NFTs are on the cutting edge of digital technology, and brands are starting to wonder what potential it holds for them.
What started as a trendy way to create digital trading cards has now caught the interest of celebrities and brands alike, with big names like Twitter, Barbie, Taco Bell, Campbell’s, and Crockpot getting in on the action. And while there’s no doubt that NFTs have reinvigorated the world of digital collectibles, brands are starting to see the technology’s potential for other lucrative uses in the future.
What Is An NFT?
A non-fungible token, or NFT, is a digital asset created with the same blockchain technology that most cryptocurrencies are built on. Essentially, a network of computers races to solve complex mathematical functions – when they finish, they encrypt a set of data and generate a private cryptographic key, also called a token.
The only difference between NFTs and cryptocurrencies such as Bitcoin is that these tokens are non-fungible – this means that they are not mutually interchangeable with one another. That means that the assets they’re attached to are unique and irreplaceable, much like owning a piece of original art in the real world.
When people buy, sell, or trade their NFTs, their unique identifier is encrypted into the token itself and distributed to the entire network. Other users can easily access a token’s ownership information and history, but they can’t access the asset itself without the unique cryptographic ownership key.
NFTs are typically created to represent image files such as jpegs and gifs, but they can be attached to any digital file type – this gives the technology huge potential for brands in the near future.
Most NFTs in circulation today are purpose-built for particular assets, which are then verified on the Ethereum network. It’s a lot like a serial number that luxury brands use to authenticate their products, except in this case there is no central authority creating or monitoring NFTs, just as there isn’t a central bank minting cryptocurrency.
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How Are Brands Using NFTs Today?
NFTs first appeared on the scene sometime in 2017, when a series of 10 000 unique digital characters called CryptoPunks was launched on Ethereum. However, the technology was pretty niche until a virtual cat trading game called CryptoKitties went viral later that year. After that, the market exploded. Some of the main NFT projects on the market today include:
Most of these are a type of experimental art project – the assets are art pieces that are generated in a limited series, much like real-world collectibles. Some of them, such as The Bored Ape Yacht Club, also offer access to exclusive communities or can be worn digitally.
But NFTs are experiencing a massive boom at the moment, and big brands are starting to get in on the action. Recognizable brands like Barbie, Taco Bell, Campbell’s, and Twitter have begun creating their own NFT projects to create hype and leveraging the craze for their own marketing campaigns before the market becomes saturated. Celebrities are doing it too – Lindsey Lohan has released her own line of NFTs, and Post Malone recently created an exclusive “Celebrity World Beer Pong League” using the technology.
What Potential Future Does NFTs Offer Brands?
For brands, NFTs represent a new frontier, full of exciting opportunities in the realms of digital goods, media distribution, and more. A new interactive layer is developing on online platforms – most people call this layer the “metaverse”, and it’s expected to be a game changer in the world of marketing in the future.
As more and more of our lives happen in digital spaces, it’s important for brands to start laying the foundations for integrating these innovative technologies into their business plans and leveraging them to their advantage. In this sense, NFTs are just the beginning. Here are the top three ways we think that NFTs are going to change the way brands interact with digital spaces.
They Create Scarcity And Value For Digital Goods
At the moment, the category of “digital goods” is chronically underdeveloped in terms of monetization. It’s mostly because historically, digital goods were incredibly easy to copy and share. NFTs have the potential to create something that we’ve never seen before in the digital goods industry – scarcity. And as we know, scarcity is one of the best ways to create value.
NFTs also make digital goods easily tradable, which helps them accumulate value throughout that process. And because the chain of ownership is visible to the entire network, the value of certain pieces may change based on the identities of their previous owners, giving brands the potential to create lucrative celebrity endorsements.
At the moment, this function is mostly used for collectibles like digital art and items in video games, but it could be expanded to digital real estate, event tickets, brand licensing, and even tokens that can be related to items in the real world, such as Nike’s CryptoKicks project.
They Could Change The Landscape Of Digital Media Monetization
Digital goods isn’t the only category that might be shifted by NFT technology – experts predict that it will fundamentally change the face of digital media as well.
At the moment, most digital media is monetized via platforms – either ad-sponsored platforms like YouTube and Facebook or subscription-based platforms like Netflix and Audible. These platforms act as liaisons between creators and consumers, making their cut by being distributors. Creators are forced to give up a large part of their control and ownership over their work to these platforms and to the consumers once their work is uploaded.
NFTs have the potential to change all of that – with the ability to authenticate ownership and monetize individual pieces of content, the media ownership model may soon shift to put power back into the hands of creators, allowing them to monetize their work without intermediaries.
They Could Add A New Layer To Accessing Digital Experiences
Digital access to experiences isn’t new – especially in a post-pandemic world, getting tickets and even attending events from the comfort of your own home is a common experience.
However, NFTs could add a new layer of monetization to this space by tokenizing this access, making it a tradable asset all its own. For example, Microsoft has recently released a game that celebrates women in science. The reward is NFTs that unlock secret games inside Minecraft, and this showcases a unique opportunity for service-based businesses to implement NFTs in their marketing strategy.