The growth of NFTs in mainstream business has been exponential in the last two years, growing from a value of USD100 million in 2020 to USD22 billion in 2021. NFTs have been used to create collectable digital art and other forms of art. Celebrities, digital artists, gaming companies and everyday enterprises have capitalized on the emerging technology and see NFTs as a service as the next step in the Web 3 evolution.
In this article, we will be outlining the properties of NFTs that make them so special for the business sector and highlighting use cases for blockchain technology.
Key properties of NFTs
Digital assets that are non-fungible (unique) offer a certificate of authenticity. The metadata of each digital asset is an unalterable record that gives the digital asset its certificate of authenticity. A digital asset that is fungible has the same value as another digital asset.
Ownership: NFTs are digital assets that convey ownership. These assets can be virtual or physical. Virtual real estate like land in Decentraland can be purchased and the owner owns the piece of land in the metaverse. Similarly, a digital asset can be a unique weapon in a game. A real-world asset like concert tickets or a house can also be represented as a token in the digital space. Ownership is completely traceable and clear as it is recorded on the public ledger.
Indestructible: NFT data is stored on the Ethereum blockchain via smart contracts which ensures that each token cannot be destroyed, removed or replicated.
Immutable: By purchasing an NFT, the individual owns and possesses the digital file in their wallets. The digital item is not owned by the company who created the digital asset.
Speed: The blockchain works as a distributed digital ledger that runs on a decentralised system. By avoiding a centralised contained system, transactions can occur in a quicker, cheaper and easier manner. This allows companies which use NFTs to conduct their business in a more efficient manner.
Use Cases for NFTs
A solid use case for NFTs is in the ticketing industry. Digitalization makes ticketing more convenient but one major pain point is that users can’t keep their tickets as souvenirs. With QR Codes, tickets are scanned and then discarded. By introducing non-fungible tokens, the digital asset remains in your wallet and you can keep your collection digitally. Besides preventing fake tickets and scams because of their traceability, each non-fungible token is a unique memory touch point of experiences the owner has had. In addition, non-fungible tokens can be traded on secondary non-fungible token markets and the original owner can earn royalties from selling their tickets.
Utilizing the power of the Ethereum blockchain, official documents can be digitalised and minted as an NFT to ensure that they are tamper proof, authentic and easily verifiable. This allows for a more efficient process as well as reducing the number of people and organizations that are involved in the verification process. Additionally, industries that suffer from fraud often such as the insurance or banking industry can leverage NFTs to provide accurate claim records and provide ownership proof of insured goods.
By minting and issuing NFTs, event organisers and brands can utilise the digital asset to provide access to VIP events or previews. Smart contracts can be configured to ensure different tiers of access for users depending on the type of NFT users own. Additionally, enterprises can utilize a lucky draw model to allow their community to win VIP access to events, games or launches, increasing user engagement.
There are multiple use cases where enterprises can leverage on NFTs. Companies can white list consumers and airdrop them an NFT to get them into their brand ecosystem. These NFTs can inform consumers of on-going promotions or allow holders to redeem an item by showing proof of the NFT. Additionally, consumers that hold onto the NFT in the long term can qualify for VIP passes further down the line.
NFTs can serve as a curated experience for consumers that go beyond the product or service being sold, increasing customer lifetime value. By leveraging on NFTs, brands can unlock the next era of engagement of their communities by providing exclusive limited edition assets or unique experiences tailored to those who own NFTs. Additionally, NFTs can be personalized to a consumer as owning a one of one asset with proof of ownership creates a powerful relationship with its consumer.Owning a part of the company will increase loyalty and allow the community to be an active participant in the conversation. The value of an NFT can increase with the success of the company, giving them a stake and encouraging consumers to be ambassadors for the brand.
The ownership of a digital or physical item can be represented in an NFT which is stored on a public ledger where it can be authenticated. Enterprises and owners can easily verify the provenance of the NFT and view the transaction history of the item. Pieces of artwork, real estate, vehicles and luxury hotel rooms can allow users to see the provenance of the item. Additionally, companies that deal with health and safety such as construction companies can use NFTs to provide safety and accountability. Inspection records can be stored on an NFT to create an immutable record which shows the provenance of the checks to give consumers and auditors a peace of mind.
High value asset companies can mint tokenized fractional NFTs and share the ownership of the digital asset with multiple buyers. Items that have been tradition out of reach for the everyday consumer can be divided and tracked using fractional NFTs, allowing people to invest small sums of money to gain fractional ownership of a high priced asset such as luxury yachts, collectible watches or rare gaming cards.
Enterprises and creators can tap on the ability of smart contracts to receive recurring royalties for its products after each subsequent sale to increase business revenue. The recursive selling encourages creators and companies to invest in innovation and producing quality products that last as they receive a percentage of royalty after each recurring sale.
In the gaming industry, developers and players can create skins, weapons or characters in a video game as an NFT. The items can be monetized through in-game purchases such as licensing their skins, weapons or characters to other companies in the form of a physical figurine. Similarly, brands can create a line of products featuring an NFT as its main design motif for clothing, accessories or home decor items. The NFT can be licensed to other brands at a fee.
Additionally, as the market for NFTs continues to become more liquid, consumers can benefit from financial appreciation of these assets as the brand and company grows.
Enterprises can create interest in their brand through minting NFTs. Owners of the NFTs can be invited to special events for brands to gather insights from their communities, driving brand engagement. A liquid market to exchange a brand’s NFTs increases its value.
Gain insights into community
NFTs give enterprises a way to build community through ownership of the digital asset. Being part of a community that owns a brand’s NFT allows like minded consumers who share similar tastes and interests to gather and discuss about the brand. Enterprises can engage their community through events to learn more about consumer behaviour and marketing sentiments of their products.