An introduction to NFTs; how blockchain and cryptocurrency can unlock new potential for brands, who’s cashing in early, and why influencers are the route to success.
NFTs for Dummies
Don’t take offence to that subheading – it’s really hard to get your head around why someone would pay 20K for ownership of a GIF.
The GIF in question; Nyan Cat
You may have seen the term NFT in headlines lately, probably in relation to some whopping – actually, eye-watering – sums of money. Just a few weeks ago, the first digital-only artwork sold at Christie’s auction house for a phenomenal $69M (£50m) – but the winning bidder won’t receive a sculpture, painting or even a tangible print. So, what on Earth is all the fuss about? If you’re not sure what an NFT is, how they work or why you need to pay attention – don’t panic, we’re here to help.
This piece won’t turn you into a ‘crypto-King’. Instead, its aim is to open up awareness of NFTs, encouraging some discussion and elevation of the possibilities – which we reckon are pretty exciting. We’ll explain everything necessary to understand the landscape of NFTs, including why they might be causing controversy and how you can get involved – if you’re feeling brave. After all, Mr Musk didn’t get to where he is by resting on his laurels!
‘EVERYDAYS: The First 5000 Days’
that was recently sold at Christie’s
What is an NFT?
In an (admittedly confusing) nutshell, NFTs are collectable digital assets. Much like Art is seen as a value-holding investment, NFTs are an internet equivalent. Let’s start by breaking down the term; NFT stands for ‘non-fungible token’. This explanation from the BBC is pretty helpful:
“In economics, a ‘fungible’ asset is something with units that can be readily interchanged – like money. With money, you can swap a £10 note for two £5 notes and it will have the same value. However, if something is non-fungible, this is impossible – it means it has unique properties so it cannot be interchanged with something else.”
Sometimes it’s easier to understand with illustration, so imagine a painting such as the Mona Lisa. You can take a photo of the painting, or buy a postcard print in the Louvre gift shop – but there will only ever be the one original painting. And in the same way that the Mona Lisa’s value can fluctuate, so will NFTs’. Lydia Wang, writing for Refinery29, puts it really well: “Demand dictates worth, so NFTs’ value can go up and down, subject to the whims of the market, no matter how extreme. (In this way, NFTs are also a little like stocks.)”
How do NFTs work?
NFTs can be purchased through online, cryptocurrency (that’s Bitcoin) marketplaces like OpenSea, which artists use to ‘mint’ their work (aka, create and embed unique code into a blockchain that cannot be copied – like an original piece of art). Once minted, these works are then published into tokens, and from there, buyers can purchase the NFTs. However – and here’s the kicker – unlike purchasing a physical painting, say, when you buy an NFT, you are obtaining the rights to a digital asset – not the actual asset. Donna Redel, a professor of crypto-digital assets at Fordham Law School, told NPR that “the underlying thing that you’re buying is code that manifests as images.”
Again, demonstrations are helpful, so stick with us. This article could be minted into an NFT. But, if someone bought it, they wouldn’t be buying the literal article – they would be buying a digital asset of it. The overarching point is that there’s a record of ownership. And because these tokens exist on a decentralised database (like the Ethereum blockchain, meaning there’s no governing system and everything is “community-run”), that record is public. Which, in turn, minimises the potential for fraud or theft. Don’t go thinking you’ve hacked the system by right-clicking and saving the image of an NFT – that won’t make you a millionaire, sadly. Because your downloaded file won’t hold the information that makes it part of the Ethereum blockchain. Make sense?
How NFTs Can Unlock Potential For Brands
Hard-core enthusiasts probably think we’re all super late to the game, and will smile knowingly at these “first haltering steps of an embarrassing uncle into the discussion, patting the mainstream media and marketeers on the head to ask: What took you so long?” We’d probably plead guilty to that, and a huge amount of communicators and marketers will be in the same boat – but it’s time to sit up and listen. These new-fangled NFTs have unlocked an ownership economy that provides brands with huge opportunity. They’ve “opened the floodgates to a new type of brand storytelling and consumer interaction,” says John Ohara for Campaign. Here’s a taste of NFT’s functionality for brands:
- True Community: Just as brands had to navigate a new generation of digital natives, the time has come to begin thinking about how to parlay into becoming a consumer-owned community. Brands like Starbucks and Glossier have all crowdsourced feedback and suggestions by leaning on their online communities, to develop new products and experiences, for years. However, they’ve never had the ability to compensate that community more than gifting them credit or a discount code. With the introduction of decentralised funding of purpose-driven projects, creative endeavours and charity programs could become much easier with NFT contracts. Brands “could democratise publicly funded projects much easier with NFTs, by owning a portion of the final output,” and “providing tangible benefits to consumers,” says Ohara.
- Exclusivity On Steroids: “NFTs allow digital artworks to have the same quality of scarcity that gives physical artworks their value, while allowing them to retain infinite visibility in their native format,” Sarah Zucker, who works across various mediums, and specialises in screen-based artwork, says. Scarcity, and exclusivity, are absolutely the building blocks of social cred. Sneakers cost as much as they do because they’re produced in small batches to make them more exclusive. But NFTs, with their never-ending potential and built-in digital certificates of authenticity, will bring a whole new level of hype.
- Less Man Power: As artist Cat Russell puts it, NFTs give creators “a method to showcase and sell [their work] without jumping through the logistics of making prints.” Artists aren’t only able to reach a large, diverse, international community of buyers: they’re able to sell their work with far more ease and control. The same benefits can be applied to brands. One of the most common criticisms of NFTs is how much energy the whole process takes up – which has a stark impact on the environment. In fact, some researchers from Cambridge University say that bitcoin’s carbon footprint is bigger than the Netherlands’ annual energy consumption. That being said, there are also amazing examples of how NFT digital couture is helping brands and influencers move away from fast fashion. Would it be less socially and environmentally destructive to create an NFT sweatshirt, wearable only on Instagram, or thousands of units of an actual sweatshirt, in an Indian factory?
3 Brands Doing NFTs Well
- NBA TOP SHOT: Essentially, fans are owning a moment. There’s no reason why iconic cultural moments can’t be minted as digital collectables with NFTs – and the NBA have done just that. The basketball empire has created a way of selling digital collectables in the form of trading cards, embedded with iconic moments from the game. With a plan to add virtual jewellery, accessories and clothing that can be used across social media, the NBA is seeking to find ways to expand this revenue stream as far as it can go.
- CHARMIN: If you think the morality of NFTs is a little dubious, this is the campaign for you. It’s a great excellent example of combining PR buzz with potential for good. American toilet paper brand, Charmin, jumped on the NFT bandwagon with its own bog roll artwork (talk about being on-brand for the pandemic) that will be auctioned off for charity. The NFT – or NFTP (non-fungible toilet paper) as Charmin calls it – will come with a “physical display” for those who would like to “hang your NFTP in your bathroom alongside your IRL rolls.” They created five designs that could be bid one, and there was only one NFT per artwork. All of the proceeds from sales were donated to Direct Relief, with the highest bid over $2K!
- NIKE: Consistently ahead of the cub, Nike now holds a patent for blockchain-based sneakers called ‘CryptoKicks’. One of today’s most prolific fashion habits is the resale of streetwear – in similar ways to how art is dealt. Because a lot of these transactions happen online, fakes are a big problem. Nike’s patent aims to fight this by tracking the “ownership and verify the authenticity of sneakers using the blockchain-based system.” So, when you buy a pair of ‘CryptoKicks’, you’ll also receive a digital asset (like an authenticity certificate) attached to a unique identifier of that shoe. The result? Higher exclusivity and far less potential for fakes.
Do Influencers Have A Part To Play in NFTs?
Traditionally, influencers bring authenticity to commerce. A huge amount of influencers are already jumping on the trend; they’re already viewed as trusted NFT experts, giving partnerships more credibility and driving huge hype. Here’s how brands could work with influencers to turbo-charge NFT activity in a number of ways…
- AUTHENTIC COLLABORATION: There’s massive scope for utilising influencers to actually create exclusive NFTs, alongside your brand. This would work in the same way as any brand-product collaboration. For example, could we see Michael Jordan create a unique NFT with Nike?
- OWNERSHIP: One way to think of NFTs is like having an ownership log – a bit like a library card. Influencers that have (or have had) ownership of a particular NFT, automatically drives hype for it. This would be the equivalent of auctioning off a celebrity’s used wardrobe for charity, and could put an interesting spin on (re)gifting!
- AWARENESS: If you’re a brand bringing out a new NFT, why not get influencers to post on Instagram, wearing/using said NFT? This will work particularly well for fashion, but there’s no reason it couldn’t translate into other verticals.
Let’s get to work…
Whether or not NFTs are here to stay, they’ve certainly become a new plaything for the uber-rich – and there is real money to be made. There’s also real hype to double down on; you’re tapping into an entirely new trend, niche, asset that can help you snag that PR hook and get you front and centre in terms of conversation. NFTs give new meaning to brands, digital artists, influencers and dreamers, and prices indicate real proof for the future of art and collectables in general. We’re all nerds here, so there’s branded NFT ideas already in the bank of Connects. Drop us a line at firstname.lastname@example.org if you’re ready for a foray into cryptocurrency!