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.
Soo we have @Nike jumping into Metaverse too. Told ya, 2022 is going to be huge. ?
Learn everything you can about NFTs and Metaverse NOW. https://t.co/u9T4zjt2Nm
— Adel (@AdeldMeyer) December 13, 2021
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.
As a customer—
Loyal brand customers are not that diff from sports/music fans & NFTs can level up in a similar way based on purchases, referrals, UGC, etc
Brands can then reward holders based on NFT level w/ free gifts, early access, events etc
(Not to mention brand tokens ?) https://t.co/cSFiBhGg3y
— mags.eth ⬇️⬇️ (???) (@magdalenakala) December 29, 2021
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:
NFT trading volume surpassed $13 billion in 2021 https://t.co/hQuerLCVIa
— Mack Collier (@MackCollier) December 28, 2021