August 12, 2022
Since the dawn of trade and the widespread use of currencies, the basis for transactions was trust. Most people know that the printed paper in our pockets is worthless, it represents a common idea about abstract wealth since humans decided not to trade item for item.
For reasons of practicality, we adopted printed paper as our form of trust. Since the inception of the internet, though, cybercrime, anonymity and the general novelty of the internet have not led to an increase in trust online. Everybody knows someone who bought something off eBay and never received the actual product, or worse, a counterfeit product. This is about to change forever. Blockchain technology has made it possible to authenticate items, transactions, and now digital art.
Blockchain. Let’s not talk about the details. Essentially, cryptographers figured out how to authenticate items using a distributed ledger.
Let’s say I want to buy my neighbor’s car, we set up a contract on a sheet of paper and then, for security reasons, shoot the paper to the moon, so everybody can see that the car is now mine. After an unfortunate turn of events, the moon crashes into the earth and our contract is ruined. How can I now claim my (once) beautiful car?
Blockchain fixes this problem. In a blockchain, each participant shares the same record of transactions. If a new transaction is made, the whole blockchain gets updated. So instead of having one contract on the moon, we have thousands distributed all over the internet.
NFT stands for non-fungible token. In the real world, a fungible token would be a classic currency like the dollar. Trade $10 for $10 and you’d still have the same $10. NFTs are different in that regard. In the digital realm, NFTs are entries in a blockchain that store the ownership rights.
Yes, you read that correctly: an NFT is NOT a single copy of a piece of art, image, or video that cannot be recreated. In fact, you can search for expensive NFTs and download the same file as the original owner, but the real bragging rights belong to the owner. His name is carved into the blockchain and that makes him the owner of the original artwork.
This phenomenon has led to some rather weird events. One NFT project called EtherRock has made headlines since the NFT of a 2D rock has been sold for more than $100,000. Is this a useful investment? We don’t know. Is this a bubble waiting to burst? It very well might be. But NFTs don’t have to be high stakes. In fact, modern brands are jumping on the NFT train utilizing the most important aspect: the technology.
The use cases are abundant. The magic word is “tokenization”. Practically everything can be tokenized: event tickets, sneakers, properties, wine bottles, cigars, and even academic degrees.
NFT technology can be used to create value for brands in a variety of ways. The NBA has released their digital card game Top Shot, where fans can buy NFTs of famous NBA moments and start a card collection, casually netting $302 million dollars in revenue for the NBA.
Recently, Coca Cola launched an NFT collection: the video of an animated Coca Cola bubble jacket has a listed price of $2.3 million.
The NFT phenomenon lets businesses open a new realm of products: digital products. It seems like ownership creates a strong connection between brands and their audience. Digital artist FEWOCiOUS created digital sneakers in cooperation with Christies and for the first time in the company’s history, the site crashed due to the sheer hype of the NFT’s that dropped that day. Nike has announced an online platform called “crypto kicks”, how and what remains a mystery, however. Is everything digital? Yes, digital sneakers, digital fashion, digital jewelry. Everything can be tokenized, authenticated, and traded using NFT technology.
Will the hype around NFT’s and digital art wear off eventually? Probably, however, the technology around NFT remains relevant in the digital realm, and the use cases can be as diverse and abstract as the technology itself. If you want to find out more about NFT’s and want to create digital fans, please contact firstname.lastname@example.org.