Building the business case for NFTs
Recently musician and performance artist Grimes made USD$6 million in under an hour from ten artworks they created. Visual artist Beeple sold his contemporary art piece Everydays – the first 5000 Days for USD$69 million. And even Twitter founder Jack Dorsey made USD$2.5 million turning his first tweet into an NFT.
But as Dorsey’s sale suggests, NFTs aren’t just for art. Being what amounts to a certificate of digital authenticity embedded in the blockchain, NFTs can be used for virtually any good or service where provenance and a clear ownership trail is important.
For a number of reasons, the Tezos blockchain has the greatest potential for enterprises wanting to mint NFTs. Tezos is a liquid Proof of Stake blockchain, which means stakeholders have a level of voting rights over any potential upgrades to the protocol, determined by how much value they stake to the network. As the network evolves, the interests of enterprises are represented by their network stake.
And because Tezos is Liquid Proof of Stake, it uses less energy than Proof of Work, as well as less computational power. This has benefits for enterprises wanting to mint NFTs on Tezos in the form of lower gas fees (transaction fees), which has advantages for business costs.
Using blockchain authentication, costs are lower for enterprises than using existing, real-world services like notarization. Plus, the blockchain, being immutable, creates a permanent record of the transactions. Organizations wanting to create smart contracts also have an advantage over their IRL competitors because they use a formal verification system that is mathematically corroborated, meaning they are trustless and don’t require the arbitration of a third party.
The fact Tezos also uses orders of magnitude less energy than competitors also assures enterprise users they’re not compromising their green credentials when they mint NFTs.
Tezos has a vibrant ecosystem, with advocacy and adoption groups including TZ APAC, Tezos India and the Tezos Foundation. These groups simplify the efforts enterprise needs to make when it wants to get involved in the Tezos blockchain.
For enterprises, minting NFTs (aside from art) is still in its early days. Here we wrap up some of the ways enterprises can use NFTs as part of their operations, creating digital goods which can’t be forged or replicated.
NFTs as digital IDs
Because NFTs contain a unique set of information, it’s possible to use them for any form of documentation requiring authenticity. Think about how digital identities could be tokenized, such as in the Republic of San Marino, which has adopted NFTs as a method of COVID vaccination proof.
Any type of digital identity could be tokenized, including medical histories, driver’s licenses, birth, and death certificate – the list is endless.
An NFT could also be used for academic degrees, qualifications and even passports. Few jurisdictions have adopted NFT and blockchain for these uses, but they’re coming, and they’re going to change the whole way we approach digital identity.
Real estate NFTs
With the rise of the metaverse, digital real estate is also growing and NFTs are perfect to prove ownership. NFTs also allow people to capitalize on their virtual real estate holdings by selling billboard space to companies on their virtual buildings, as well as host gatherings and events.
But what about the real world? How can you apply an NFT to a piece of real-life land or building? An NFT could be used to check titles and verify ownership history. An NFT could also be used for development applications and consent, as well as zoning regulations, where owners are limited in what they can do with their holdings.
Blockchain also opens up opportunities in the area of fractionalized real-estate ownership. This means properties can be broken down into packages and sold, making what was previously an illiquid market more accessible to a broader investor base.
With fractional ownership, gas fees are very low (depending on the blockchain used, but still lower than traditional real estate transaction costs) making the transactions attractive for investor groups.
The first example of fractional ownership via blockchain-based tokenization was Black Manta Capital Partners, in the EU. In 2020 it undertook a Real Estate Token Offering (RETO) for Berlin real estate worth USD$12 million. As part of the RETO, private and institutional investors were able to invest in prime Berlin real estate for as little as €500.
Invoices, patents, and documents
Any corporate correspondence could be turned into an NFT, particularly where an audit trail and verifiability of the document is needed. Patent applications, filings and grants could also be embedded as NFTs in the blockchain, while companies could issue NFT invoices. Being paid would be a transfer of cryptocurrency, creating a payment trail which is immutable and can’t be contested.
Supply chain and logistics
NFTs in the supply chain will be used to ensure products are what they claim to be. Fish, for example, could be traced from where they were caught all the way through processing and supply and on to the end consumer. That consumer would have proof the fish was sustainably produced and wasn’t caught illegally.
Just about any good requiring provenance could be represented as an NFT, including medicines and other products where counterfeiting is a problem. Luxury goods makers, car manufacturers and others could all see where their supplies came from, where they were being used and when they reach the end user.
NFTs as a marketing strategy
Brands can also capitalize on NFTs by selling limited edition goods to consumers, building their brands, and creating loyalty from the buying public. NFTs are verifiable and traceable, meaning the consumer knows the NFT they bought is authentic, and can’t be reproduced.
NFTs can also be used to build brand loyalty and community around their products. Recently Coca Cola sold a range of collectibles, called a Friendship Box, with the winning bid bringing in USD$575,883. The Friendship Box contained four multi-sensory, friendship-inspired NFTs which put a virtual spin on Coca Cola imagery.
Formula 1 team McLaren Racing launched its McLaren Racing Collective experience on Tezos, where fans can collect NFTs representing different parts of a McLaren racing car. The parts are limited editions, and those who manage to complete the set win a 3D interactive collectible of the completed MCL35M vehicle, as well as the chance to win an all expenses paid trip to a Grand Prix race in 2022.
Building a community using NFTs creates additional touchpoints for the brand, providing unique ways to bring people together under the branding umbrella.
For example, famed rock band Kings of Leon launched their album, When You See Yourself as an NFT earlier this year, as well as a token that granted fans perks for their live shows, such as front-row seats. In that, the band was able to foster a more direct relationship with their fans.
It demonstrated how NFTs and IRL goods could be packaged together, traversing both the online and offline space. It also shows how NFTs can also be used to build pre-launch buzz around new products, or to create new revenue streams by creating digital goods to augment the sale of physical goods.
It’s still early days for enterprise NFTs, but the uses are almost without limit. Any document, any digital goods and any ID can be turned into an NFT. Being unique, NFTs are perfect for government and enterprise wanting to create goods and services that are verifiable and can’t be replicated, either digitally or in the real world.