The buzz around NFTs has taken over the internet. If you haven’t heard, NFTs are digital collectibles that are changing the future of art collecting and more. Taco Bell, Mark Cuban, Grimes and even Gary Vee have jumped on the NFT bandwagon.
What is an NFT?
NFT stands for non-fungible token. Non-fungible means assets that can’t be substituted because of unique attributes. For example, the Mona Lisa – it is rare, one of one. NFTs are non-duplicable digital certificates of ownership for an assigned digital asset, like art, audio, video or items in video games. They are stored on a secure distributed database called a blockchain – the same decentralized digital ledger technology that underlies cryptocurrencies like Bitcoin and Ethereum. NFTs are publicly verifiable intellectual properties authenticated on the blockchain. Most NFTs are based on the Ethereum blockchain, but other blockchains also support NFTs such as Neo and Tron.
On the other hand, fungible items can be exchanged as their value defines them rather than their unique properties. For example, US dollars, Bitcoins or Ethereum. My one US dollar is just as valuable as any other one US dollar.
Insights from the NFT hype
Since the pandemic, people have been saving more, faith in the stock market and traditional currency is low and people are looking for alternative ways to invest. With more digital connections and gaming culture hotter than ever, people are comfortable with owning and investing in digital assets, even though it means that they might never hold it or touch it physically.
NFTs are one of the latest ways to collect. Collectors are nothing new – from Jordans, sports cards and art to even ticket stubs, programs or lanyards from an experience. Now blockchain helps elevate and digitize our experience of buying and collecting with proof of authenticity and ownership of its entirety. Though a majority of NFT buyers are ‘members’ of the crypto community, with the rise of artists and musicians creating NFT, it’s attracting a broader audience.
We are also witnessing prominent brands slowly embracing the NFT marketplace. For example, UFC is launching its own NFT platform selling digital collectibles. And we’re seeing them pop up in the F&B industry (Pringles), CPG (Charmin) and luxury goods (Gucci). Even the media jumped in, with Time auctioning a cover.
Possibilities in the brand experience space
We’re going to see more of it infiltrate the brand experience space. For example, Kings of Leon released a limited number of albums in the form of NFTs that would grant owners a lifetime of perks when attending their future events. Another example is NBA Top Shot, a proprietary platform that changes the fandom culture. It’s where player highlight videos are sold in ‘packs’.
NFTs can build communities. Brands can create Dynamic NFTs that are unique to specific experiences. Within an event, when the audience interacts or certain outcomes occur, different digital collectibles can be unlocked. Brands can start to drive audience behavior and engagement using these. For example, if Steph Curry scores 20 points in the first half of the game, it unlocks a Steph Curry NFT highlight from that game that only the live audience receives. At a conference, if certain topics are brought up during a panel discussion, an NFT collectible can be unlocked for the audience. Brands can encourage consumers to attend events using the incentive of NFTs, and even create exclusive collectibles. Over time, the brand can repay them with physical or virtual perks too, allowing them to help identify superfans.
Potential of NFTs
Open wallets = social currency
NFT marketplaces have the potential to be the new Instagram, Facebook or even Bumble – a new age of social media platforms. On NFT marketplaces, you can browse, buy, sell and exchange; you can see what others have purchased or are collecting, which is a window into their interests and passion points.
Artists and creators
NFTs allow the original creator and brands of the digital assets to profit each time the token is being traded. And the amount is entirely up to them. The win here is for the ‘artist’ – you’re directly supporting the creator and their work. From an intellectual property standpoint, there aren’t any disputes about who was first too. As long as the song, art or other media was added to the chain, it will remain there forever and the history of when it was created is clear.
NFTs are giving brands the opportunity to enrich the brand-customer experience. It’s a trend that has opened a new door for brand storytelling and consumer interaction. It is changing how brands engage customers, allowing them to maximize the value derived from their relationship. As for the longevity, only time will tell – but brands that can successfully connect digital to IRL experiences using NFTs will be on top, and we’re looking forward to it.
Barbie Lam is futurist at Jack X.