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Why Should Your Business Care About NFTs?

Non-Fungible Tokens. Can we all agree that’s the worst name ever?

What does it even mean? And they are selling for millions of dollars??? Suddenly EVERYONE is talking about Bored Apes this and Crypto Punks that.

And you don’t understand any of it. This is the position a LOT of us are in as we begin the new year. NFTs are one of the areas of the burgeoning web3 space that I’ve been trying to wrap my head around for the last few months. In doing so, I’ve been focusing on the potential business impact, ie “Why should your business care?”

What are NFTs

Non-Fungible Tokens. That word ‘fungible’ trips people up. It almost sounds like fungus. Non-fungus token?  Yeech!

Fungible means interchangeable. Think of currency. My dollar is interchangeable with your dollar.  My $3 in Bitcoin is interchangeable with your $3 in Bitcoin.

So it stands to reason that non-fungible means the item is NOT interchangeable. A non-fungible token is unique. An NFT has unique properties and characteristics. You can have two NFTs that are similar, but they will both be different in ways that makes each unique. And when items are unique, that means they aren’t the same, so they aren’t equal. You may have a 1978 Firebird Trans Am, and I may have a 2010 Ford Focus. Both are similar, in that they are both cars, but they are unique cars and as such, they have wildly different values and aren’t considered interchangeable.

Wait, can’t I just copy that JPEG?

Ah the ‘right-click’ theory. That you can easily copy an NFT as an image on your computer and have it as well.

The NFT is much more than simply an image. It is the unique data and provenance associated only with that particular NFT. This is where much of the value of NFTs are derived, and you can’t simply right-click and copy that.

The ownership of an NFT can be verified on a blockchain, as well as its history. We’ll talk more about the business implications of this in a minute. When you right-click that NFT you saw on Twitter, you can copy the image on your computer, but there’s no claim of ownership. For instance, if you wanted to take that image and sell it as an NFT, we would be able to verify that it’s not the same one that already exists, and which has a set value in the marketplace.

Ok, but it’s still just an image, right? I’m still not getting it.

Let’s go back to ownership and the history of ownership. More specifically, let’s go back to The Legend of Zelda.

One of the most prized toys of the 1980s was a Nintendo Entertainment System. I still remember getting that HUGE Sears catalog in the mail in 1985 and seeing that beauty for the first time! I bet a lot of you reading this can remember losing the hours of your youth playing Super Mario Bros, Metroid, Double Dribble, and so many more great games!

Let’s say you and your family are shopping at an indoor flea market. And you walk by a booth with a lot of those old Nintendo video games. You see a copy of The Legend of Zelda sitting there. “Hey!”, you exclaim to your son, “I had this when I was your age! I loved this game!” You see a price tag of $5, and decide to get it. You take your copy home, smiling as you are reunited with your childhood.

I’ve done the same thing. Occasionally over the years I would spot an old Nintendo game at a flea market or store, and I’d pick it up. I’ve accumulated a few over the years, and a few weeks ago as I was going through some old boxes, I came across my treasure trove of old Nintendo cartridges. One of them was The Legend of Zelda. I smiled as I saw the golden cartridge, and flipped it over.

And that’s when I saw it.

Faded, written in black permanent marker were two words: ‘Mack Collier’. That’s when it hit me: This wasn’t a copy of The Legend of Zelda that I had picked up at a flea market, this was actually THE copy of The Legend of Zelda I had owned as a kid! I even remembered why I had written my name on the back of it (in permanent marker, no less!), because at the time I was trading NES games with buddies at school. We would swap games for a week or so, then give them back. Well I traded a game and after a week, the kid I traded with said he had ‘lost’ my game.  I suspected he simply liked my game better and decided to keep it.  So I wrote my name on my copy of The Legend of Zelda to avoid this happening in the future. Ha!

The point in this story is, while there are many copies of The Legend of Zelda game out there in the wild, there’s only one copy IN THE WORLD that Mack Collier owned as a teenager in the 1980s. Luckily, I still have that copy. And my name being written on the back helps verify (at least to me) my ownership, and the record of ownership and the associated story that comes with it. That adds value to this item (at least to me).

The history of ownership helps tell the story of the item (in this case an NFT), and that helps assign value to the piece.

What would be a business example of using NFTs?

Let’s say your supermarket chain wants to start a brand ambassador program. Your program will launch with 100 members. Each member will receive their own, unique and numbered NFT. This will represent their ‘digital identity’ within the program. What the NFT is really doesn’t matter in this example, it’s more about the functionality it enables for the holder. Think of it as an ambassador’s Membership Card that proves they are a member of the supermarket’s ambassador program.

So if you join the brand ambassador program, you are given an NFT that gives you Level One privileges within the program. Additionally, each year you are given 500 tokens that can be used as currency within the program and among its members (Think of these tokens as being similar to Rewards points in a loyalty program).

This is where it can get interesting.  The tokens allow you to purchase items (real and digital) associated with the program and brand. In addition, performing certain tasks can earn you more tokens. Such as signing up for the brand’s newsletter, referring a new member to the ambassador program, filling out a survey, etc.

So what can you do with your tokens?  There are a million possibilities, but for simplicity sake, we’ll focus on three areas:

1 – Use the tokens to buy products directly from the supermarket. Basically, the tokens could replace cash. Or you could use the tokens to buy a discount for a set amount of time, etc.

2 – Sell the tokens to other members. As all members are using tokens to reach certain tiers in the ambassador program, users that have more tokens than they want or need could see their excess to another member.

3 – Using tokens to upgrade your NFT. Remember above that I said when you joined the supermarket’s brand ambassador program that you receive an NFT that gives you Level One privileges? What if you want to upgrade your NFT? Let’s say for 750 tokens, you can upgrade your NFT to give you Level Two privileges. These could include higher discounts, larger token payouts for performing tasks, and more access directly to the brand. This leveling up could go all the way up to Level Five (or Ten, Fifty, whatever). With better perks at each level.

 

The NFT becomes a sort of digital resume or history of that person’s activity within the brand ambassador program. And everyone could trace what the person had done by seeing on the blockchain how the NFT had changed over time. So the activity becomes the ‘story’ of the NFT, and that helps create value for the NFT itself. It’s that ambassador’s digital identity.

You owe it to yourself and your business to learn about NFTs

I started really investing some time in learning about emerging Web3 technologies like blockchains, cryptocurrencies and NFTs a few months ago. At first, I was totally unimpressed with NFTs and focused most of my attention on understanding crypto. But the more I learn about NFTs, the more confident I feel in saying that 2022 will be an even bigger year for the space.

Which would be pretty impressive:

 

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Falling Down the Web3 Rabbit Hole

web3 rabbit hole

In 2008 I got on a plane for the first time in my life. I was a bit nervous as I got on, then we started heading down the runway and I got a little more excited.

Then we lifted off. And we started to climb. As we climbed, I was pushed back in my chair, and I started to get REALLY nervous. I was suddenly struck with the thought that I was about to fall through the bottom of the plane and to my death!

Just then, I managed to look over at the person across the isle from me. It was an elderly woman, and as I am contemplating how many more seconds I have before I fall through the bottom of this plane, I noticed she calmly picked up a magazine and began to read it, not a care in the world.

In that moment I was suddenly struck with a thought: She must know something I don’t. If she was that relaxed about flying on this plane, I probably didn’t have any reason to be nervous either.

I was thinking about that story recently as I’ve begun to educate myself on the emerging technologies that are forming what we are calling Web 3.0 or Web3. A big reason why I decided to learn more about Web3 is because I kept seeing people who are smarter than me, saying that everyone needs to learn about Web3 because it is the future. Just as I trusted that the elderly woman on that plane knew something I didn’t, I decided to trust that these smart people know something I don’t.

What is Web 3.0 and How is it Different From Web 2.0 or Web 1.0?

So each of these periods mean different things to different people and have different start dates. But for the most part, advances in technology, or how we wanted to use that technology, marked the shift from one version of the web to the next.

Web 1.0 – If you were born from say 1970-1985, this is the web you grew up with. This era is generally defined as beginning in 1990 or so, and ending around 2003-2005. This was where everyone was getting their first exposure to the web. This is when you could go to WalMart and spend $70 for the latest and greatest version of Netscape Navigator web browser (yes, we used to pay for web browsers!). The web was a very static place, and often you would see companies launch websites and simply take their offline circulars and put them online. It was difficult, but not impossible, for the average person to create content.

Web 2.0 – This era is the one most of us are familiar with, and it is generally considered to have started sometime between 2003 and 2005. This marked the ‘social’ era of the web, where content creation became much easier. We all suddenly had a plethora of tools to create content, and to also engage with other people’s content. We learned to collaborate easily with other people’s content.

This time period is also known as the centralized era of the web. Because all these wonderful content creation tools gave rise to things like social networks, that facilitated a way for us to all meet with other people easily and easily collaborate with other people’s content.

The problem this created was that the platforms that were built to help facilitate the content collaboration, also took the lion’s share of the profit from the content creators. Every day we went to Facebook and Twitter and created copious amounts of content, that these platforms then took and monetized.  They turned our content into profits, and we got some Likes and Retweets for our trouble.

Web 3.0 – This era of the web that we are transitioning to right now could best be described as the decentralized web.  Web 2.0 was marked by centralization. For instance, we all went to Twitter or Facebook to talk to each other. The platforms were walled off, what you did on Twitter really didn’t work with what you were doing on Facebook. And both platforms took your content and data, and made money off it. Typically, your reward would be a Like or Retweet at best.

Web3 is about decentralizing the web, and shifting power back to the users and builders. It will hopefully be a web where new platforms are built that can compete with existing ones like Twitter and Facebook. But the difference is, the owners will be the users and people who build the networks. If you create content on a Web3 platform that helps grow that platform, then you get compensated, maybe in the form of cash, more likely in the form of tokens or cryptocurrency that gives you ownership in the platform itself. So the people doing the work of building the platform get to share in the growth and profits from that platform.

Additionally, ,these apps will be open source, so if someone builds the next Twitter and someone else builds a decentralized Facebook, the two apps can communicate with each other in way that the current Twitter and Facebook cannot.

I think this is a big reason why we have seen an explosion of efforts by Web 2.0 social platforms to find ways to compensate creators in 2021. These platforms can see what changes will be coming with Web3, and they want to keep creators on their platforms and creating content for them. I honestly think these moves are about 10 years too late.

 

Where Can I Learn More About Web3?

You’re going to see that Web3 has a huge influence over the content I create from now on. As I learn what’s happening, as I start to work with clients on Web3 initiatives, I will be sharing what I’ve learned so we can all benefit.

As I’m learning about Web3, there are three areas I am focusing on; Cryptocurrency, NFTs, and the Metaverse.

So far, here’s some sources I’ve come across that have helped me:

Web3 Twitter List: This is a list I’ve created on Twitter of people who are helping educate us all on what Web3 really is. Please follow this list, I am updating it frequently with new members as I discover new experts who can help us all learn more about what’s next with the web.

Podcasts and Spaces: I am listening to a LOT of podcasts on Web3. I loved this one from Tim Ferriss featuring Naval and Chris Dixon. An excellent introduction to Web3:

 

BTW, I love the passion that the people in this space have for Web3. It reminds me of the early days of blogging, where we all saw the potential and were excited about the future. It feels like we are still in the earliest days, where only the builders and those with the passion for growing a better web are the ones putting in the work.

Sure, there are some Web 2.0 people (even some names most of us would recognize) who are trying to leverage Web3 just as a way to make money. These people are easy enough to ignore.  And besides, if you help build something amazing that helps people, the money will take care of itself.

Web3 offers a world of possibilities for businesses and content creators of all shapes and sizes. If you are reading this post, you owe it to yourself to familiarize yourself with these concepts and ideas, because it’s not going away.  You can learn it now and help shape the direction the future takes, or you can wait 5 years and follow the path someone else has cleared for you.