You may remember back in 2004 when Oprah Winfrey on her show ‘Oprah,’ gave everyone in the audience a car. Cue the nostalgic memory of Oprah shouting “you get a car! You get a car!” Fast forward to 2022 where Paris Hilton is on ‘The Tonight Show with Jimmy Fallon’ giving everyone in the audience an NFT. My initial reaction was, “well, I would have preferred the car!” However, according to CNBC, an NFT recently sold in February for a whopping, $23.7 million. So, this begs the question. What is an NFT and why should you care?
First, NFT stands for non-fungible token. The token “non-fungibility” refers to the fact that it is a unique receipt of purchase. Unlike physical consumer products which are mostly interchangeable, except for singular works of art or creativity, NFTs guarantee ownership of a receipt of purchase for a digital asset. These can range from artwork to video clips and even property on platforms like Facebook’s Metaverse.
You will get certain types of NFTs. So, for example, the reason Paris Hilton could hand out multiple NFTs to an audience was because there’s a limited sale number of items. In this instance, I think of it as purchasing an original print from an artist. They may screen print 100 items; however, once all 100 are gone, they can’t be replicated. Therefore, if I purchase 3/100 no one else in the world can own that version. Translate that mentality to the crypto space and you have an NFT.
The Verge helps break it down by claiming that when you purchase an NFT you’re not buying the digital file itself – but the record on the blockchain that stores the purchase record of the file. Who created it, who owns it, and who has owned it throughout its history. This file narration and record of the purchase is what holds the value of the NFT.
Purchasing an NFT
To own an NFT you will need to make this purchase through blockchain and cryptocurrency. However, marketplaces such as OpenSea are promising to become the Amazon of NFTs. According to their website, these types of marketplaces will allow you to purchase without cryptocurrency. OpenSea is currently estimated to be worth around $13 billion.
What Does this Mean for Companies?
Companies are jumping in on the NFT hype and rightly so. It gives them the opportunity to reach new markets, have a hand in the game, and cash in on the brand investment. Here are how some companies are using this to their advantage:
· The NBA has sold a clip of LeBron James dunk for $71,455 with Dapper.
· American rock band, Kings of Leon, released their album, ‘When You See Yourself,’ in the form of an NFT becoming the first band to do so.
· Mattel partnered with luxury fashion houses like Gucci with Hot wheels and Balmain with Barbie. Richard Dickson, Mattel president, and COO shared with Forbes “It’s incredibly meaningful and powerful as we effectively roll out our NFT strategy across Mattel. It’s part of our business and staying relevant.” · As Harvard Business Review reported, Karl Lagerfeld had a limited edition set of NFTs with 77 digital pieces for €177 each. They sold out on the platform ‘The Dematerialized,’ in merely 33 seconds.
NFTs and Fashion Week
Another example of high fashion taking to NFTs is Roksanda. In their recent London Fashion Week (Feb 2022), Vogue Business reported how Roksanda paired up with sponsors Clearpay and the Institute of Digital fashion (IODF) to create a tiered system of NFTs. The NFT itself was through a sculptural geometric print gown that was available for augmented reality (AR) try-on via Instagram and sold in a variety of options the morning of the show. This marked the first time an NFT has been shoppable on a luxury brand website in pounds rather than cryptocurrencies, a game-changer.
How to Break into the World of NFTs
In a recent article from Forbes around NFTs and the future of commercial real estate, Aviva Sonenreich, makes the point that the transaction of an NFT through blockchain adds the benefit of being faster, more secure, and shows a lot of potential in secure document transfer and proofs of purchase. It also reduces the paperwork when transferring property ownership.
While NFTs show great promise, it raises a few flags around regulatory compliance, trademarking laws, and the very concept of ownership.
Companies, Tread with Caution – The Ethereum.
According to CoinDesk Ethereum is a blockchain-based software platform that can be used for sending and receiving value globally with its native cryptocurrency. If you’re interested in investing in NFTs, tread carefully especially if sustainability is at the top of your strategy. The reality of the quick speed and nature of blockchain means it runs through a lot of energy.
Is the Future NFT?
Much like the dot com bubble of the early 2000s, the market is growing rapidly and there is room for you to benefit from the hype. How will the NFT space affect the way we interact moving forward? We will just have to wait and see.
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