What The Future Holds For NFTs – And How Brands Are Leveraging Them

Blockchain, News, Opinion | April 21, 2021 By:

Talk about odd bedfellows; whoever thought artistic works would ever be associated with blockchain technology? And yet this unlikely union, introduced to the world in the form of “non-fungible tokens” (NFTs), is making an impact in the digital art world, pop culture, brand marketing, and how the market establishes value on the ownership of art pieces.

If you’re still new to the concept, here’s a primer:

Let’s look at the etymology of the term “non-fungible token.”

  • The word “fungible” means anything that can replace (or be replaced) by an identical item.  Currency makes a great example. Someone hands you a hundred-dollar bill one day, the next day, you give them that or a different hundred dollar bill. The hundred-dollar bill is a “fungible” item because the value is the same even though the physical object is different.
  • “Non-fungible,” therefore, means a singular item that cannot be replicated—or replaced. Like a rare coin or postage stamp, the irreplaceable nature of the item translates to the non-fungible item (or rather, “token”) as being of high value. So, a “non-fungible token” (NFT) is something that is literally a one-of-a-kind item – the way many people might value an original painting or a rare rookie baseball card.

Because NFTs are cryptographic assets, each bearing a unique identification code, the NFT can’t be exchanged at equivalency – simply because it’s truly one-of-a-kind.  Thus, NFTs are versatile in that they can represent any item: artwork, music, video clips, thought leadership content, or even personal identity.

NFTs Allow For Original Digital Art Ownership

While anyone can copy a digital file, the NFT ownership of that work cannot be replicated. In many ways, the concept is equivalent to that of owning an original painting, even though reproductions are available on the market. NFTs allow an interested party to claim actual ownership of digital art works, which is why NFTs can command astronomical sales prices.  This is good news for digital artists, who, for many years, have been undercompensated for their work, merely because digital art is so highly and inexpensively reproducible.  With NFTs, a wealthy collector pays for the right to “own” the original.  It’s essentially the ability to purchase very expensive “bragging rights”.  It also affords them the right to sell that ownership – when the asset appreciates (or doesn’t).

NFTs and Marketing

How does all this relate to brand marketing? Simple. While we use the “ownership of a priceless piece of art” example to explain how NFTs define their value, that isn’t the only way an NFT can be used.  For savvy brands, rewarding customers with NFTs may actually be an inexpensive way to build brand loyalty and awareness – retaining some customers while attracting others.

Think of it like the Pokemon cards phenomenon.  The cards were inexpensive to produce and had no inherent value in and of themselves, and yet they commanded top-dollar during the peak of their popularity.  Similarly, brands can establish cheap-to-produce NFTs and then offer them (and the inherent value that comes with ownership) to their customers.

NFTs open up countless new ways to engage and interact with customers, by offering them ownership to one-of-a-kind branded assets.  For loyalists, these assets will have value as collectibles and further cement a relationship with the brand. 

The Emergence of Secondary Markets

Taco Bell recently made available a series of branded digital tokens to its customers for a very low, entry level, price.  Those in the know about NFTs quickly gobbled these collectible tokens up, while the rest of us were sitting there scratching our heads.  

This has actually led to some person (or persons) to corner the market on Taco Bell NFT tokens, which has created a very lucrative secondary market for those looking to sell ownership rights to these now hard to come by items. And clearly no dummies to the crypto economics, Taco Bell made sure they received a small percentage of secondary sales – in perpetuity – so the brand has not only rewarded its customers and raised brand awareness, it’s reaped ROI during the process as well.

Dutch Tulip Bubble Anyone? 

Are NFTs the cryptocurrency future of art and digital marketing worlds?  Or is this a passing fad, like a Pokemon or Cabbage Patch Doll craze?  It’s hard to tell. But one might assume that NFTs, once more established, will become less volatile – and a more stable and standardized way of valuing art and brand association.