How can businesses use NFT to their advantage? What is NFT?
If you are a keen marketer or an ardent follower of social media then a few exciting pieces of news like these might have not escaped your sight:
- Launching of NBA Top Shot that offers highlights of memorable basketball games in digital format, referred to as ‘moments.’
- Selling of digital artworks on the virtual marketplace with ownership rights by the artist and musician Claire Boucher (also known as Grimes) for $ 5.8 million.
- Virtual auction of Taco Bell Gifs to support Live Más Scholarship.
- Auction of the copyright of a jpg file of digital art collage by the digital artist Mike Winkelmann at $69 million
- Auction of the exclusive right of the music album ‘When You See Yourself’ by the band called ‘Kings Of Leon.’
There are more such multi-million dollar plans and deals attracting social media attention of late, and if you wonder what is the common link between them, look at the products sold – the digital files with digital ownership!! The jpg, GIF image files are being sold as products!
But a digital file can be copied, edited, tampered with any time, isn’t it? Then how on earth will you be sure about the originality of the file? How will you claim the title, proof of ownership, and copyright of this asset ( well, a mere digital file as an asset), and what will you do with these digital assets, will you be able to resale them like other assets?
The answers to all of these questions lie in the new path breaking technological advancement called NFT, which is heralding a new era in business and commerce and also showing great possibilities in many other areas including the economy, infrastructure, and governance.
What is NFT?
NFT is Non-Fungible Token. If your head has started spinning, it may if you’re not a student of economics, take a pause and then ask, ‘what is a non-fungible token?’
To understand non-fungible tokens we need to understand the term ‘fungible.’ Fungible is something that is made of identical or interchangeable units and also can be exchanged for other material of equal value. For example, Gold is a fungible asset as any unit of pure gold can be replaced with the same unit of pure gold, be it in any form. We can purchase some material in exchange for equal worth of gold. Currency is also fungible because a unit of currency or coins, for example, a $100 bill can be interchanged with 2 nos. $50 bills.
In contrast, there are some assets that can’t really have a true copy or a fully identical replacement; they are unique. For example, diamonds that become precious through cutting and polishing by the experts. It is said that no two diamonds are the same. Even if they are of the same grading they will not look the same to your eye, hence their prices will also differ. Therefore, we can categorize diamonds as non-fungible assets investment.
Lands and residential properties are some other examples of non-fungible assets because each unit has a unique set of qualities that can’t be copied or duplicated.
Can’t be copied or duplicated – this unique quality of non-fungible assets inspired new ideas of creating non-fungible assets on the digital space by the content creators in the forms of memes, media, tweets, arts, articles, music, in fact any type of digital property that can be collectible and will have some antique or vintage value going forward. This is done by attaching a unique identification code or a digital autograph, called a token, to that digital property.
That’s it! The idea of creating an NFT or a non-fungible token as a collectible digital asset shielded with tamper proof digital authentication has ushered in a great new form of branding that leads to superior emotional connect with the audience and at the same time bring large revenue to the company.
How to make an NFT?
Blockchain technology holds the basis of NFTs. Blockchains platforms are the digital ledgers that contain all records of transactions and are practically impregnable to hacking or breaches.
A non-fungible token or NFT is a cryptographic digital token, which is not interchangeable, in sharp contrast to cryptocurrencies such as Bitcoin that are essentially interchangeable or replaceable or fungible.
An NFT is created by submitting the file of the digital work in question to an NFT auction market such as KnownOrigin, Rarible, or OpenSea. This automatically puts the hash value of the file on a digital ledger or blockchain as an NFT. Once an NFT is stored on the blockchain it gets a foolproof identity protection for ownership by the parent company. However, all transactions of an NFT require crypto tokens and cryptocurrencies only.
Ethereum is an open-source, decentralized blockchain technology that offers ERC-721, a free and open standard non-fungible token that has a globally unique tokenID.
Actually, the NFT itself contains very little of the data, rather it includes links to where the original digital works are stored. But that link may not be permanent, which means the title can be for a certain period and will be revoked automatically at the end of that period. The ownership of an NFT doesn’t grant the exclusive right to the file by default. However, there is a provision for applying explicit licensing to an NFT deal. The author or creator is needed to transfer the copyright to the buyer as a certificate of authenticity, and that continues if the ownership is changed further.
How can brands use NFTs to their advantage?
NFTs are showing immense possibilities to start a whole new paradigm in branding. The level of interest and enthusiasm it has created speaks about its capacity to garner huge and sustainable consumer engagement, which we all know is the single most important goal of marketing and branding.
In the digital age where people spend most of their time on a variety of channels and platforms, NFTs present a unique branding opportunity through creation, collection and trading of digital collectibles and memorabilia.
And not to forget the revenue it brings to the business with millions of dollars – not only through the first deal but also as royalties from the future tradings. In fact, the future trading option helps your brand to be a talking point with some bragging value.
NFT is certainly a big power at the hands of the marketer but it requires intelligent use and good timing. For example, the Taco Bell GIFs mentioned in the beginning were apparently launched to support the Live Más Scholarship, a popular social initiative.
Studies show that 83% of millennials tend to attach with brands that align with their values. Taco Bell attracted huge interest by linking their NFT launch with a social cause supported by their target audience.
NFTs can also be used by a newcomer business to grab attention and build followers.
Chinese virtual sneaker brand RTFKT decided to design an NFT sneaker and put it up for auction on the eve of Chinese New Year. The virtual sneaker fetched a whopping $28000. What a wonderful way to disrupt the market and make a name for yourself.
All indications suggest that people are loving NFTs and are willing to spend money on them, even more so as the concept is powered by the Blockchain technology that also ensures hasslefree trading opportunities. It’s also possible to recreate more NFTs of the same digital work. Marketers pull up your socks, the NFT craze is sure to continue for a long time to come.
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