NFT meaning in business

What is Web3？

The Bennett Institute for Public Policy at the University of Cambridge has helpfully defined Web3 as “the putative next generation of the webs technical, legal, and payments infrastructure—including blockchain, smart contracts and cryptocurrencies.”

Web3 is an idea for a new version of the World Wide Web which will incorporate three co-dependent concepts:

Decentralized – whereby the traditional internet is redesigned and repurposed to remove centralized data storage. This applies to how companies and websites can currently hold onto your personal information (name, email address, personal information, contact details) and require it for you to engage with their platform. This was the basis on which Web 2.0 was built; with Web3, the concept in theory is that your data remains in your hands and cannot be used by other companies for profit. Web3 is intended to be built on blockchain protocols (see below).

Blockchain technology is a public or private decentralized ledger of all transactions across a peer-to-peer network (which is what Web3 will be). Each ‘block’ in the chain contains a scrambled copy (known as a ‘cryptographic hash’) of the block before it, a timestamp, and transaction data which will establish ownership and conduct transactions. A current example of blockchain usage is the transaction ledger for cryptocurrencies.

Token-based economics – financial transactions will use cryptocurrencies such as Bitcoin and Ethereum, and the products and benefits purchased will be distributed as NFTs (non-fungible tokens, see below) which are stored on a public blockchain where ownership can be verified.

In essence, Web3 will be a collection of products and services built on top of the traditional Internet structure. These will allow you to buy and sell digital tokens and services and retain full ownership, allowing you to buy, sell or trade them yourself.

What are NFTs？

An NFT, or non-fungible token, is (a) unique and (b) in digital form. It may have begun life as digital or may have since been digitized. An NFT might be a work of art, music, or video, for example. Anything digital can be sold as an NFT.

‘Fungible’ means ‘replaceable with another of the same type’, so these tokens can‘t be replaced by anything else. For example, a unique work of art can’t be replaced, but a Bitcoin can be swapped for another Bitcoin, so cryptocurrency isnt an NFT.

In December 2021, Nike acquired RTFKT (pronounced ‘Artefact’), a company that produces virtual trainer designs that can be bought by using the cryptocurrency Ethereum and stored in an online ‘wallet’. Each purchase has an individual code verified using blockchain technology, which means its a unique purchase. Think of it as a receipt, or proof of purchase.

As an example from the world of music, the rock band Muse released their latest album as a limited-edition run of 1,000 NFTs. Users who pay £20 will receive the full album in lossless audio, along with digital signatures of the band.

NFTs can also give buyers access to additional memberships and awards. For example, Bored Ape is a collection of NFTs which come with access to the Bored Ape Yacht Club, their membership portal. This offers events and a thriving online community. Owners include celebrities such as Eminem, Madonna, and Snoop Dogg.

Every NFT is unique, and ownership can be verified on the blockchain. In other words, everybody can see who owns what. You can also sell your NFT to others and use it across various Web3 platforms. This represents a new frontier for businesses and individuals who are engaged in creativity. You can even use your purchased NFT in your own creative endeavors. Once you own it, its yours to do with as you wish. The best example of this is Eminem and Snoop Dogg performing in a live mixed media performance at the MTV VMAs as their respective Bored Ape NFTs.

How do they work？

Central to NFTs is the ability to label a specific instance of a digital asset as genuinely unique.

Usually, digital items such as photos, videos, animations, and documents can be endlessly duplicated.

An NFT determines that one of those instances is the genuine original.

Even if many copies are made of the asset, an NFT determines that one particular digital asset is the original version.

NFTs can be traded similarly to physical objects, with ownership passing between people and businesses.

NFTs are be used for a variety of digital assets, such as:

digital works of art such as photos, images, and digital paintings

virtual real estate and property within virtual spaces

collectable items, such as virtual models

in-application items, such as avatar clothing in a video game.

However, they are becoming attractive to businesses looking to assign digital assets to others, such as customers, that similarly have value to giving physical gifts to customers.

Some NFTs are sought as collectables.

As they are original items, they have a rarity that can increase their value – similar to how a painting may increase in value.

Buyers also have exclusive ownership rights, as an NFT can only have one owner.

How do you make, buy, and sell NFTs？

NFTs can be created (or 'minted') with digital assets representing tangible or intangible items, including art, animation, videos, music, and even Tweets.

Once made, creators can open a shop on several online NFT marketplaces to sell their work, the most popular NFT marketplaces including Rarible and OpenSea.io.

Some NFTs can sell for hefty amounts of money.

An NFT created by digital artist Beeple was sold by Christie's for $69 million in 2021.

To buy NFTs, customers need a digital wallet to store cryptocurrencies and NFTs.

You can then purchase NFTs from several online NFT shops and marketplaces.

The pros and cons of NFTs

There are both pros and cons to non-fungible tokens.

Pros:

allows creators to sell their work more easily

reduces piracy as there is one 'true' version of a digital asset

makes the divided ownership of digital assets easier

anyone can invest in NFTs

blockchain technology is highly secure

can be more environmentally friendly as no physical assets are created.

Cons:

scammers can exploit the lack of consumer knowledge about NFTs

pricing and trading can be wide-ranging as the market has limited pricing experience

NFTs are not regulated, meaning buyers could lose their capital

unlike the NFT itself, the blockchain technology that currently supports them requires vast amounts of computer energy, which can negatively impact the environment.

NFT commercial opportunities for business

Since an NFT can be 'minted' from any digital asset, the opportunities for businesses to jump on board are endless.

Companies are exploring how creating unique digital assets can be an income driver or form part of marketing activities.

Types of NFT opportunities could include:

Creating unique virtual objects that can be bought and sold

Nike launched Nike CryptoKicks in 2022, which enabled digital designs as part of the footwear in exchange for redeeming an NFT that was given, for free, to select customers.

Collectables and rewards

NFTs can be used as the digital equivalent of collectable objects, such as toys or models.

Restaurant chains, sports brands, and entertainment businesses can create virtual NFT models of items buyers can purchase, collect, and resell later at a hopefully increased value.

Authentication

While almost exclusively digital, NFTs can be assigned to any object that requires authentication.

This can be documentation, such as identification documents or certification, through attaching NFTs to records within the supply chain to prove ownership of goods throughout the shipping and delivery process.

Limited edition items

Companies can create unique works, such as artwork, photography, and ebooks that can be assigned a limited number of NFTs.

This means digital objects can be sold as limited editions, or even single, unique editions, and may be able to command a high price depending on demand and rarity.

Raising capital

Some businesses may be able to exchange previously hard-to-value digital assets as NFTs to raise finance.

Intellectual property – from inventions to music catalogues – can be digitized and offered to investors as NFTs in exchange for real-world capital.

Brand building

Offering customers the chance to download and own a unique digital item, such as virtual toys and goods, can be a way to increase brand engagement.

While NFTs are an answer to proving ownership of primarily digital assets, it's worth seeking independent, professional financial advice before investing in cryptocurrency, blockchain, and NFT-related technologies.

The Financial Conduct Authority does not regulate NFTs, and that means your business could lose any money it invests in NFTs, both in their creation and through purchasing and ownership.

The concept of portable online ownership

The concept of portability is woven into Web3. For example, if you purchase a pair of trainers from RTFTK, your avatar will be able to wear those trainers anywhere you appear within the metaverse. You could wear them in your Horizon Workrooms meeting with your customers, and then again later while blasting away with your mates in Fortnite.

Artwork is already being traded in this way. Artists are now creating one-off pieces of NFT art that can be bought, used, or displayed in whatever way the buyer sees fit. An interesting example is the NFT ‘avatar’; Sotheby‘s regularly runs Metaverse auctions where artists offer limited-edition, algorithmically generated profile pictures for purchase online, for use across the Metaverse as the buyers’ profile pictures – and, in some cases, their avatars. A profile picture or an avatar may not seem like a status symbol in the world of Facebook and Instagram, but within collector circles they are significant.

How is this important for brands？

Whilst Web3, the blockchain, and NFTs may, for now, seem like the domain of big business and the hyper-rich (after all, a Bored Ape NFT will currently cost you north of £111,000), there is potential for brands to leverage all this.

Creating an NFT that can be used to gain access to products and services across platforms, and selling it to customers in a branded package, would allow you to go beyond simply selling a product, event, or service, and allow you to wrap the whole process up into a branded package.

For example, if you were to sell a ticket to a music concert as an NFT, you could receive not only a ticket to the event, but access to experiences related to it, including a live recording of the concert, a limited, numbered digital signature of the artist, access to an exclusive fan club of fellow fans who also purchased this NFT, and the opportunity to build an ongoing community experience around a single purchase.

It does sound complex and difficult to navigate. And its still something of a jungle out there, with high levels of fraud and wildly fluctuating prices.

Understanding NFTs for eCommerce and retail

Theres no one way to use an NFT. E-commerce businesses and retailers have already begun to use NFTs in all kinds of capacities. NFTs have a wide range of use cases in e-commerce to engage with customers further:

One such use is offering consumers digital assets that are used to represent real-life assets such as experiences or products;

Another possible use is for rewards and loyalty programs which might offer consumers NFTs that they can collect over time;

Still, some businesses might use NFTs as digital assets that are inherently valuable.

Examples of NFT business use cases

Big brands such as Nike, Taco Bell, and even Coca-Cola have moved to adopt the use of NFTs as a way to engage with consumers.

For example, Nike recently launched their first line of NFT sneakers. Taco Bell has started to use NFTs to raise money for the Taco Bell Foundation, a nonprofit organization dedicated to helping youth attain educational opportunities.

As many use NFTs as there are in retail and e-commerce, the use of any new technology can come along with certain challenges that must be addressed. With NFTs some of these challenges include ensuring that NFTs are compliant with emerging regulations, addressing security concerns, and more.

Importantly, NFT websites and NFT e-commerce platforms may need to find ways to ensure that consumers have secure wallets with which to store NFTs. To do this, retailers might partner with businesses that specialize in securing digital assets.

NFT business models for eCommerce and retail

What business models can organizations use to generate revenue with NFTs？ Lets explore a few possibilities:

Selling NFTs as NFTs

Some businesses might simply be in the business of selling the NFTs themselves–they might be digital art, collectibles, or novelties. In many cases, these might be customizable and available through a custom NFT marketplace. Some businesses might offer ways for consumers to mint and create their own NFTs by using NFT builders.

One potential upside of this business model is that its very straightforward, while a potential downside is that should consumers lose their interest in NFTs, there may be no additional value offered.

Using NFTs for marketing strategies and campaign

While selling off a single set of exclusive NFTs for a low price might not seem like a great way to generate revenue, offering NFTs can be a great way to generate conversations. For example, Taco Bells tweet announcing that they were offering NFTs received hundreds of retweets, over a thousand likes, and hundreds of quotes.

A similar tweet from Coca-Cola received over a thousand quotes. While the potential upside is clearly higher marketing visibility, one potential downside to this approach is that it could result in negative press and backfire as well.

Using NFTs as a part of a larger rewards or loyalty program

Businesses may offer consumers NFT drops as a part of their rewards or loyalty program. This can be a way to make shopping more exciting for consumers, offer more personal rewards, and even learn more about customers. One challenge that businesses might face with this approach is creating desirable rewards for NFT.

E-commerce platforms can choose what benefits come with NFTs – for example, consumers who‘ve collected one NFT may get access to exclusive rewards or discounts, and consumers who’ve collected two might have access to even bigger discounts.

NFT use cases across industries

There are many possible use cases for NFTs. Lets explore some particularly exciting ones:

NFT and Gaming

The gaming industry already holds an audience that tends to be invested in new digital technologies, particularly when theyre able to drive gaming experiences. NFTs can be used to create digital goods that are used in games exclusively by owners. Big players like Ubisoft have made moves toward a future where gaming and Web3 meet.

NFT and Retail

We‘ve already explored some of the NFT use cases in retail and the reasons businesses can make use of NFT in retail. What’s more, retailers can find ways to make NFT drops even more appealing through methods such as NFT visualization and by offering customizable NFTs. Companies like Nike, which offer NFTs, may be able to tap into exciting new markets as a result.

NFT and Fashion

Perhaps with the amount of overlap between art and NFTs, its no surprise that one industry that can embrace NFTs is the fashion industry. In fashion, it may prove particularly important to offer beautiful, visually appealing NFTs. Gucci and other major fashion brands have already started to experiment with NFTs.

Monetizing NFTs in eCommerce and retail

We‘ve discussed, already how there are a few different business models that can make use of NFTs, but let’s talk a little bit more about actually generating revenue. There are a few ways to monetize NFTs, and not every business model even seeks to do so. Here are some ways NFTs can be monetized:

Selling NFTs themselves: sure, this is the most straightforward method, but there‘s nothing wrong with it. One of the ways businesses can monetize NFTs is simply by selling them. Adidas recently made millions on an NFT collection. Let’s look at some NFT examples and prices: on Opensea, users will find items such as Adidas virtual gear, which at the time of writing ranges in price from .02 ETH to over 1 ETH;

Selling NFTs that represent real-life goods or in-person experiences: some businesses might take a different approach to NFT monetization and offer real-life products or services along with them;

Using NFTs as a way to drive sales: offering free NFTs is another way companies can drive revenue through NFTs – albeit indirectly. By offering consumers NFTs for free, companies may be able to generate loyalty and buzz.

How to start an NFT business

If you‘re interested in starting an NFT business, it can be helpful to understand some of the things we’ve discussed – such as what business models can be used with NFTs, how different big players have approached the matter, and different ways that NFTs can be monetized.

However, you might be wondering more about the nuts and bolts of it all – how to create an NFT, what the best NFT creator software is, and which NFT platforms you might be able to use to help. In other words, really, how to start NFT businesses.

The short answer is there is no one single best way to start any business, let alone an NFT business. Importantly, you may want to consider some of the same things . Nearly any business owner might – what your intended market will be, what value you will offer, and what pain points you can address.

The truth is, there are many approaches you can take to creating NFTs to use for your business. All you need to do is embrace new technologies to take your business to the next level. Zakeke, our Visual Commerce Platform, can help you through the power of visual commerce, empowering your e-commerce with Customization, 3D Configuration, and Augmented Reality.