At some point you may be expected to express an opinion on Non-Fungible Tokens (or NFT’s as they are more commonly known), especially with the news last week of one selling for $69m.
With Covid-19 accelerating the digital transformation of traditional businesses and the creator economy exploding due to new types of infrastructure, the virtual economy is booming.
The monetisation of new types of virtual assets is creating whole new opportunities for businesses as well as new types of engagement models.
So, here’s my attempt to bring together what they are, why they’re interesting, which brands are getting involved and some questions to ask yourself to ascertain whether you should also consider them.
So, WTF is an NFT?
NFTs are digital blockchain-linked assets that are completely unique and not interchangeable with any other asset.
The ownership is recorded as part of the blockchain ledger so is irrefutable and a guarantee of its authenticity.
Examples range from plots of virtual land in multi-user platforms, to programmable art, to ownership records for physical assets.
Because they are unique and impossible to replicate, they can bridge the gap between the virtual and the physical economies, offering a huge market of valuable digital goods that can be scaled, collected, and traded.
The NFT market tripled in 2020, with the total value of transactions increasing by 299% year on year to more than $250m but this year it has accelerated with an NFT by Beeple called “Everydays – The First 5000 days” sold by Christies for $69m.
Have any brands started to use them?
Here are three examples from the worlds of entertainment, gaming and fashion.
- Last year the BBC released 200 Dr Who trading cards which covered characters, objects and scenes from the show’s entire 57-year history. A marketplace for the cards will be launched in 2021 and then later this year they will be used in a turn-based free-to-play tactical card game with battles fought on digital tabletop boards.
- Atari’s is trying to revitalize the firm by moving its experience onto the blockchain. Last year they launched a set of digital collectibles made from the original art and design that capture the retro formative years of video gaming. Its lent its IP to ZED RUN’s digital horses that you can buy, own, race, breed, care for, and invest in. And last week they announced they were setting up a Crypto Casino, developed in partnership with Decentral Games on the Ethereum blockchain which will include Atari-themed games and Atari NFTs. The companies expect to see bets of $150 million in 2021 and $400 million over two years, according to their joint statement.
- At the end of 2019 Nike patented a “system and method for providing cryptograhically secured digital assets” for minting, exchanging and intermingling cryptographic digital assets in the form of digital shoes which can be linked to a real-world physical shoe.
It doesn’t stop there – Louis Vuitton, Breitling, NBA, Formula 1, Warner Music, Paramount, Ubisoft are all experimenting too.
But remember just because you can, doesn’t mean you should. This week Charmin jumped on the bandwagon with an NFTP which has gone down like a lead balloon with people.
OK, should I get the team together to come up with some NFT ideas?
The big issue with NFTs is the environmental cost as Beeple burned the equivalent of 49 years’ worth of energy with just two NFTs a few weeks ago. The environmental impact clearly needs to be reconciled for them to reach mainstream acceptance.
Here are 3 questions you should ask before you consider diving into this crazy world.
1. Is getting talked about important?
Recently at Adweek a Twitter/Pulsar study found that a 10% increase in brand conversation led to a 3% increase in sales. A study by Cog also showed that brands with higher levels of ‘buzz’ enjoy stronger growth. As Les Binet once stated “it seems we’re willing to pay much more for brands everyone’s talking about.”
So, if getting talked about is important (such as for a TV show or video game or music release) then you could certainly ride the rising wave of the NFT conversation.
2. Does your product signal status in some way?
What we buy often plays a role in signalling our status amongst our peers and the wider world.
Luxury brands are therefore tipped to get heavily involved in this space owing to the premiums attached to their physical products and how augmenting with virtual ‘bragging rights’ via NFTs seems to be a no brainer.
This is clearly why companies like Louis Vuitton are already experimenting.
3. Do you have a hardcore fanbase?
Clearly these are a LONG way from the mainstream. But as the virtual economy grows there is an opportunity to create whole new revenue streams from this space. If you have a hardcore fandom who are willing to hunt out or collect or trade or obsess about your products (case in point BBC Dr Who fans or Nike trainer addicts) then this is clearly an opportunity to capture revenue beyond physical products.
If you can answer yes to all of these then there could be a role to experiment with them. Just don’t expect to be selling them for more than Beeple.
Written by Simon Carr, Chief Strategy Officer, Hearts & Science
Google Trends: https://trends.google.com/trends/explore?date=today%203-m&q=NFT
Non-fungible token market grew by 299% in 2019: https://thefintechtimes.com/non-fungible-token-market-grew-by-299-in-2020/
Kings Of Leon release first NFT album: https://www.rollingstone.com/pro/news/kings-of-leon-when-you-see-yourself-album-nft-crypto-1135192/
Grimes sells $6m of NFT art: https://www.theguardian.com/music/2021/mar/02/grimes-sells-digital-art-collection-non-fungible-tokens
The ecological cost of using the blockchain: http://cryptoart.wtf/#https://superrare.co/artwork-v2/the-mystery-language-of-the-initiates-6562
BBC dr who: https://cointelegraph.com/news/bbc-gets-into-blockchain-tokens-with-doctor-who-worlds-apart
Atari casino: https://www.bloomberg.com/news/articles/2021-03-08/atari-partners-with-crypto-gaming-operation-to-launch-casino
Cog Research. Understanding humans presentation. 2011