The Purpose of Non-Fungible Tokens
NFTs are slowly beginning to demonstrate how various industries can be improved in ways we’ve never seen before. They do this by representing assets of all kinds, digital or physical, in the form of a digital token. This cryptographic token provides an immutable certificate of ownership while verifying an asset's authenticity.
Because every NFT is stored on a blockchain, we can track every transaction made around the token that represents the asset and verify who owns the token and essentially the asset behind it. This differs from a traditional internal ledger, which can be vulnerable to fraud from centralised parties.
The unique selling point for NFTs is that they promote market efficiency in virtually any market. They remove the need for unnecessary intermediaries and paperwork by digitising critical information that is available for anyone to acknowledge and verify.
How Have Companies Applied NFTs?
2021 saw mammoth brands and companies dipping their feet into blockchain technology through NFT collections. Some were successful, while other high-profile teams failed to impress. A brand’s first NFT collection was their first step into experimenting with what they potentially believe may play a pivotal role in the future of digital consumerism.
The first step isn’t likely to be the primary strategy but rather a show of intention to adapt to an evolving market. The most successful brands didn’t stop building after claiming their .com domain in the Web1 era.
Nike partnered with RTFKT in a project called Cryptokicks. The partnership involved the release of digital sneaker collectibles that didn’t differentiate too much from their successful model of dropping actual sneakers around the world in low volumes.
The project targeted existing die-hard fans, and the collection sold out very quickly. Fans could buy limited edition sneakers as they usually would, but the product was digital this time. Although sneakerheads couldn’t wear their new kicks, they could trade these digital shoes on an open marketplace, and there’s an excellent chance they’ll be able to apply them in a virtual environment at some point.
This is just one example of a brand we know looking to experiment with NFTs. Many of the biggest brands have either launched an NFT collection or shown their intent to do so — a sign of remaining competitive in ever-changing industries.
NFT Use-Cases for Business: 3 Ways Companies Can Apply NFTs
Companies and brands can play a role in changing the way the general public ideates NFTs. Rather than being purely scarce and expensive digital assets, there’s a good possibility that NFTs will be associated with all kinds of consumer products one day. Here are a few ways companies could implement NFTs within their framework and create unique experiences for their customers.
1. Exclusive Membership
One of the most original ways that NFT projects have rewarded holders is by giving them exclusive access to communities and events they host. Verifying whether someone owns an NFT makes it even easier to identify your community and supporters is easy.
Businesses can launch an NFT collection that grants customers exclusive access to events or releases held by the company. A perfect example of this would be Adidas’ first NFT collection. They partnered with Bored Ape Yacht Club in a collection that gave holders the exclusive right to limited edition merchandise drops from Adidas.
Any business with a large following could release a collection like this can create a new form of exclusivity, sparking a new type of consumer interest.
For example, a golf equipment brand could drop an NFT collection that entitles holders to early access to a new product release. This benefit of getting exclusive access before the masses will entice golf fanatics to get their hands on one of these tokens. This also creates a point of connection between the brand and its customers.
2. Tokenising Products
Companies can also look to link NFTs to physical products. This is when physical consumer items have important data represented by metadata encoded into an NFT. Think of the NFT as a digital receipt with way more potential benefits.
NFTs can help add a layer of transparency for customers into what they’re buying. The NFT can hold essential information that verifies the product's authenticity and where the product has been sourced. This added layer of transparency can play a crucial role in improving buyer confidence and potentially removing the problem of counterfeit products.
Tokenising products also means that ownership and product ownership transfers can be tracked easily thanks to the blockchain. Each transfer around a token is publicly visible, meaning there is a serialisation around each asset.
There is also the feature of recapturing value around products through secondary sales. Product-backed NFTs can have royalties encoded in their smart contract is ensure that the creator of the NFT (the business) earns a small percentage of each secondary sale made. An added method for revenue generation.
A powerful example is Scoin, the South African Gold Coin Exchange. Scoin has partnered with Momint to tokenise one of their legendary coin sets and has also fractionalised the coin set. This involves dividing ownership of the asset into many digital tokens, providing a lower price entry for part-ownership of an iconic coin set. Although the physical coin set is held by Scoin, this enables anyone from around the world to claim part-ownership in a historic coin set - something that wasn't possible before.
3. Extending Product Lines into Digital Worlds
These digital worlds, otherwise known as a ‘metaverse,’ are virtual environments where people can engage in everyday activities, but just with a digital identity. Grayscale has estimated that the metaverse could be a one trillion dollar industry, with others mentioning that investing early into metaverse-based projects could be like investing in the internet's earliest days.
Companies can take advantage of these virtual worlds and have their products ready and usable by avatars and the digital public. We’ve already seen companies like Gucci, Adidas, and Nike create digital versions of their apparel, allowing true fans to wear their favourites in the metaverse.
With projects based around the metaverse only really just getting started, now might be a good time to consider digitising product lines in the forms of NFTs. With these blockchain-based certificates of ownership getting so much attention and their use-cases multiplying, it might be wise to tick off the NFT box and showcase readiness to adapt to the next age of the internet.