The three letters – NFT – which have been rattling all over the media over the past few months do not mean anything to most people. For those who are somehow connected with the art world, this is a new technology that has allowed many new names to make a statement on the market, and several multimillion-dollar transactions to take place. Only those who have been working with high technologies for a long time understand that this is not another hype, not some fickle, but a new stage in the process of digital transformation that is taking place in our lives.
This technology will help streamline such transformation and ensure its security, since most of the things we own no longer have physical embodiment – be it a subscription to a streaming service, tickets to music festivals, or even medical documents.
NFTs, or Non-Fungible Tokens, are a unique record on the blockchain acting as a digital certificate of a unique object, digital or tethered to a real-world item.
Let us delve into the concept. A blockchain is a database, an ordinary digital ledger, but a decentralized one that restricts the introduction of any changes in this database to some central authority, thus ensuring the transparency and security of the data recorded within.
The token is a record in such a database. There are two types of tokens – fungible and non-fungible ones.
Let us illustrate the case with an example from everyday life. Your $100 banknote and the one held by a friend are equal in value and can safely be exchanged without loss of value for either party to the exchange. This is an example of a fungible token. However, if we have Claude Monet’s “Water Lilies” on the one hand, and Pablo Picasso’s “Girl on the ball” on the other, then an equivalent exchange will not be possible, since these are completely different assets with their own characteristics. This is the principle behind Non-Fungible Tokens (NFTs), wherein each is a unique object with its own unique record and set of characteristics.
The sector of digital art clearly highlights the advantages of this technology. As such, it is through this industry that the concept of NFTs has captured the imagination of those who are not directly related to the given technology. Digital art, which only exists in the online environment, has been a gray area for many years. Artists and hobbyists alike were unable to claim authorship or ownership of their works, which could be easily downloaded, copied, or edited by anyone willing to infringe.
But now, with the help of a solution created by blockchain developers, it is possible to issue a digital certificate for each artwork, whether it be an image, a video, a piece of music, or even just a tweet, and safely transfer and sell it to third parties.
The inquiring mind can rightly assume that digital certificates can be issued using blockchain not only for artworks, but also for any item created in digital format. And that is true. The given technology appeared in the gaming industry back in 2017 with the advent of the Cryptokitties game, which steamrolled across the entire crypto community. Now even the largest players on the given market are announcing the release of internal game items like magical spells, weapons, etc., in the form of NFTs, thus avoiding cheating and fraud, making it possible to move such assets from game to game.
The use of the given technology extends to a wide range of products and areas, but there is a nuance. No legal framework has yet been developed and transactions with serious items like real estate are not yet possible.
The arts and entertainment industry was the first to catch on to the trend of NFT usage. While the former industry is primarily focused on boosting direct sales, the latter has gone a step further and is using the technology as an innovative way of building communities and raising brand awareness.
Most notable is the NBA TOP SHOT project, created by Dapper Lab (the team that launched Cryptokitties) in collaboration with the NBA (National Basketball Association). Over the past year, the turnover of the project amounted to more than $500 million, as more than 1 million users took part in the development of the platform to one degree or another, and the most expensive digital card was sold for almost $400,000.
NBA TOP SHOT
The principle behind the project is quite simple, and the team took an idea with a long history as the basis for its development. It all stands on the concept of collecting sports cards translated into digital format and selling the images of the coolest moments from current and past games of the seasons of different sports clubs in the league. With the help of NFTs, they made it easy for users to showcase their collections to other members of the community and receive bonuses and honorary badges in return. It also simplified the process of reselling the cards on the secondary market.
In just a year, a huge community grew around the project, which has become even more loyal to the NBA brand, increasing match viewership and player ratings.
“Now that is moment is worthy of NBA TOP SHOT!” - when a cool moment happens during game streaming, the commentators now say this.
Unfortunately, the advantages of the technology are not yet fully understood by large companies and brands, so there are not too many high-profile cases available for review. However, this gives an advantage to those who will be the first to pick up the trend and develop it further.
For example, a number of big brands sell virtual clothes and accessories, which can later become an adornment of the virtual counterpart of the token owner in a favorite game metaverse, or at a virtual party. For example, RFTKT has partnered with artist Fewicious to sell $3 million worth of virtual sneakers. Burberry was one of the first to launch an in-game clothing NFT collection in a partnership with Mythical Games. Louis Vuitton released a digital fashion line with League of Legends. Luxury brand Dolce & Gabbana will launch a non-fungible token (NFT) collection called Genesi and will be promoted at Dolce & Gabbana’s upcoming shows Alta Moda, Alta Sartoria, and Alta Goilleria.
Louis Vuitton for League of Legends
My experience in marketing and working with NFT technology stretching back since 2017 makes it possible to suggest that there many other possible ways of using the technology for promoting brands, including:
*Telling the story of the company, share the best moments, convey value through collectible digital items;
*Engaging customers with all sorts of challenges with NFT prizes that can increase both direct sales and brand loyalty;
*Drawing attention to an event like a product launch through ticket sales using blockchain technologies and the distribution of memorabilia in the form of NFTs;
*Issuing digital copies of the company’s real products, thereby opening up an additional source of profits and a new way of consumption in such environments as video games or metaverses.
Non-tech savvy users, or those who have come across early versions of NFT platforms, may argue that this whole blockchain and crypto industry business is very difficult to understand and the onboarding process is slow. It is also quite expensive in terms of development and transaction costs, so it will be difficult to adapt it to the broad masses.
I disagree, as the industry is developing and a lot has already been done to simplify onboarding and the process of buying and selling NFTs, as well as reduce development costs. For example, users of the NBA TOP SHOTS platform do not need to hold any cryptocurrencies or create their own virtual wallets, since the whole process takes place on the platform side and is hassle-free.
In conclusion, I would like to say that the hype peak of NFT technology has passed and easy money-making has given way to the familiarization of the broader masses with the underlying concept. Most are tired of the usual marketing ploys that migrate from brand to brand. And this is where NFTs will come in handy with their innovative gaming component.
I think the technology will continue to develop in the marketing application and gamification direction until the necessary legislative base is established. It will be very exciting to behold the creativity of large and small brands alike in this field, as I am sure that time will breed numerous new and interesting use cases.
Disclaimer: Olga Filatova is a co-founder & the COO at FLASHBACK