We’ve all heard about them, we’ve tried to research them, we’ve tried to understand them, but they’ve left us hanging with many questions to be answered. I’m talking about the digital asset, the NFT. Why are NFTs making headlines and why are they changing art, collectibles, and more for years to come? I have answers and more on why NFTs could be the future of collectibles and eCommerce as we know it.
What does NFT stand for and how do they work?
NFT is an acronym for “non-fungible token.” OK, but what does this mean? Start with the letter “F,” representing the word “fungible,” which by definition is “the ability of a good or asset to be interchanged with other individual goods or assets of the same type.” This includes (but is not limited to) dollars, gold, or Bitcoin. If we place the “N” or “Non” in front of the word fungible, the definition changes to “goods or assets that are unique, irreplaceable, and one of a kind,” including real estate, art, or an item(s) that carry value. Last, “T,” which stands for “Token” and refers to the blockchain, which for an NFT is a public certificate of authenticity.
The blockchain is a digital public ledger that shows transaction history of an item and proof of ownership. When buying or transferring a digital asset to your digital storage/wallet, your move must be approved. This instant and decentralized approval is made possible by millions of computers all over the world that validate your transaction. This approval action or “Proof of Work,” means “one party (the prover) proves to others (the verifiers) that a certain amount of a specific computational effort has been expended.” For example, a bank or institution’s main purpose is to verify Proof of Work between your accounts making sure, for instance, that you have enough money when you make a purchase. These actions take time for approval; blockchain fixes this issue. In the blockchain, there are no institutions or banks involved so any transaction you make will be approved or denied in minutes. You are your own institution, remember this.
Why is this technology valuable?
A now household name in the NFT space is the established artist, Beeple who made headlines selling an NFT of his digital artwork called Everydays: The First 5000 Days. This transaction made history with the piece selling for a whopping $69,346,250 at Christie’s Auction on March ‘21. Beeple has been an established artist for many years and this is the first NFT offered by the artist, making it a hot ticket item. But why and how? Well, NFTs make digital art scarce, no different than buying an original physical Picasso painting and therefore creates value.
It does seem unfair to call out the most expensive NFT ever sold and not speak to the billions of affordable works sold by artists all over the world. NFTs make it possible for a digital artist to create an original digital piece and sell it as an original. Buying original digital art was not possible before NFTs. So If you would have purchased digital art in the past there was no way to prove you owned the original work.
NFTs can be found on marketplaces such as Nifty Gateway and Open Sea where artists can submit their work for sale. Art prices can range from free to as high as you feel comfortable paying and the art can be purchased through an auction or an instant buy styled experience. NFTs are opening doors on a new creative medium that has never been explored before at this scale giving people a way to collect, buy, and sell digital art right from their computers.
NFTs have been flourishing in multiple digital sectors such as gaming, collectibles, metaverses, art, and music. The area getting the most buzz has been digital artwork, being the front runner of this space. Anything from digital images, animated gifs, and short video clips with audio or music. All of this is exciting for digital artists, but it doesn’t stop there.
NFTs have been around for a few years. The technology was first being explored in the mid-2010s. The first project that cinched the technology’s popularity was Crypto Kitties created in 2017 and it is still going strong today. Crypto Kitties are digital cats that you can collect, buy, sell and multiply on a custom world marketplace. This gave NFTs their first kick in popularity and, as time went on, developers in the space found more uses, which brings us to the 2020s.
Relevant NFT use cases
The reality is, not everyone wants to purchase digital art for a lot of money — but this is just the beginning. Think of this technology as akin to the internet when it was new or when email was revolutionary. In other words, this is just the beginning and developers are actively innovating new applications for NFT technology in the future.
The truth is NFTs can be used in many more common applications and could bring useful value to your life. NFTs in the simplest terms are digital proofs of ownership that can be paired to digital or physical items. Everyday uses considered in the NFT space include deeds to properties, titles for vehicles, business licenses, certifications, admission to events, medical appointments, insurance coverage, subscription services, and more.
In retail, a company could:
- Leverage NFTs to create (or mint) exclusive limited runs/editions, partnering with artists, auction sites, or charities.
- Design and sell merchandise from clothing to artwork to front row seats at virtual events will become new sources of income and loyalty.
- Run a contest with NFTs being the prize.
- Raise funds by selling one of your most iconic assets through exclusive NFTs to true fans.
- Provide GenZers and gamers with virtual replicas of your iconic physical products, protecting ownership through NFTs.
- Offer your customers the opportunity to pay with cryptocurrency in both worlds.
- Pairing NFT-related initiatives with a carbon offsetting solution to counteract NFT emissions because minting or processing an NFT consumes a lot of computing power.
How to make NFTs happen with LiveArea
At LiveArea we are always looking into innovation accelerators and new technologies for our clients. NFTs could uncover solutions for growth through our NXT Intelligence™ service focused on innovation, emerging technologies, and brand experiences. NFTs may seem far-fetched right now but keep yourself updated because you might be reading a lot more about NFTs in the future.