and invest in new companies.
An example of this in action is Orbeon Protocol, which has built a kind of blockchain investment platform. This allows startups to raise capital from investors quickly while also connecting to the Web3 world, where users can access other services, including a decentralized exchange.
Startups looking to raise funds can use such protocols to mint equity-backed fractional NFTs as a form of investment and these NFTs can be purchased from as little as $1.
For the startups in question, using NFTs in this way significantly reduces fundraising costs and allows them to be in direct contact with their backers.
How does it work
Let’s say a startup company wants to raise $100K.
They will use a service that offers NFT fundraising that will then issue 10,000 equity-backed fractional NFTs, each representing a $10 investment in the startup. These NFTs can be bought, sold, and even wagered on decentralized platforms by other crypto users and on exchanges.
In the event that a start-up does not reach its financing objectives within a pre-established period, investors can get a full refund, depending on the platform they are using. This practice is designed to take the guesswork out of the equation and allows investors to only invest in strong companies that receive sufficient backing.
Bottom line
The application of NFTs in investing in startups is a relatively new idea that has yet to catch on.
However, after the decline in sales of traded NFTs in 2022, it is possible that people will start to become more interested in other ways to apply NFTs besides buying artistic photos.
The use of NFTs in startup investing is therefore one of the most exciting applications with the potential to democratize and truly revolutionize the way we invest in businesses.
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