NFTs have been the buzz word within blockchain, conversations within social media and even mainstream media over the last year of so. At times it has been hard to go more than a day without hearing a reference to NFTs, but cutting through all of the noise lies a powerful technology that can be applied to more than JPEG art.
For the most part NFTs have gotten a pretty bad rep, a search query of NFTs on Google or Bing will show you what many think of them. Simply typing in NFTs in Google leads to suggestions of “stupid”, “bad” and “worthless”. This narrative couldn’t be further from the truth, but with little to regulation in the NFT space its true that scam artists have taken advantage of this new technology, using it as a platform to scam and take people’s money, or perform a “rug pull” and running away with investors’ money.
Let’s take a step back in time!
Before we go any further let’s start by taking a look at the history of tokens. With all the hype about non-fungible tokens (NFTs) over the last couple of years it’s easy to forget that the notion of fungible & non-fungible tokens has been around for many years, centuries even. Its simple economics derived from our ancestors that we have carried to this day – objects that resemble coins (tokens if you like) traded and exchanged for goods.
In modern times tokens have been used in a variety of different ways to represent cash, think about the times you’ve used a telephone box (if you’re old enough), or exchanged money for tokens to use arcade game, perhaps even swapped money for tokens in a raffle…again if you’re old enough! In these instances, the tokens represented the cash equivalent of what you paid and therefore could be considered interchangeable with money.
When we look at tokens in very modern times (i.e. in blockchain), the notion hasn’t changed at all. However, in an era of blockchain technology the concept of fungible or nonfungible when discussing tokens becomes an integral part, specifically when addressing Cryptocurrency and NFTs.
It’s a non-divisible thing…
It feels like a good time to look at the difference between fungible vs nonfungible before we go any further. The notion of tokens discussed so far has very much been with fungibility in mind, in that tokens can easily be exchanged for another token of the same value or cash equivalent.
Fiat money is a good example of something fungible, in that you can swap a pound coin for another pound coin or a dollar for another dollar, they are completely interchangeable. There is nothing special or unique about a pound or a dollar, which is what makes them so easy to swap. Money is by nature fungible or if you like, “divisible”.
So, what is non-fungible? This is something that cannot be easily traded or exchanged with another of its kind, due to being completely unique or “non-divisible”. One of the ways I think about whether something is fungible or nonfungible is to look at a camera and a photograph separately. Once a photograph is taken you have two aspects at play – the camera and the photo and only one of them is a non-divisible, the photograph. This is because a camera is not unique and can (in most cases) be exchanged for another camera but the photo you took is completely unique.
Therefore, something fungible represents something non-unique, interchangeable, and divisible (like cash or the camera) and nonfungible relates to something unique, irreplaceable, and non-divisible (like a photo).
Let’s take a look at the types of NFTs
For the most part NFTs have had their greatest association with the art world, however this is really just the tip of the iceberg when it comes to the technology NFTs provide. NFTs can also be much more than just digital art, but some people with little to no exposure to NFTs might believe this is the extent of this technology. This is simply not true, they can be music, text, videos and much more. Here are 5 examples of some of the most popular types of NFTs:
- Artwork: By far the most common form of NFTs. Unique digital artwork that comes with a receipt of authenticity.
- Memorabilia: This is where video comes in. It can be spots clips of famous moments in the premier league, NBA, NFL and more.
- Collectibles: Think CryptoPunks or Bored Ape Yacht Club. These are like physical collectables like football or Pokémon cards but in the digital world.
- Land: Or should we say, “virtual land”. People can own virtual piece of land within a video game or a metaverse.
- Music: Artists can release their music as an NFT, both individual songs and albums.
- There are of course many other types of NFTs, we could go on forever, but the point is that the list is extensive or even indefinite.
Practically anything can be an NFT. In terms of how, blockchain is the powerful technology that sits behind NFTs. Each time an NFT is bought or sold a digital record is stored on the blockchain. Therefore, NFTs can be thought of as a digital receipt of a transaction.
One of the reasons people have enjoyed blockchain technology, relates to art. Selling art as an NFT can fight forgeries within the lucrative art industry. Someone looking to purchase an original Van Gough or Monet painting would either have to trust the person they were buying from or hire an arts dealer to inspect it and verify it’s authentic, in fact both examples rely on trust. If these art pieces were sold as an NFT the transaction becomes “trustless”, as all details of ownership and authenticity are stored on the blockchain. Anyone can view it.
This can be applied to many other industries if you think about it, taking the need for trust out of transactions.
NFTs & Crypto – the difference…
Remember we talked about fungible and nonfungible, well Crypto is the former and NFTs are the latter. However, they do share a common denominator – blockchain technology.
NFTs and Crypto are powered by blockchain technology and both use smart contracts (a self-executing contract that includes an agreement between buyer and seller), however they function in different ways. Let’s quickly touch upon NFTs Vs Cryptocurrencies in more detail as this will help to better understand where NFTs fit into business.
Both crypto and NFTs use blockchain and smart contacts, but unlike crypto which acts as the purchasing power in the form of a token or coin, NFTs are the goods you can receive in exchange for the crypto. You could say crypto is a contemporary form of fungible money and NFTs are the new-tech digital goods you can purchase with this money. In essence crypto is the money and NFTs are the goods.
How do NFTs fit within a business?
Now we have looked at fungible vs nonfungible, the types of NFTs and crypto vs NFTs, we need to consider where this technology fits within business and how businesses may be able to take advantage of this.
From start-ups to global organisations, NFTs are by no means a “one size fits all” approach. Different types of NFTs and use cases may be more suited to smaller business, large organisations, different sectors and so on. Let’s take a look at some of the examples of NFTs and business which might inspire organisations (big and small) to think about how this tech could support their business journey, whether that’s though development, client transparency or streamlining existing processes.
10 ways businesses can utilise NFTs:
Fund raising: Ok, so one way that businesses can take advantage of NFTs is through raising money. This has proven to be a fast way of generating capital, especially for expansion of smaller businesses. For example, a business might want to open a new location and by creating a campaign for supporters of their brand to purchase an NFT it offers a low-cost alternative to a loan from a bank. Smart contracts can be set up so that the money is only ever used if milestones on the project are met. In the same vein, businesses can use NFTs to fundraise for cause-related marketing campaigns. Both examples make donation safer for an investor, with the smart contracts keeping track of the money and where it goes.
Supply chain: A great way that NFTs can replace existing processes is through improving supply chain management. Here NFTs could potentially represent unique assets in the supply chain, which would enable the exchange and ownership history of the given asset to be transparent. As well as this, using NFTs can make life much easier by removing the long and complex trails of this exchange journey. In short, NFTs used in this way can reduce cost and improve how efficient the process is for sourcing and acquiring goods and services within a business. They would help to increase visibility, automate workflows, and importantly mitigate risk.
Insurance: It’s no secret that fraudulent insurance claims cost money, time, effort, and resource everyday within the market – fraud is a real problem. For example, ghost claims twist the truth and are a regular issue for many insurers. Insurance companies can utilise NFT technology to provide an accurate record of a claim such as car crashes, with NFTs providing proven ownership of insurance.
Data storage: Another way in which businesses can benefit from NFTs is ownership and track assets via systems such as SCM, ERP and CRM software. You can use NFTs to validate a product is authentic, register trademark information, record ownership rights, and manage business critical data. Track a products entire lifecycle, from raw materials to production and distribution, it is possible for an NFT token to exist within all stages of this process. By doing this you can ensure that there are there are no issues with copyright or licencing at any stage.
Copyright: NFTs can be used for Intellectual property & copyright to provide an indisputable record that can’t be questioned. Being able to provide a record of when you made something is extremely useful in the case of infringement, when it comes to copyright cases. NFTs used in this way can also be useful for protecting your brand. Think about the ways this could also aid reducing counterfeit products! NFT tech could be applied to proof issuance such as single-use promotional coupons, discounts, event tickets and so on.
Legal: When you think about the importance of safeguarding information it’s hard not to consider the legal industries. Solicitors, prosecutors, and all legal teams deal with very sensitive and valuable information every day. Whether this is a notarial agreement or evidence in court, ensuring a proper record of the authenticity of the data, where it came from and when it was recorded can be solved though NFTs and alleviate problems within the legal industry.
Inspection: NFTs can also play a big role for inspection & facility management. If a company is dealing with many intricate systems or construction processes, inspections are required to ensure that safe measures are in place, being held accountable. NFT tech can be used for inspection records in order to create an indisputable record, one that has been conducted in the right way, from start to finish.
Virtual products: Moving on from the data, information and record keeping focus for NFTs, Ecommerce businesses might want to create NFTs tied to Physical Products – i.e., virtual products. This example is following the hype of brands such as Nike where virtual products have been tied to physical, such as customers receiving a digital pair of shoes after buying the real thing. This is very much a fundraising exercise for eCommerce businesses, it is an opportunity to build hype and drive profits.
Loyalty program: A cool way NFTs can be used in businesses is to drive brand loyalty. Brands may want to create a customer loyalty program; an example could be a digital NFT loyalty card. Customers could download an app to their mobile device, scan the card every time they visit the business and accrue loyalty points. Tokens earned can be then used in store to purchase exclusive items such as limited-Edition merchandise. This really ties in with the NFT exclusivity angle for brands.
Promotions: Sticking with the marketing theme for business use cases, gamification promotions could prove to be a cost-effective way of producing marketing campaigns. Digital marketers know the pain of small budgets! Where once only really achievable for large enterprises, franchises etc. NFTs offer a possibility of introducing extremely engaging gamification marketing campaigns for smaller businesses. In the digital world of NFTs anything is possible with gamification, you just need imagination.
Future businesses in Web3
It wouldn’t be right to consider the ways in which NFTs could play an integral role in businesses without the consideration of web3 and of course the metaverses that will live in it.
Within a game or metaverse users can already buy NFTs such as virtual real estate, clothing, cars etc for their avatars. When more metaverses begin to emerge and we inevitably move further into this new iteration of the internet we will likely see selling NFTs to virtual audiences increase.
Larger businesses are already staring to pay attention to this shift and smaller businesses can do the same. Savvy businesses can take advantage and commission branded NFT items to sell for virtual worlds, think about the first movers in the space – The Sandbox & Decentraland. Huge brands such as Nike are way ahead of the curve by following suit, producing virtual shoes as we have already discussed.
While we may be far away from businesses within the metaverse being commonplace, shifting from regular websites, companies can already start to take advantage of this. For example, business owners can create (mint) an NFT version of a real-life product and sell it to people through marketplaces such as OpenSea. They don’t have to have their own virtual world, yet…
NFTs, not without challenges…
It wouldn’t be fair “bang on” about how great NFTs are without acknowledging some of the challenges, particularly within business.
First of all, it’s important to realise that we are still in the very early days of NFTs. It’s no surprise that in some people’s eyes NFTs are still seen as art JPEGs, it’s an extremely complex piece of technology that a lot of people have difficulty understanding. Before we can get mainstream adoption within business, NFTs need to overcome some key components.
The UX for buying, selling, and using NFTs within processes needs to be simple. Before this tech can gain mass adoption, whether that’s at an individual level or via companies, it needs to be a seamless experience. Without going into too much detail on this (perhaps one for another time), other issues relate to cross-chain compatibility, adoption of blockchain and cryptocurrency in general as well as the dreaded gas fess associated with minting.
In essence, UX and fees are some of the biggest hurdles affecting mainstream adoption of NFTs.
Let’s wrap this up!
As a marketing professional I will always consider the ways that NFTs can play a role as a strategic marketing tool, perhaps using the tech for fundraising, promotions, or gamification to get maxim engagement with customers. However, the realm of NFTs and their utility within organisations goes way beyond this. NFTs have real world use cases for replacing many existing protocols in business, especially in relation to data.
Two words that come to my mind when thinking about NFTs tied to processes within business are “visibility & streamlining”. This is because it’s hard to deny blockchain technology keeps track of everything and this immaculate record keeping could be so integral to businesses, saving them both time and money.
We are still very early in the world of NFTs and I’m certain many businesses of all sizes will be cautious when looking to adopt new ways to handle processes, replacing the traditional with the new. Perhaps it will need large organisations within many different sectors to take the plunge and test out this technology before others follow suit. Then, we may see a domino effect.
No doubt there are challenges associated with this tech, and this always needs to be considered by any businesses looking to use NFTs, whether as an extension of marketing for promotions, fundraising or tracking supply chain data. It’s all so new and at present quite hard to understand, hard to use even. Essentially, in my mind this is what is currently holding back this technology in the mainstream.
Whatever happens I do believe that great technology usually always prevails and before long we will see more and more legacy processes in business being replaced with tech powered by blockchain, perhaps to point that NFTs are so integrated into businesses that many don’t even realise they are using them. One day perhaps!
However, sticking with the present I do believe it’s worth both large and small businesses taking the time to look at existing processes, thinking about how NFTs could one day allow them to introduce new features or replace existing methods.
As they say, food for thought!