Though the track record and applications of cryptocurrency are largely unproven and unregulated, its impacts on modern technology are undeniable. From U.S. banks to international celebrities, many are participating in this new form of currency and believe that it is here to stay. And when the Blockchain was first used as a means to document and sell a non-fungible token by artist Kevin McCoy in 2014, a new opportunity was born— the NFT, which would change the way we do commerce forever.
At a base level, NFTs are like barcodes. Except not only do they include a unique digital product, but they also hold metadata on the product’s owner at any given time. The accuracy of these barcodes lies in the fact that every transaction of an NFT is documented on the Blockchain, which can be validated by anyone anywhere. This reduces the potential for fraudulent purchases or counterfeit materials sold.
Because of their ability to authenticate ownership, NFTs have taken hold in the art world and even used art as a primary channel of expansion. Beyond using NFTs as a way to simply authenticate physical art, NFT creators have started to use NFTs as works of art themselves. In a sort of poetic insurrection, Blockchain company Injective Protocol literally bought and burned a Banksy original and sold a video of the destruction as an NFT. Street artists like Banksy walked so that NFT artists could run.
Zooming in on this intersection of art and “ownership”, our modern day concerns around data privacy mean that NFTs carry some interesting implications. For example in her viral article “Buying Myself Back,” model Emily Ratajkowski illustrates the way social media has stripped us of our ability to own our own digital content. It wasn’t until the rise of NFTs that Ratajkowski was able to finally “buy” her image back by minting it into an NFT. NFTs therefore democratize the ability of individuals to own and monetize their own content like never before. And seeing as data exploitation has predominantly impacted women (as was the case with the infamous Lenna image), NFTs offer specifically women the ability to reclaim ownership and sell NFTs as a form of artistic feminism.
But the applications of NFTs extend far beyond the art world, with key players being individuals (like Mark Cuban, Beeple, and Pplpleasr), marketplaces (like sorare, Dapper Labs, and OpenSea), and vendors like Nike that use NFT technology as a means to grow their own businesses or brands.
For individual NFT creators, the key opportunities for technological advancement lie in the creation and sales process of NFTs. Creators like Woonyoung Jung, for example, have written algorithms that mass produce NFTs— each one unique— at scale. This Warholian method of NFT creation allows creators to maximize their output and expand their reach.
Marketplaces, on the other hand, are becoming increasingly saturated and rely on network effects to gain significant traction. The opportunities for advancement are therefore going to be concentrated among the select few that have both creators and customers at scale. We will start to see some smaller marketplaces lose momentum while others that can procure the biggest creators and acquire the most customers will win. Technologies that reduce friction for both ends of their funnel will be vital in helping marketplaces grow.
Perhaps the most interesting and underutilized aspect of NFTs is their application for brands and vendors to grow their businesses— NFTs as a service, or NFTaaS. For example luxury brands have started to use NFTs as a means to authenticate ownership over physical products. NFTs have also started to be used as a method of food ordering that is both faster and more transparent than traditional payment methods.
I am particularly bullish on the potential opportunities for NFTs to optimize and scale eCommerce businesses (which already make up a multi-trillion dollar market). I outline just a handful of the key opportunities (as well as potential risks) in my post, “An Investor’s Guide to NFTs and eCommerce.” What forms NFTs will take in the coming years remains to be seen, however one thing is clear: the technology is here to stay. Investors who remain on the forefront of ways to scale businesses using NFTs will find lucrative opportunities for years to come.