And Then There Were NFTs
If you take nothing else from this post, take this. The pace of innovation is accelerating, and if you blink, you might miss something important. Case in point, at the beginning of 2021, most people had never heard of NFTs. But at the time of this writing in March 2021, it’s hard not to have heard of them.
Over just a couple of weeks, seemingly endless dumbfounding headlines have been shared across news outlets and social media flaunting, propping up, and critiquing the astronomical prices suddenly being paid for what, on the surface, appears to be digital copies of art and internet memes. We’re talking about many of the same images that are freely shared and downloaded across the internet.
So what gives?
Why are NFTs suddenly worth so much money? Where did they come from? And, in the world of brands, should we be paying attention? The answer to the first two questions is “it’s complicated,” and the answer to the last question is “definitely, yes.”
Before we dig into the implications of NFTs for brands and potential future use cases, let’s do a quick primer on what NFTs actually are.
The term NFT stands for “non-fungible token.” Fungible means mutually interchangeable. Think money, where a dollar...is a dollar...is a dollar. But, a piece of art holds different values depending on who’s looking at it, and not all art is identical.
The token part has to do with the blockchain. Cryptocurrency is tracked through a blockchain, a public ledger that documents where every coin appears and moves as it’s traded or purchases are made. The same goes for NFTs that are also tracked through a blockchain.
Essentially, NFTs (non-fungible tokens) are tiny contracts that get “minted” onto a blockchain and contain little details like the link to a digital file, and who owns it when, and it changes hands. At its core, that’s it. When Grimes is trending on Twitter for selling 6 million dollars worth of NFTs in a day, it’s really just tiny ownership contracts that she’s selling. The value is in the scarcity, in the ownership contract, and most importantly in the patronage. In large part, the recent NFT craze has served to give value to artists who have created in the digital realm for years without much way to earn income outside of freelance commissions, and online shops.
But, while NFTs have hit the mainstream in recent weeks, they’ve actually been around for a few years. The first real experiment into NFTs came by way of punks and kittens...sort of. Cryptopunks were one of the first NFTs consisting of a series of 10,000 unique 8-bit heads.
They were given away for free, and now fetch tens of thousands of dollars in trades. CryptoKitties, a sort of digital trading card game, came out shortly after with some added features, and they too command high dollar trades today. Since then, NFTs have been slowly picking up steam with new marketplaces coming online and big-name artists jumping onto the platform.
As of now, there are at least half a dozen marketplaces positioning themselves to be the go-to spot for buying, trading, and housing these NFT collections. While some marketplaces like SuperRare and Nifty Gateway are exclusive about who they let in, others like Open Sea and Rarible will let just about anyone sell their digital wares via NFT.
And NFTs, remember, are just digital contracts. So, they aren’t limited to digital art. Jack Dorsey, the founder of Twitter, is auctioning off an NFT of his first-ever Tweet. People sell land parcels in virtual worlds, and the band Kings of Leon is claiming to have released the first NFT album with special benefits and features for those who bought in. In this example, there are still physical goods delivered to the buyers, but the purchasing experience is completely different.
How Do Brands Get Involved
With this much hype over such a short period of time, it’s no surprise that brands have already started to insert themselves into the NFT crypto culture. One of the first to act was Taco Bell. While it might seem like a quick cash grab or a cheap attempt at PR, it’s actually pretty on-brand Taco Bell. They know their audience is younger, likely spending a lot of time online, and perhaps needing a late-night snack while perusing digital artifacts. And, they donated the profits, of course.
There are, no doubt, countless other brands weighing options right now for jumping on the NFT train, and that’s understandable. But, the lasting effects on your brand in the burgeoning “metaverse” will come from making the right decisions now.
The giant buzz in the NFT world today is largely circling around digital art pieces, images and short video clips. But, we are only at the tip of the iceberg here. So, supporting artists through grants or commissions is great for getting involved in the community today.
But, maybe digital art isn’t what your brand is really about. And, that’s okay. We’re already starting to see custom digital wearables like those made by RTFKT Studios, that can live in your image gallery and be worn by your avatar in new blockchain-enabled worlds like Decentraland and The Sandbox. The latest NFT release from RTFKT is in partnership with Atari, a brilliant fit for the brand that helped launch the digital gaming revolution.
Over time, we’ll see more and more things get minted onto the blockchain, like event tickets, coupons to redeem physical goods, and every sort of digital IP imaginable. There will be fads, just there are in the real world. But, there will be plenty of lasting effects as well. And, now is the time to start exploring where your brand fits into all of this.
A Fad or a Movement
While there have been some unimaginable values put on digital works recently, and while some of that value will never be recouped, what we are seeing now is a collective creation of the idea of real-world value for digital goods. Not just goods created in the real world and digitized, but goods that only exist in the cloud.
Cryptocurrency is starting to find its place, not just as a flashy investment strategy, but as the future of currency, at least in the digital realm. And, while there are many competing standards and lots of hurdles to overcome, it seems more and more likely that we will all have crypto wallets someday that we use as frequently as our regular wallets, if not more.
There is a thriving community of creatives and developers eager to build upon this foundation. There is a lot of venture capital money being poured in, for better or for worse. And, the general giddiness and excitement from people watching all of this unfold is palpable. In fact, the definition of palpable is the perfect way to describe the feeling of scoring your first NFT - so intense as to seem almost tangible.
It appears that we are on the cusp of a paradigm shift in the digital economy, are you ready to jump?