July 26, 2022
NFTs, or non-fungible tokens, are a hot topic in both the business and consumer world. These popular new digital assets are generating the interest of many business leaders, as some are sold for thousands or millions of dollars. However, to successfully make NFTs a consistent part of a business plan, leaders need to understand how they work and their nuances.
During a recent U.S. Chamber of Commerce Foundation Tech Forward event, an expert panel discussed the basics of NFTs and their potential in the modern economy.
Are NFTs Cryptocurrency?
NFTs are unique digital assets such as images, songs, GIFs, videos, coupons, or anything that can be shared and owned digitally. Cryptocurrency, on the other hand, is a form of currency that exists digitally that secures financial transactions through cryptography.
While NFTs and cryptocurrency are not the same thing, they are both built on the same underlying blockchain technology and are therefore closely related.
“[NFTs and cryptocurrency are] sitting on the blockchain, which means they're un-permissioned, they're accessible, they're open, they're transparent, anybody can create them, anybody can use them, [and] anybody can trade them,” said Arry Yu, Chair of the Cascadia Blockchain Council.
How Do I Buy an NFT?
Purchasing an NFT is not like a typical e-commerce transaction. Those interested in buying one must change their native currency to a blockchain-based cryptocurrency like Ethereum before they can complete their transaction. This exchange generally happens on a dedicated NFT platform.
“There are lots of platforms that sell [NFTs], OpenSea happens to be one of the more popular ones, and then you would do the transaction using the cryptocurrency,” said Yu. “But it's not that straightforward because cryptocurrency isn't that straightforward quite yet.”
How Are NFTs Distributed?
NFTs are sent directly to consumers from the point of purchase. For business owners, these assets can offer a direct-to-consumer product that eliminates a physical footprint and distribution. While this will be a cost-saving solution for B2C businesses, B2B companies will need to learn how to implement NFTs into their model.
“The true promise of NFTs is to eliminate businesses where there are middlemen,” said Tor Constantino, Vice President of Global Corporate Communications for IQVIA. “And if you're a middleman [who] provides … title searches for homes [or] legal services, you're gonna want to get up to speed quickly on NFTs and see how you can integrate those into your offering suites, so you don't get eliminated when this becomes much more prevalent in the next five to seven years.”
How Can Small Businesses Implement NFTs?
The usage of NFTs may seem like it's exclusively for artists and major corporations, but many small businesses are now using them as well. Small businesses have created and sold NFTs for sweepstakes initiatives and to raise money for charities they support. They can also create and sell NFTs to promote their business and generate revenue.
“Small business owners could use [NFTs] as single-use promotional tools,” said Constantino. “You could have coupons, you could have promotional discounts that are represented in an NFT type of QR code, or as a design of your company's logo with a specific type of number. It could be a special invitation only for customers who have a certain … use case.”
What Are the Drawbacks of NFTs?
While NFTs are an exciting technology with lots of financial potential, they do have limitations, one being the lack of broadband access in areas of the United States and other parts of the world. Without internet access, consumers cannot participate in the exchange of NFTs.
“We definitely need people from other parts of the world,” said Maliha Abidi, Artist and Founder of Women Rise. “People are aware of NFTs. They are enthusiastic, they are creative, and they have amazing ideas, but there are restrictions around regulation, even technology or resources.”
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