How NFTs Work — and How They Could Prove Profitable for Your Business

Please fol­low and like us:
Pin Share

Opin­ions expressed by Entre­pre­neur con­trib­u­tors are their own. 

2022 was an inter­est­ing year for NFTs (non-fun­gi­ble tokens), to say the least. This was the year that saw pub­lic knowl­edge of NFTs go beyond Bit­coin and oth­er cryp­tocur­ren­cies to the field of dig­i­tal col­lectibles, such as art and photographs.

But while buy­ing art and oth­er col­lectibles may be get­ting most of the atten­tion from the gen­er­al pub­lic, they result in some of the more prac­ti­cal (and prof­itable) busi­ness appli­ca­tions get­ting over­looked. In real­i­ty, NFTs can have a vari­ety of prac­ti­cal appli­ca­tions that help orga­ni­za­tions achieve their exist­ing busi­ness goals.

First things first: How do NFTs work?

NFTs are is cryp­to­graph­ic assets that are based on blockchain tech­nol­o­gy. The non-fun­gi­ble aspect is impor­tant, as it gives NFTs dis­tinc­tive prop­er­ties that mean they can­not be replaced or repli­cat­ed. They are unique, and can’t be manip­u­lat­ed or forged. Most often, we see NFTs in con­nec­tion with dig­i­tal assets, such as art, sports cards, games and oth­er col­lectibles, where the blockchain pro­vides a cer­tifi­cate of authenticity.

NFTs can be bought and sold on the mar­ket, with pric­ing based on mar­ket demand, just like a phys­i­cal prod­uct. How­ev­er, the unique data that is part of the NFT makes it easy to val­i­date own­er­ship and ver­i­fy the authen­tic­i­ty of the token.

NFTs are also used to rep­re­sent own­er­ship details, mem­ber­ships and more — and these var­ied use cas­es have proven key to busi­ness applications.

Relat­ed: Here’s a Begin­ner’s Guide to Cryp­to, NFTs, and the Metaverse

Linking digital tokens to physical benefits

One key to gen­er­at­ing busi­ness growth via NFTs is link­ing the tokens to a phys­i­cal, real-world prod­uct or expe­ri­ence. As the report Brands in Web3 Q3 2022 by NFT Tech high­lights, fash­ion brand Tiffany & Co. was able to turn NFTs into a set of exclu­sive phys­i­cal goods. The com­pa­ny part­nered with Cryp­toP­unks to cre­ate an exclu­sive line of 250 “NFTiffs” pen­dants. Priced for 30 ETH (rough­ly $50,000 at the time), the unique pen­dants sold out in 22 minutes.

Anoth­er exam­ple comes from the Aus­tralian Open. In 2022, the Aus­tralian Open launched a high­ly suc­cess­ful meta­verse ini­tia­tive of mint­ing AO Art Ball NFTs that linked to data from live match­es. This was paired with vir­tu­al­ly host­ing the Aus­tralian Open in a 3D vir­tu­al real­i­ty plat­form to pro­vide an unprece­dent­ed lev­el of access to one of ten­nis’s largest events.

While the ini­tial launch was suc­cess­ful in and of itself, the Aus­tralian Open’s com­mit­ment to this NFT ini­tia­tive is poised to be even greater in 2023, with the announce­ment that hold­ers of each Art Ball NFT will receive two com­pli­men­ta­ry sev­en-day Ground Pass­es to AO23’s finals week. Art Ball hold­ers also gain access to addi­tion­al exclu­sive expe­ri­ences, such as streams and view­ing suites through the “Super­Sight” fan expe­ri­ence and access to oth­er Unit­ed Cup matches.

With both Tiffany & Co. and the Aus­tralian Open, link­ing NFTs to real-world prod­ucts or expe­ri­ences proved to be a high­ly suc­cess­ful method for deep­en­ing rela­tion­ships with their tar­get audience.

In addi­tion, when NFTs are used in this way, they invite mass mar­ket par­tic­i­pa­tion, turn­ing fans into finan­cial­ly-incen­tivized brand ambas­sadors who enjoy a high lev­el of util­i­ty — and of course, can seam­less­ly trade their dig­i­tal assets for real-world cash.

Relat­ed: Putting the Intan­gi­ble Into Your NFT Project

Reaching new demographics

NFTs don’t just help brands strength­en rela­tion­ships with their exist­ing cus­tomers — quite often, they can prove key to reach­ing a new audi­ence entirely.

Case in point: For quite some time, cloth­ing brand Polo Ralph Lau­ren has seen its pri­ma­ry cus­tomer base large­ly con­cen­trat­ed among old­er adults, while younger demo­graph­ics like mil­len­ni­als and Gen Z have been less inter­est­ed in the cloth­ing brand.

In 2021 and 2022, how­ev­er, Ralph Lau­ren made a full-fledged com­mit­ment to dig­i­tal ini­tia­tives such as NFTs and the meta­verse. These includ­ed launch­ing a “phy­gi­tal” fash­ion col­lec­tion in Fort­nite, as well as an exclu­sive dig­i­tal cloth­ing con­nec­tion through the game Roblox.

These dig­i­tal­ly-focused efforts were a major suc­cess for the brand. As report­ed by Vogue Busi­ness, Polo Ralph Lau­ren saw its third-quar­ter rev­enue increase by 27% after the launch of its Roblox col­lec­tion — with that growth large­ly dri­ven by a 58% increase in the acqui­si­tion of new dig­i­tal customers.

In this case, strate­gic imple­men­ta­tion of dig­i­tal assets allowed Ralph Lau­ren to reach a younger tar­get demo­graph­ic in meta­verse-style spaces where they would have the great­est appeal and poten­tial impact.

When done right, NFT ini­tia­tives can help revive sales and rein­vig­o­rate a brand’s image, mak­ing it more rel­e­vant and appeal­ing in today’s com­pet­i­tive market.

Using NFTs wisely for your business goals

As these exam­ples illus­trate, the poten­tial use cas­es for NFTs go well beyond sell­ing dig­i­tal art. With a strate­gic approach, busi­ness­es can use NFTs to find new ways to engage with younger, more tech-ori­ent­ed demo­graph­ics. NFT-based projects can help posi­tion your com­pa­ny as an inno­va­tor at the fore­front of dis­rupt­ing the marketplace.

That being said, any busi­ness invest­ment in NFTs should be done strate­gi­cal­ly. Major NFT fail­ures in 2022 gar­nered a lot of media atten­tion, and should serve as a pow­er­ful reminder for busi­ness­es as they enter this space. All invest­ments in NFT should be done with the inter­ests of the end cus­tomer in mind.

When you focus on how your tar­get audi­ence could real­is­ti­cal­ly ben­e­fit from your use of NFTs, you will be able to iden­ti­fy strate­gies that have true stay­ing pow­er, and that will build greater rap­port between your brand and its most tech-savvy customers.



Source link

Please fol­low and like us:
Pin Share

Leave a Reply

Your email address will not be published. Required fields are marked *