Non-Fungible Tokens (more commonly known as NFTs) are virtual assets such as art, which are bought and sold online, often using cryptocurrencies.
They have gained a huge real-world following, thanks to the hefty price tags, sensational headlines in mainstream media, and the creation of NFTs by global household names like Coca-Cola who recently created and sold NFTs in an online auction worth $575,883.61.
However, most of us still only have a basic understanding of what NFTs are, how they are created, bought, and sold, and what this might mean for the future of virtual merchandise.
If you fall into this category, but want to know more about NFTs then this blog is for you…
NFTs (Non-Fungible Tokens) are digital assets which represent a real-world object.
For instance, Jack Dorsey’s (Twitter’s boss) first Tweet sold for £2.9million last year, while artists such as Damien Hirst sell digital art creations via online auctions, which some commentators say have been reminiscent of a ‘digital’ gold rush due to the hype and hysteria surrounding sales.
These NFTs are often one-of-a-kind works of art or creations, with unique identifying codes (created using blockchain technology as with most cryptocurrencies) creating a form of scarcity which may inflate prices but also gives owners the opportunity to own the original item.
NFTs are becoming increasingly popular, and many international brands are now creating specific digital products marketed as NFTs.
Buyers might own a Coca-Cola jacket which their avatar can wear in the Metaverse or purchase Emirates airlines “brand experiences in the metaverse, alongside both collectible and utility-based NFTs” which are designed to function in conjunction with Web3 and enhance customer experience.
The possibilities really are endless.
While Non-Fungible Tokens hold their value in their scarcity, many brands are looking to incentivize digital asset sales through the creation of ‘utility’ NFTs.
These utility NFTs are essentially digital assets which have some ‘real’ or perceived value in the real world.
For instance, when auctioned, the virtual Coca-Cola jacket mentioned earlier, came with a real-life retro Coke fridge, stocked with the brand’s leading beverages, and the proceeds of the sale were given to charity.
The gaming industry has been one of the leading proponents of utility NFTs with in-game purchases linked to character development, accessories, and products.
Gamers can ‘buy’ or earn virtual products for their avatars then sell these to other gamers via the game’s marketplace for real money.
Utility NFTs offer an opportunity for community involvement, encouraging purchases with real-life perks such as concert tickets, special merchandise, or unique artwork – there is an added layer of value for purchasers.
Linked to the Metaverse and Web3, the future of NFTs is difficult to predict.
Similarly, most NFTs are unregulated as yet so risks can be high.
However, most countries are now looking at ways to regulate cryptocurrencies, and for some individuals, the decentralized nature of NFTs offers a viable alternative to copyrights, especially artists and others creating unique works.
Many international brands are already heavily investing in NFT creation, so it looks like the future of NFTs is assured, in one form or another.
More information on the role, value, and risks of NFT projects is obtainable from our Intro to Non-Fungible Token (NFT) course.
The course covers the follows areas in depth and is designed to assist firms or individuals in understanding NFTs and their uses:
• Define the fundamental technology and human elements in the NFT ecosystems
• Explore the design of existing use cases mapped to the Utility NFT Framework
• Recognise the role, value, and risks/controls of utility NFT Projects as they operate in the new decentralised economy
• Identify the steps and journey in designing and launching an NFT project