What Are NFTs and How Can My Business Capitalise on Them?

The first known NFT was minted by the digital artist Kevin McCoy on May 3rd 2014. ‘Quantum’ is a pixelated octagon in which a rapidly changing succession of circles and many-sided figures pulse, expand and fade in different colours. In June 2021 ‘Quantum sold at auction for $1.47 million. NFTs have since become a very big deal.

What Are NFTs?

Any form of digital asset can be an NFT. They are called non-fungible because their unique nature means they cannot be exchanged for another identical item, in the way that, for example, bank notes can. It is their unique nature and consequent rarity that gives them their value. News stories often focus on digital artwork but anything that can be digitised qualifies, including music, video clips and even Twitter founder Jack Dorsey’s first ever tweet.

The other important element is the way in which proof of ownership is demonstrated and maintained. Every NFT has a digital signature which is recorded using blockchain technology, the most commonly used one being Ethereum.

The Business Value of NFTs

Business brands have started to recognise certain properties of NFTs that can be extremely helpful in marketing and encouraging customer loyalty. The self-expressive nature of NFTs makes them an ideal medium in which to make brand statements and they are perfectly compatible with the growing Metaverse.

Their uniqueness and collectibility create value and their ownership promotes a sense of being part of a privileged community. When customers invest in branded NFTs, they are demonstrating a powerful commitment to the brand, particularly in the case of limited-edition NFTs.

Using NFTs in Business

You may think that NFTs are currently the exclusive preserve of mega brands such as Gucci and Nike but while their wealth and status certainly give them the freedom to experiment, there’s no reason why smaller businesses shouldn’t exploit some of these opportunities. We’ve already touched on the notion of limited edition NFTs, so bear in mind the value of this kind of privileged club in building brand loyalty. Here are some other ideas to consider.

If your business involves the creation or sale of physical products then creating virtual products tied to the physical is an excellent way to get started. When a customer buys both, it strengthens their relationship with you but also increases profits, because NFTs cost little to make but can multiply in value. In addition, you can benefit from future item sales through the smart-contract mechanism which makes it possible to claim a percentage of future profits from the NFT.

The Metaverse presents endless opportunities to profit from NFTs since it is a virtual world wherein users are already accustomed to the purchase of virtual fashion, footwear, devices and all kinds of accessories.

The owners of brands of every kind are conscious of the risks of counterfeiting. Cheap copies of quality goods carrying clever imitations of logos and supposedly unique features account for significant lost revenue as well as undermining the integrity of a brand. If an NFT is tied to a physical item, its authenticity and ownership are verified through blockchain and cannot be falsified. This might seem a rarefied concern of interest only to those for whom possessions are trophies or status symbols, but it has many practical applications too, including discount coupons, event tickets, certificates of ownership, licences and many more.

NFTs can make a significant difference to supply chain management, enabling businesses to track and update items at different points in the production process. The source and quality of raw materials as well as the methods of production can be recorded and made publicly visible, guaranteeing that customers are receiving exactly what they pay for. Businesses will also find it much easier to identify any defective products or components that appear in the chain.

These are just some of the uses to which smart small businesses can put NFTs. Yes, the technology is still new and carries with it some uncertainties but NFTs can open so many doorways to increased profitability that it would be wise to start exploring and experimenting immediately.