GDR’s head of strategy Eric Coulon explores how NFTs can help retailers and brands move the needle and imagines the next potential developments of the ‘token’ economy.
You’ve probably heard or read about Non-Fungible Tokens (NFTs) by now. This application of the blockchain technology is said to be the future. But if you’re a brand or a retailer, should you actually be doing something about them now? Are you missing out if NFTs are not in your plans? In this article I want to explore how they work and explain why I think they could have great potential for brands.
What are NFTs?
To put it simply, Non-Fungible Tokens (NFTs) are crypto tokens. They are a blockchain application just like Bitcoins, but every NFT is unique. Because of this, NFTs can be used to prove ownership or authenticity of a virtual object like a digital artwork.
NFTs work like a barcode, but in reverse. They not only contain information about the product’s past but also about the product’s present. They keep a dynamic track of ownership and usage and the record is transparent and accessible to all. Their decentralised nature also enables us to cut out the middleman. Thanks to NFTs, million dollar digital artworks are being sold by Christie’s, and human employees in virtual casinos are being paid directly by their customers (more on that later).
NFTs now: they’re great at creating excitement and PR
A lot of the current excitement is around using the tech to sell digital art. Well-off digital art patrons can purchase six-figure crypto-art pieces like a cat gif, Jack Dorsey’s first tweet or a piece of digital painting. At the time of writing, the Gucci Ghost gif, above, is for sale at $16,000. The seller acquired it for $3,600 back in February but no new acquirer seems to have been tempted so far. There are also now digital walls in digital galleries to hang your digital art.
Overall, the NFT bubble is of a decent size: since November 2017, there has been a total of $174 million spent on NFTs.
For those not well versed in the world of cryptocurrency, it may seem overwhelming and hard to see any real long-term applications for NFT, but I believe they are part of a much broader change, a new ‘token’ economy, a revolution that is ready to have an impact on retail.
Fashion brands are leading the way
Some of the first brands who saw an opportunity for a more widespread use of NFTs were fashion designers who are now creating unique digital pieces for gamers. Fashion studio RTFKT is known for its viral sneaker designs, memes and collectible exclusives. Gamers can shop during exclusive drops and wear the digital sneakers and jackets in games and virtual worlds. In the brand’s own words: “The RTFKT project was scheduled to take off in 2040, but the human development in consciousness has accelerated faster than anticipated. We are here to accelerate our digital future now.”
The trend for digital clothing was gathering pace before RTFKT, with the likes of DressX selling non-unique digital fashion pieces that it overlays on to customers’ pictures for between $40 and $250. By adding NFTs to the equation, RTFKT is able to elevate the proposition and promise unique, exclusive digital products to each customer, allowing it to justify its five-figure price tags.
You can now also get a virtual home makeover thanks to NFTs (if you live in a virtual home of course). Argentinian designer Andrés Reisinger recently sold ten pieces of virtual furniture on Nifty Gateway, a digital design marketplace. The most expensive piece sold for almost $70,000 and the furniture can be placed in any 3D space or open world like Minecraft.
In the real world, NFTs are also starting to be linked to physical objects as a way to prove authenticity and fight against counterfeits. To that end, Nike has patented a blockchain-enabled system for its sneakers called CryptoKicks. The cryptographically secured digital assets will be used to track ownership of the physical shoe and also give its owner a digital replica of the shoe to be used in virtual worlds. These assets are stored in a digital locker and the ownership can be transferred to a new owner at any point.
NTFs application are virtually unlimited. So what’s holding us back?
Tokens like NFTs reduce friction in transactions. They also offer much quicker analysis of market conditions (Who owns what? What is it worth? How many are interested in purchasing it?), they provide greater security through transparency and decentralisation, and a higher level of customisation for digital products and services.
So what’s holding us back? First there is no common network, and a multitude of different cryptocurrencies and tokens exists. Currently the most common ones are Ethereum-based, but other crypto technologies like Bitcoin have their own equivalent. We have yet to agree on a common platform, while regulation and legal frameworks are also quasi non-existent.
As with all new bubbles and crazes, the rise of NFTs has also brought with it a fair share of controversy, with many questioning their carbon footprint (stocking blockchain data requires tremendous amounts of electricity) and just how secure they are (identity theft and stolen NFT cases have been reported).
Once we get over those obstacles, NFTs’ applications are virtually unlimited: tomorrow you could trade your brain, downloaded and turned into an AI, through NFTs. Your whole brand equity could be secured or traded by the technology. Or, your retail experience could be reimagined around decentralisation and transparency.
NFTs Tomorrow: an opportunity to reinvent your retail experience, whilst generating new real world jobs.
NFTs and cryptocurrencies are already the lifeblood of virtual worlds, now more commonly called the ‘metaverse’ (for meta-universe). Decentraland is one of those emerging metaverses on which you can buy virtual real estate. The decentralised Ethereum-based blockchain virtual platform offers land for sale (through NFTs) on which you can build and create your own space and start a business. You can, for instance, run a theme park or a casino. You can serve customers, earn coins and grow your business. You can even hire real humans. This casino is hiring real people to replace its bots as casino greeters and hosts.
Soon we’ll see museums open in Decentraland to hold and display all these NFT artworks. The next move will be about retail, and virtual shops on Decentraland will be hiring real human shopping assistants to sell NFT-backed jackets, shoes, accessories or even – why not? – virtual perfumes.
As the real world is going more automated and robotic, the metaverse is going more human. In the near future, our lives will be completely intertwined between real and virtual, physical and meta. Whilst your avatar will be shopping for seafood at FreshHippo, assisted by a robotic fishmonger through remote store vision, you could be purchasing a unique NFT Louis Vuitton bag with a real human sales assistant at Decentraland’s newest metaverse department store.
Embracing the digital future
NFTs started back in 2017 with CryptoKitties, a blockchain game on Ethereum similar to playing a Tamagotchi, where each NFT is a unique digital pet that needs to be looked after. Only four years later, it has moved far beyond entertainment and leisure and the metaverse casino mentioned above is hiring real humans on a virtual platform. The possibilities for future innovation as digital and physical worlds continue to merge are almost limitless. But as with all fast-moving innovation, the first-mover advantage is paramount. So I’d advise brands and retailers, if you think the transparency and exclusivity offered by NFTs can elevate your brand proposition, go fast, be the first and make it more than just a gimmick.
Here are a few pointers to consider:
- Leverage NFTs to create (or ‘mint’) exclusive limited editions, partnering with artists, auction sites or charities
- Run a contest with NFTs being the prize
- Raise funds by selling one of your most iconic assets through exclusive NFTs to your fans
- Provide GenZers and gamers with virtual replicas of your iconic physical products, protecting ownership through NFTs
- Invest now in metaverse real-estate
- Offer your customers the opportunity to pay with crypto in both worlds
- And last but not least, I’d strongly recommend coupling all NFT-related initiatives you undertake with a carbon offsetting solution to counteract NFTs’ massive emissions. The planet, and your audiences, will thank you.
As speculative fiction author William Gibson said: “we are the last generation to make any distinction between online and offline”. The great convergence he has been prophesying might finally be here and NFTs and crypto-tokens could become a key weapon in every brands’ arsenal.
If you’re interested in talking to us in more detail about any of the themes discussed in this article, or the challenges you’re facing as a business, we’re here to help. Get in touch with firstname.lastname@example.org