What is an NFT?

The sudden uptick in blockchain news surrounding NFTs has left many brands wondering how they can leverage the tokens for engagement and revenue. The acronym, which stands for 'Non-Fungible Token,' describes a unique unit of data that can either be sold or traded.. 'Non-fungible' means unique and irreplaceable.  A good example of a fungible item is a coin, which you can trade for another coin. A more appropriate digital example would be a bitcoin, which is often traded online for goods, services, and other bitcoins. NFTs, however, are each unique. They resemble baseball cards because while people can trade one for another, neither are the same item.

NFTs work as a part of a blockchain, specifically the Ethereum blockchain. A blockchain is a specific type of database designed to keep digital currency honest and prevent fraud or mismanagement – for example, having a user create extra currency for themselves. Ethereum is a cryptocurrency, much like bitcoin, but its blockchain also keeps track of NFTs due to its unique properties. Other cryptocurrencies have since begun to modify their blockchains so that they can support NFTs.

The average NFT can be any digital item, including images, music, or gifs. The reason why NFTs have begun to cause such uproar is that people got the idea to use these tokens to sell digital art.

How NFTs made the blockchain the new frontier for brands

Unlike traditional art, digital art is easy to copy, although the quality of the copy may differ. With NFTs, however, one can own the original piece of art in its intended quality. This possibility created a stir within the online marketplace.

Some argue that NFTs came into existence as early as 2012, during the popularity of Coloured Coins. Colored Coins are smaller denominations of Bitcoins. They represent many different kinds of assets, including coupons, subscriptions, issue shares, and access tokens. When created in 2012, they were a huge development in the general abilities in Bitcoin. However, they used to be difficult to quantify and required a permissioned environment where all people could agree on their value.

The subsequent historical development was in 2014, when the issue of agreed-upon value became more apparent. Financial experts got the idea to create blockchains for assets to systemize the value of items like Colored Coins. Adam Krellenstein, Robert Dermody, and Evan Wagner founded a Counterparty platform created to distribute protocols to add assets onto the Bitcoin blockchain design.

In 2016, the 'Rare Pepes’ community became a major presence on Counterparty. The Pepe meme had a large fanbase that valued rare iterations. By 2017, Pepe memes were being traded frequently on Ethereum, and this activity morphed into a project known as Peperium. Later in the year, Matt Hall and John Watkinson began a similar, newer project featuring unique characters. This project, titled Cryptopunks, was the basis for the NFTs we see today. The next project, Cryptokitties, became so popular that at one point, each had a value of $100,000.

Once the value of Cryptokitties was established and evolving, the modern-day NFT was born.

Three top strategies used by brands to drive revenue with NFTs

NFTs have reshaped the way media and entertainment companies can digitally market their brands and products general. Here are the three main ways that brands are capitalizing on this technology to drive revenue.

1. Selling historic moments from media archives as NFTs

• Logan Paul monetized otherwise free YouTube video clips multiple times by selling them as NFTs.
• Dapper Labs has NFT exclusive with NBA and NFL and Candy Digital for the MLB

• CNN Vault sells pieces of their archive library, which spans significant historic events like the inaugural space shuttle launch

2. Create and sell new NFT collectible assets connected the brand

• Fox Entertainment offers fans an exclusive NFT destination to build their own collection of digital masks for Masked Singer characters
• Nike looks poised for the Metaverse and NFTs. There is speculation of a patent for the brand's own "Cryptokicks" and Nike's job listings include "virtual footwear" design roles.
• The world's top K-Pop band, BTS, is planning to sell digital NFT cards of its band members
• Coca-Cola auctioned off NFTs to benefit the Special Olympics earlier this summer

3. Personalizing vouchers or gifts given to their customers, driving engagement and emotional investment

• Fan tokens that allow teams to get closer to their fanbase, by monetizing interactions with fans and get exclusive access to athletes and events

Overall, NFTs can create not only new ways to market a brand but also new revenue streams. We've only just scratched the surface of monetization opportunities for brands on the blockchain.

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