In 2021, the overall market value of non-fungible tokens (NFTs) increased $41 billion over the $200 million level in 2020. NFTs have been everywhere for a while now. These digital assets, some of which trade for millions of dollars, range from works of art to proof of ownership for physical assets. In this article we conduct a deep dive into NFTs to find out if they merit the hype and how they can introduce and extend a world of possibilities into multiple market verticals.
What are NFTs?
At this point, many of us have heard about NFTs but still may not be quite sure what they are or why we should pay attention to them. An NFT is a unique digital asset that represents a real-world object. Through Blockchain they offer an untransferable, smart, built-in authentication as a certificate of ownership which collectors value even more than the item itself.
Blockchain is a distributed digital ledger of electronically stored information which is widely known for its role in cryptocurrency systems due to its high levels of security and its decentralized record of transactions, all of which make it almost impossible to corrupt. Blockchain guarantees fidelity and security of data, and the proof of ownership of NFTs is recorded therein, translating into a higher level of authenticity.
So how does this fit into the metaverse and its promise of a world of possibilities? Currently they’re associated with collectible jpegs or gifs, but NFTs will acquire their true value when the digital world comes to life. All real-life purchases will have their equivalent in the metaverse thanks to NFTs.
Why are NFTs important?
- Proof of Ownership: Once an NFT purchase is complete, the transaction is registered on Blockchain, although this doesn't imply that the NFT becomes nontransferable. If the NFT is set up for selling, ownership may be transferred and a new owner will be designated.
- Digital Presence: NFTs are designed to last at least for as long as the Blockchain itself and, as predicted, they are not going anywhere anytime soon.
- Fake copies are easily identified: Simply by checking the Blockchain, anyone can confirm the authenticity of an NFT. This closes the piracy-authenticity gap so frequently found in the market.
NFTs & Ecommerce
NFTs are widely known for being art-related or collectible objects. Although their boundaries aren't traced yet, they've been proven to even be considered as experiences, authentication certificates and digital representations, among other possibilities. NFTs in eCommerce are still evolving, but we're starting to see a path for what may come in the future
- Digital experiences with real-life objects
A focus on ‘experiences’ is an innovative strategy for brands to connect with their users. Every day more and more companies are improving their experiences with NFTs. There are countless ways to combine an experience with physical goods or even with other services - all extending NFTs’ list of benefits. Additional value increases with the uniqueness of the experience.
Other applications are being implemented into NFTs; for example, drivers' licenses, events tickets, voter registration, loyalty cards, fundraising, birth certificates, academic degrees, warranties, listings, deeds, medical records, policies, memberships and personal data. This takes the NFT experience to a whole new level.
- The Metaverse and NFTs
In essence, in the metaverse, NFTs will be the digital version of real-life products a user may acquire. As it continues to grow, NFTs will transform into a road headed to the greater good. With them, users will be capable to create virtual representations of their real lives, whether we're talking about clothes, properties, objects, collectibles, etc.
- Proof of Ownership
A trustless environment is an exchange of a product without the need of trusting the other part. This happens all because the transaction becomes completely safe, with the ability of the NFTs built-in security to prove and translate the ownership to any buyer. This process guarantees the ownership, uniqueness and real existence of the product.
All of the NFTs possibilities make us wonder why luxury brands should incursion into web 3.0 technologies. For Colnago, BACKBONE developed a fully integrated ecosystem with web 3.0 technologies such as AR, blockchain, NFT, and product customization. A digital ecosystem designed to win.
BACKBONE's ecosystem designed for Colnago includes a 360° hyper-real, 3D model visualization of the C68 bicycle model. Users can choose the colour, material and design that best suits their customized bicycle. Moreover, once users have configured their dream bike and completed their purchase, they will receive an NFT with all of their bike specifications straight into their digital wallet. This NFT will have the shape of a 3D image file and a 360º video which allows the user to have the exact digital representation of their Colnago bicycle.
The main focus of the NFT is proof of authenticity and a certificate of ownership. An NFC tag is included on the bicycle's frame - this is the entry point to the user's new digital passport. The bicycle's true owner is registered on the Blockchain making him or her the sole owner of the bike. This not only guarantees product authenticity but makes the post-sale process a lot easier. When any owner decides to sell, the bicycle can be transferred to a new owner by registering the transaction on the Blockchain.
As well, the NFT is the digital representation of the bike for the metaverse. Owning the bicycle both in the real world and in the metaverse will be advantageous once the metaverse is launched in earnest. The Colnago case study is living proof of next generation digital experiences as it relates to web 3.0 technologies. When it comes to the luxury goods market, this is a perfect fit; you can even register how much revenue the bicycle generates and increase its value as a result. Colnago is blazing a path for other luxury brands to transition into new technologies.
5 Industries NFTs will Transform
We’ve seen how NFTs are a strong fit for brands such as Colnago, but there are many other industries that will be transformed by introducing NFTs into their operations and experience planning. Let’s review a few of them and how they could be transformed. Here are a few examples.
Travel community: This industry already uses NFTs for rewarding customers for certain goals or achievements, loyalty programs and nature conservation.
Airline loyalty programs: Airlines are offering NFTs for collectible arts as a part of loyalty programs, and the frequent travelers are being registered on the Blockchain and receive rewards based on their loyalty.
- Data patient ownership: NFTs may be used to improve access, restore patient’s medical information ownership and decentralize data gathering.
- Monetizing research information: Pharmaceutical and medical technology businesses would need access to patient data when developing new technologies, enabling patients to monetize their data.
- Superior processes: An NFT streamlines the transaction process in the real estate sector, enabling a person looking to buy to take possession of a property in a matter of minutes, avoiding paperwork, and reducing fraud probabilities.
- Security: Real estate transactions through NFTs safeguard both buyers and sellers and make trouble-free asset transfers simpler.
- Security: Tickets will be password protected in the user’s digital wallet and only that specific user will be able to use the NFT which means 100% security for the buyers and ticket owners.
- Event producers' guarantees: When selling the ticket, the producer can choose its parameters, for example not allowing reselling. The NFT may be non-transferable, or a resale price can be defined along with any other validation it may require.
- Rewards: Offer a randomly set number of tickets, awards, prizes, or free merchandise, etc
- Venue benefits: On the day of the event producers can give discounts for food or snacks, offer buy one get two deals, and other venue-related benefits that could encourage users to buy at selected locations or be eligible for certain benefits.
NFTs' true value lies in their uniqueness and proven exclusivity. NFTs can be traded, sold and resold as you would with a physical product. Exceptionally, they cannot be divided like cryptocurrency. A whole new marketplace is being created and NFTs, from this moment on, will only continue extending and growing their territories. It's worth keeping an eye on them since it all seems to indicate they're not going to disappear anytime soon.
If you want to learn more about how to implement NFTs in your business, feel free to contact us and unveil the future of digital transformation.