Non-fungible tokens, or NFTs, are still a relatively new movement in digital consumerism. However, their impact has already created a long-lasting effect that will transform the e-commerce market in the years to come.
NFTs are individually authenticated, verifiable, and non-interchangeable items. Complete with unique identification and metadata, they are genuine one-of-a-kind objects with only one official owner at any given time.
Well-known brands are willing to invest in NFTs, even at this early stage, because they help boost the user experience, increase brand awareness, and expand opportunities for brand engagement, according to Vinod Varma, founder and CEO of Creator.co.
The NFT market has experienced 10-times growth over past last two years and market watchers expect the momentum to continue.
New Revenue Stream
With the adoption of NFTs, both brands and influencers can now create unique content capable of being monetized and enable followers to own a unique collectible piece.
“NFTs can aid a brand’s equity, create publicity for a product launch or brand event, or be used as a form of customer appreciation, serving as a unique custom gift or coupon,” Varma told The E-Commerce Times.
As this trend persists, brands will begin to see that an entirely new form of revenue is opening up with NFTs, as goods can now be sold in a completely digital format instead of a physical product.
“Brands and influencers who partner together to create innovative content will be able to leverage numerous benefits and only strengthen the relationship with each other and their audiences,” he added.
Different From Crypto Money
NFTs and cryptocurrencies are both based on blockchain that uses similar innovations and standards. Both draw on a similar target market. But they are not the same.
Think of NFTs as a subsidiary of crypto, meaning they can be traded and sold but with a cryptographic form of money. In their most basic context, NFTs are a unit of data stored on the blockchain in the form of a digital ledger that can be sold and traded, explained Varma.
The main distinction between the two is indicated in the name. Cryptocurrency is a currency, and that means, just like other currencies, it is fungible and only has monetary value, he clarified.
Essentially this means that with crypto, it does not matter which tokens an owner has. It will ultimately have the same value as the next one, and so forth. An NFT’s value comes from its uniqueness and the fact that it cannot be equally replaced with something else.
Non-fungible tokens are not a type of currency that serves as an equal exchange among all holders. Instead, each NFT is unique to each individual who owns it.
What’s the Difference?
That difference may lack a distinction to some people. Consider this comparison, suggested Varma. Cryptocurrency, like bitcoin, is fungible. An individual can trade one bitcoin for another and will still have the same coin.
However, NFTs are a one-of-a-kind trade that is non-fungible. So if you traded one NFT for another, it would be completely different.
Still not finding that difference to have a distinction? Perhaps a rundown on how NFTs actually work in transactions will blow away the fogginess.
How NFTs Work
At a very high level, most NFTs exist on the Ethereum blockchain. Other blockchains can also implement Ethereum’s versions of NFTs, but for the most part, Ethereum is where most of them live, according to Varma.
Ethereum is a cryptocurrency but supports NFTs by storing extra data that allows them to work differently than an ETH coin, he noted. NFTs are individually authenticated, verifiable, and non-interchangeable digital items.
Complete with unique identification and metadata, they are genuine one-of-a-kind objects with only one official owner at any given time. They are bought, sold, and traded with this at play, Varma added.
Understanding the difference now? Let’s dig deeper.
Brands and influencers are willing to invest in NFTs, even at this early stage, because they help boost the user experience, increase brand awareness, and expand opportunities for brand engagement. Why the adoption has picked up so much speed takes a few reasons to answer.
Brands can utilize NFTs in mobile advertising campaigns, which can be distributed strategically across different digital outlets, and monetized numerous times, noted Varma.
The ultimate usefulness is giving both brands and influencers the ability to create unique content that is capable of being monetized. This, in turn, enables followers to own a unique collectible piece.
“The NFT market is not just an option for those who are internet-savvy. NFTs hold the key to creating a widely accessible and transformative market for all individual creators. Even though the accessibility is high, the awareness and relevance of NFTs are still relatively low for the everyday consumer,” Varma offered.
One way to ensure widespread adoption is to have the NFT market be saturated with content that provides relative value to the market itself.
After the pandemic, and with the digital transformation, individuals are now ready to participate in the types of technology that allow for instant, easily accessible, peer-to-peer sharing, he said.
So that is the point of NFTs.
Point Taken, But Why Do We Need Them?
That answer, suggested Varma, depends ultimately on whether you are a creator or a consumer.
Follow along to understand better Varma’s reasoning on this point.
For creators, NFTs serve as an option to sell unique work to a market that has never existed before. It also allows for more awareness and visibility of the corresponding product than ever before.
“NFTs also have a feature that creators can enable which pays them a percentage every time the NFT is sold or traded, ensuring that if the creator’s design becomes popular, they will reap some of the benefits,” explained Varma.
Consumers want NFTs for several reasons. First and most apparent, buying art allows you to financially support artists and own designs you like while retaining fundamental and unique usage rights.
Plus, you get the fantastic bragging rights of owning your unique NFT. However, suppose consumers wish to take the investment route.
“In that case, NFTs can also work like any other art asset. The consumer purchases the piece with the hopes that the value will continue to increase, and one day it can be traded or sold for a profit,” he said.
Wait, There’s More
NFTs are starting to usher in a new form of social commerce that empowers creators, consumers, and brands, added Varma. They allow small businesses to harness public blockchains for producing digital goods.
This ability can be delivered instantly to a crypto wallet. An NFT is a one-of-a-kind digital object that serves as an authentic way for customers to make a profit from the retail platform.
Here is how NFTs empower brand and influencer relationships, according to Varma, it comes down to possibilities.
“The possibility of what an NFT can be is always growing and has already enabled many creators to flesh out their own innovative ideas. This creates an opportunity for brands and influencers to work together like never before,” he said.
From videos to virtual houses, music, artwork, online races, and digital collectibles, NFTs continue to grow in originality and type. Additionally, the number of marketplaces that sell NFTs is only increasing, meaning all of this is just the beginning, he predicted.
“The most significant takeaway for brands and influencers is that NFTs are not simply a recent trend or the latest fad. They are impressive digital entities that exist solely in the digital ecosystem but supply value in the real world.”
As our culture becomes more and more focused on digital, NFTs will increase as organizations and people use them as investment opportunities for the new virtual climate. While most people may still favor physical assets the most, NFTs are the way of the future, he added.
Whether a virtual collectible, music selection, or digital piece of art, NFTs allow both brands and influencers to join together in a unique way to leverage both digital content and intellectual properties.