Since the blockchain boom, NFTs are the latest crypto-currencies that are generating the most debate in the tech industry.
In this article, we will explore this recent phenomenon and study its impact on your business.
What are NFTs?
NFTs (Non-Fungible Token) are digital tokens that represent real-world objects such as art, music, gaming accessories, and videos. They are bought and sold online with crypto-currencies. The Ethereum blockchain, which is the second most popular crypto-currency after the bitcoin, is used to buy NFTs.
Ethereum was designed as an account management system to set up smart contracts that transfer ownership of NFTs from one person to another and to justify ownership of an asset and its authenticity.
More and more digital artworks are now sold as NFTs. These tokens can be purchased for several reasons: as a financial investment, as a collector’s item, or for sentimental value. NFT buyers may also simply see it as a way to feel more connected to the creator or brand involved.
How to create an NFT?
If you have digital content that you want to sell, you can go to platforms like OpenSea or Valuables by Cent. After following a simple process, you can create your own NFT and sell it to interested buyers.
The process of creating NFTs for physical assets is a bit more complex, but there are specialized platforms currently working to facilitate these transactions through Ethereum’s ERC721 token.
When it comes to digital assets, here are a few items that can be turned into NFTs:
- Digital artworks
- Jpeg images
- GIFs
- Videos
- Tweets
- Etc.
Paying to own a tweet may seem surprising, but this idea seems to interest more than one if we refer to the incredible story of the sale of Jack Dorsey’s first tweet. Indeed, in March 2021, the founder of Twitter auctioned the tweet below to sell it in NFT:
just setting up my twttr
— jack (@jack) March 21, 2006
Several entrepreneurs working in the field of crypto-currencies were willing to spend a lot of money to acquire the very first tweet on the Twitter platform. This tweet as NFT was eventually sold for $2.9 million. This story is a perfect example to illustrate the madness and fervor that NFTs can generate.
How do we explain the inconceivable values of NFTs?
Value is subject to speculation and hype. The seller can set any starting price they want. It is up to the buyers to decide if they want to pay that price for the asset.
Scarcity also plays a role in attracting customers. The rarer an offer is, the more attractive it is. An NFT allows the buyer to own the original item. It contains built-in authentication that serves as proof of ownership. Collectors value these “digital rights of possession” almost more than the object itself.
NFTs have the following advantages:
- “Tradability”: Because of their unique value, NFTs can be traded without difficulty on any platform.
- Traceability: Because non-fungible tokens are based on blockchain technology, a purchase can be traced back to the original owner, ensuring the authenticity and uniqueness of a digital creation.
- Reliability: Non-fungible tokens are created using blockchain technology and operate in a decentralized ecosystem. Therefore, there is no central authority or third party involved.
How do NFTs impact the e-commerce sector?
As we explained in our previous article on e-commerce in the Metaverse, as people begin to explore the digital world, they also want their avatars in these digital landscapes to own the same or better products than they own in real life.
So, by pairing NFTs with physical products, brands have a new way to appeal to both early adopters of the Metaverse and traditional shoppers who only care about owning the real products.
Nike is among the brands that have begun to adapt this digital world to their business strategies. Nike has obtained a patent for a line of NFT-based sneakers called “Cryptokicks.”
By building its blockchain system, Nike combines real sneakers with an NFT version, so customers have the joy of using the real product while enjoying the use of their purchases in unique ways, like digital works of art.
The fashion and art sectors are also pioneers of NFTs, as evidenced by the significant investment and participation of other major brands such as Balmain and Gucci.
Balmain’s CMO, Txampi Diz, believes that NFTs are an important part of the company’s future: “The most important element of these projects is to tie NFT and everything digital to a physical experience.
That’s a perfect example of how I see the future of NFT.” As such, the brand just launched the latest NFTs as a group buy with a new line of sneakers, retailing at $1,069 per pair, with the signature of the brand’s Creative Director, Olivier Rousteing.
As for Gucci, given its experience with virtual fitting to capitalize on the AR and VR trend, its digital-only products seem like the next logical step. Gucci’s sneakers are only $12.99 a pair, which is a much more affordable way to have vintage Gucci products in virtual reality.
As trading capabilities unfold, the value of limited products is likely to increase (as is the value of real-world designer items). So, it’s a case to watch.
Despite the popularity of e-commerce, one element that will never rival the traditional store experience is the ability to purchase a product immediately. Even as consumers demand same-day delivery, companies are striving to create frictionless experiences and meet tight delivery times.
The rise of NFTs allows consumers to meet this need. When they decide to purchase a tangible product with a virtual NFT, customers immediately own those products, even if they have to wait several days to receive the actual item.
While it seems like a far-from-achievable idea at the moment, the principle of offering products that have no shipping or storage costs excites merchants around the world because they can increase the breadth of their product catalog while increasing their profit margins on each sale.
NFTs can verify the authenticity of a product sold on an e-commerce site. For example, any customer buying an expensive luxury item, such as a Chanel handbag or a pair of Christian Louboutin heels expects it to be authentic.
With the rapid evolution of technologies and practices that allow for the creation of true-to-life counterfeits, differentiating real items from counterfeited ones can be quite tricky, even for experts. That’s where NFT’s blockchain-based verification systems come in.
With a digital certification that can’t be altered, erased, or misplaced (unlike a physical card), NFTs help maintain the value of your product by adding an extra degree of luxury with an NFT.
If apparel were also accompanied by an NFT acting as a personal signature and deed of ownership, the perceived value of the items would increase and the fight against counterfeits could see the light at the end of the purchasing funnel.
NFTs are revolutionizing our world and our buying behavior. It’s a trend that will for sure impact the customer journey in the years to come, so as a brand, you need to be prepared. If you need more information, don’t hesitate to contact Eminence.