Non-fungible tokens (NFTs) have exploded in popularity recently and are clearly one of the big marketing trends for 2022. These digital assets are selling for eye-watering amounts, with the most expensive being a piece by digital artist Pak, The Merge. It sold to a group of collectors for $91.8 million in December 2021, reportedly the largest sum ever paid for a work by a living artist. In fact, JP Morgan estimates that NFTs already have a total market value of $41 billion.
Naturally, brands are keen to get in on the action. Some have gone all-in on NFTs, others are experimenting, and the rest are watching on from the sidelines. But none can afford to ignore a trend that looks like it is here to stay.
There is still some confusion about what exactly NFTs are, what the risks are, and how brands can gain value from this new technology. This guide to promoting NFTs for brands will explore each of these important questions and help you figure out if NFTs are worth investing in today.
We'll also look at some brands that are exploring how to use NFTs in their marketing, in some fascinating ways, including Gucci, Barbie/Balmain, Stella Artois, and McDonald's.
NFT (usually pronounced "en eff tee", although a minority prefers “nifty”) stands for non-fungible token. ‘Fungible’ is an odd-sounding economic term that simply means ‘mutually interchangeable’, in the sense that one item can easily be exchanged for another of similar value. For example, I can exchange a $10 bill for another $10 bill, or for items that we agree equate to that value.
So if a token (a unit of data) is non-fungible, it is unique and cannot be so easily exchanged. It can be bought and sold for its individual value, but cannot simply be swapped with another identical token.
NFTs are stored on a digital ledger (known as a blockchain) that is distributed across thousands of computers - and this ledger cannot be altered. Therefore, the owner of an NFT has ownership of the asset related to their token.
This is important in the digital world, where we can produce endless, perfect copies of any piece of data. The one-millionth screenshot of a digital artwork is identical to the original image. Since scarcity creates value, digital artists have struggled to earn their true worth. NFTs help to create the valuable rarity that art requires.
The NFT can relate to just about anything people want to own online. The New York Times has sold articles as NFTs, Jack Dorsey (founder of Twitter) sold his first tweet as an NFT, and a company called Look Labs even sold a “digital perfume” as an NFT.
But it is important to note here that the artwork itself is not stored on the blockchain. It would be economically and environmentally impractical to store these files in this way, as blockchain technology requires huge amounts of computing power. After all, NFTs were created to help with property purchases, not art trading. Their core function is to store and enable smart contracts, which are programs that run automatically when pre-agreed conditions are met.
The NFT acts as a certificate of ownership and a receipt of purchase, but it is essentially a link that points to the original art file. We should expect more elegant solutions in future, however it is worth noting this current reality from a brand’s perspective.
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