What do NFTs mean for digital businesses?
Non-fungible tokens (NFTs) have blown up the digital art world in recent months. From Beeple’s $69million JPG file to Logan Paul selling videos of himself opening Pokémon card packs (don’t ask… please), NFTs have been receiving more and more attention. That forces us to ask what place they might have for startups and digital-focused businesses as the idea matures and becomes more commonplace.
First off, you might be wondering what all the hype is really about. We get it - they’re a weird concept. NFTs are an attempt to apply the concept of physical ownership to digital goods in the same way that people can own original paintings, collectables, and other pieces of work. They act as a certificate of authenticity that cannot be forged or duplicated, making whatever they’re attached to 100% unique. That could be a gif, a video, an item in a video game or even a Tweet. It’s not the item itself, however (or its copyright and intellectual property) - just its value as a commodity.
Who wants this?
So what’s the point, especially when someone else could just download their own copy of whatever your NFT authenticates? Well, not much in tangible terms. It’s more a way of connecting whatever it is you’ve paid for to yourself. For some, that’s simply the bragging rights to be able to say “I own this”. For others, it’s a way to visibly and actively support work that you enjoy and believe in. It’s increasingly difficult for digital creators to be rewarded for their work and this gives a way for patrons to support them whilst getting something in return. They could even be viewed as an investment - if the work goes up in value then selling it is a much more straightforward process than auctioning and transporting a valuable physical artwork. One transaction on the blockchain can move both the funds and ownership of the token, and it’s done.
Some strings attached
NFTs come with baggage, however. For one, it could be argued that attaching ownership to things that exist online goes against the whole spirit of the internet. In a world where the rich-poor divide is widening faster than ever, the web was still a relatively level playing field. Breaking it down into another set of commodities to be bought and sold feels pretty gross. There’s also the environmental impact to consider. NFTs rely on the blockchain and are inexorably tied to cryptocurrency mining. As of 2021, Ethereum mining’s total electricity consumption matches that of Libya, with a carbon footprint bigger than Zimbabwe’s. At this scale, offsetting by purchasing credits or planting trees isn’t going to do nearly enough. There are platforms and technology improvements that are attempting to help but they’re still not perfect nor widespread enough yet.
What does this mean for me? Should I be thinking about using NFTs?
For digital businesses, it’s worth remembering that NFTs needn’t only apply to artwork. The core concept is ownership, whether that’s by selling something, rewarding your supporters, or giving users a stronger sense of involvement in your platform or project. What’s more, they offer a way to get paid directly via cryptocurrency: an attractive alternative to dealing with payment processor fees or walled-garden app stores. There’s definite value to that if the negative impacts can be managed responsibly.
NFTs represent a shift, both good and bad in the landscape when it comes to the ownership, transparency, and value of digital goods. If you find yourself with questions around these topics, do get in touch and we can work with you to help understand the best options and routes to, hopefully, developing a sustainable and rewarding way to build your ideas.