NFT Insights: Deferred Payment Options
NFTs (non-fungible tokens) are showing expanding use case potential, including merging some of their technological aspects with DeFi (decentralized finance).?
By using decentralized blockchain technology, there is a growing developer movement to implement NFTs in more ways beyond its initial use case for media distribution and as a royalty system.?
Many financial products and instruments are also non-fungible because they represent unique properties and conditions such as a corporate bond, meaning there is potential technological synergy with NFTs.?
This new blog about NFTs and asset tokenization will discuss this synergy and how NFTs can provide a potential finance-related use case: deferred payment options.
What are deferred payments?
A deferred payment is when the bill for the goods or services is provided and paid for at a later time after the goods or services have been received by the counterparty or consumer.?
This deferment of the transfer of money enables payment flows and economic transactions to operate more efficiently as one party quickly receives what they are looking for and the other party receives payment along with additional interest at a later date.
This transaction model is ubiquitous in many sectors of the economy.?
Many businesses don’t pay their suppliers at the moment the materials are received. Instead, they receive a bill or invoice and the transfer of money happens later at an agreed-upon date.?
Modern economies cannot function without this deferred payment model.?
If every transaction could only be completed with cash on hand, the economy would be much less efficient and would have many more friction points.?
Therefore, delayed payments fulfill a very important economic role in enabling the smooth flow of goods and money.?
Despite their importance, delayed payments have changed little since the start of the Internet.?
Many bills of payment are still generated by closed systems or on paper, meaning they are difficult to track or verify in case of a dispute involving many stakeholders.?
Also, the payments for these bills can be slow due to the usage of outdated technologies and rules, as numerous stakeholders need to be involved in processing payments.?
This is especially problematic when the payments are between parties in different countries and the payments need to cross borders.?
Deferred payments with Cardano NFTs
NFTs have the unique ability to represent the unique circumstances of a delayed payment through programmable?token metadata. Essential data and information can be recorded in each NFT and made viewable by any party.
Conditions such as the payment amount, date of payment, supplier, tax number, national currency, and more, can all fit neatly inside the token’s information.?
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In the case of Cardano blockchain NFTs, they can also be updated with the dynamic metadata from?CIP-68, a Cardano Improvement Proposal (discussed further below), making them reactive to when a payment happens.
The result is an NFT that can track any delayed payment and automatically update its status to all participants.?
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There are many potential business applications using this feature:
These financial instruments are very common, but they are difficult to track and involve many middlemen. An NFT can potentially serve the same purpose as a letter of credit, and be trackable by all parties.?
In this way, the conflicts that arise when a testament is updated, but no one is sure what the latest version is, can be avoided via the distributed ledger.?
An NFT that serves as a shipment manifest can potentially track all these pieces of information. The token metadata can be updated to reflect the status of the cargo and automatically trigger the payment.?
What is CIP-68 and why is it important?
Cardano Improvement Proposal 68 (CIP-68) is a new metadata standard that is more robust.?
Some of the shortcomings it addresses are:
This allows for a better utility for token metadata that goes beyond NFTs. It also allows for changing token metadata, making it more versatile and mutable once the token is minted.
NMKR’s Cardano NFT and tokenization service
NMKR?has already implemented?CIP-68?in its NFT and tokenization platform. The tools provided allow any person or business issuing an NFT to configure updatable metadata using CIP-68 for a Cardano NFT.?
Now, companies and developers can create unique deferred payment options within their NFTs using the NMKR platform. The applications can reflect the needs of real use cases and not be stopped by having to find certain smart contract developers.?
NMKR has also enabled?NMKR Pay, a payment gateway for businesses and users, to integrate with their NFTs created on NMKR. This will allow for easier payments using traditional methods for people wanting to transact with the NFTs issued on NMKR.
Read more:?What is NMKR Pay?
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