NFTs. But what does it mean for you, your work or your business?

You must be thinking while rolling your eyes with a healthy dose of scepticism - “Here is yet another article about NFTs”

And I know what you’re getting at - with nearly every person and their dog talking about it right now.

Even then it feels like you’re getting sucked into a vortex, and even if NFTs probably still needs another 5 odd years before they get mainstream (I hope this ages well), we need to make sure we still take a moment to think about all of this. Something about seeing the forest for the trees.

With my business hat on - the question I ask myself is What is the ‘so what’? How will this new trend create change (if at all) for businesses in the future?

Before you read on, I’m going to assume the following about you…

1. You believe that blockchain, although still early days, will have significant implications in how businesses and economies operate in the future

2. You believe that individual consumers are taking back their power from companies and are dictating what is important and how companies should behave

3. You have some basic knowledge about what is blockchain technology and its promise

If that so, let’s dive a little deeper into this.

Let’s quickly summarise what exactly is an NFT and the blockchain?

I’ll try and not go into too much detail as there is a tonne of articles explaining it, but an NFT stands for Non-fungible token and it is one of many things born out of blockchain technology.

If you put aside the cryptocurrency aspect for a moment, blockchain had many promises to the business world when it started gaining traction a few years ago. The idea of a decentralized record that was immutable and transparent created news ideas such as combatting global wine fraud, tracking and transparency of the supply chain and challenging traditionally intermediary organisations.

However, these use-cases have yet to really break-out to be industry-changing. In many scenarios today, it's often used as a fancy database with the blockchain label slapped on it.

But right now, we are on the cusp of something new. Something novel. And something that just might shake things up.

The idea is that each NFT token (a bunch of unique letters and characters that you can transact, store and print) that lives on the blockchain is intrinsically attached to a specific asset, whether it is physical or digital.

As each NFT is unique, it equally makes the asset that it's attached also unique.

A quick example

Let's say you have a pair of sneakers. They are of a rare model and make, or have been worn by someone famous. This pair of sneakers, because it is unique, scarce and desirable by others have value. Its context creates value in the product.

Now imagine that these sneakers were digital. I know it’s a stretch… but stay with me. If what a virtual sneaker could be made unique, scarce and desirable by others. It should then also have value.

But, in the physical world, you can manufacture one product and make it unique. You can’t do that in the digital world - we can infinitely duplicate files and share them.

This is where NFTs come in. As an NFT is always unique and cannot be tampered with as it’s on the blockchain if it is attached to that virtual sneaker, then that, in turn, makes it unique. Once it is unique, it now has value.

Okay Will, but that doesn’t stop me from taking a copy of that virtual sneaker.

Yes, that is correct, but your copy won’t be attached to the NFT. Hence, it is not the original. It is not the same. And people want the original.

This is how NFTs have paved the way for digital art. Where it created context and narrative scarcity of digital assets.

But there is no reason why this has to stop with art

So what does this mean for you and businesses as a whole? My current perspective is that NFTs have a lot of undiscovered potentials and we are just starting the scratch the surface of it.

I believe this is the case because I believe NFTs is critical to enabling the ultimate use case - the creation of a truly persisted virtual world that runs in parallel with our physical world. Some might call it the metaverse. Just as I own everything lying around on my table right now, NFTs will create ownership of everything in that digital world.

Now, that might be quite far away but if that’s the end game, then there is bound to be plenty of opportunity between digital art and the metaverse.

To start characterising and exploring what might be enhanced through NFTs is to ask yourself the following questions:

1. How will creating product and asset scarcity create new value to my product or service?

2. How will the ability to identify a product’s history create new value beyond today?

3. How will creating ownership to individuals create new opportunities?

Here are some examples that I am excited about, but I am keen to hear some of your ideas as well

As an individual… NFTs can be a new investment asset class. Similar to the physical world, as the digital world becomes more mainstream we will start to buy digital things that will be owned and consumed by our digital selves. Made even more important as our physical and digital selves continue to blend together as one.

Still sceptical? Maybe 15 years ago, I spent a lot of time playing Ragnarok Online, an online multiplayer game. This game had its own economy. I bought items from others for cheap and sold them at a higher price at different locations - location arbitrage. Using this money, I bought scarce, fashion items that serve as a symbol of status. People also sold rare items for real-world money.

Fast forward today, people pay good money for Fortnite skins and have started buying digital real estate as investments.

As a brand… NFTs may have some very interesting use-cases here. But the one I think we will start to see first is creating a form of scarcity of access.

Imagine a limited number is NFTs circulate around and your most loyal fans, who own the NFT, have exclusive access to you, your company and/or your content. It'll be like loyalty and membership but in a market place. People will pay to gain access. What people will pay will adapt to the value of the access.

Brands could even put in place mechanisms such as getting a small percentage when the NFT changed hand. Incentives the brand to create exclusive content that is in demand.

As a retailer… minting (creating) new NFTs can create a new offering and generate new revenue for retailers. For instance, taking inspiration from digital art and collectibles, retailers can self-create digital collectibles of their products and services and drive new revenue from this scarcity.

A designer label would be able to digitise and commercialise its early assets such as concept arts and create ownership of it. The value of the concept art would rise if the value of the final product rises. This might be akin to owning film scans from a famous movie.

As a manufacturer… NFTs can be used to significantly bolster the management and sharing of assets.

Imagine an aircraft manufacturer with expensive and highly mission-critical parts used in aircraft across the world. As aircraft parts and aircraft are sold and move over time, the maintenance and ownership history of parts become critical in understanding the whole picture. Whether it’s to understand part safety or its resell value.

Building on this, aside from location and ownership, imagine other data points such as max and min operating temperature data baked into the NFT. One can quickly see how a robust and transparent breadcrumb of high impact goods is extremely important.

As an entertainment provider… As new blockchain ecosystems and worlds are emerging, there is an opportunity for entertainment providers to tap into the local economies of these digital worlds.

For instance, Decentraland is a blockchain-enabled virtual reality world, where individuals can purchase land and build on top of that land. Running on cryptocurrency, entertainers can create games, casinos, events and much more in these worlds and charge a fee.

In addition to providing a service, providers can create NFTs merchandise to generate other sources of revenues.

As a financial entity… at its core, NFTs is about verification of ownership. This could be extended to digital identity on the blockchain, where you yourself is the NFT.

Now, it may not be traded or changed hands like digital art, but your public record is a powerful identifier for yourself. With issues of fraud and identity theft, this would be wildly beneficial. However, there is a fine line to walk when it comes to privacy.

So what do you think? What would NFTs and the blockchain more broadly enable as we move towards a new world that tightly blends the physical and the digital?