Check the Way Companies Are Building Digital Asset and NFT Strategies

The month of August, 2021 was when Gartner issued a research report that identified emerging technologies in the “hype cycle,” which shows the growth of new products and industries. The report placed non-fungible tokens, also known as NFTs, at the top of a curve known as”the “Peak of Overinflated Expectations”–a point in time at which the technology is greeted with a amount of attention that is both positive and negative and entices certain companies to adopt it and scaring away others.

However, I believe that NFTs aren’t quite at this point, but remain in an “Innovation Trigger” stage, in which the technology’s commercial viability is being discovered. The innovation is a catalyst for imitation, resulting in an exponential growth curve of the delivery of products as well as value-creation. It’s an ideal time for companies particularly those that have entertainment and media assets, to start thinking about their own strategies for NFT and ways to maximize any advantage gained from early-movers to gain an ongoing competitive advantage.

An NFT can be any digital asset whose ownership is recorded on the blockchain–typically art, collectibles, and other unique assets used in games or virtual worlds. As businesses enter the new industry, blockchain-based startups are developing the most effective commercial model for this technology, and established businesses are investigating ways to make use of the assets of blockchain within their current business strategies.

In established companies, many beginning NFT investments were focused on maximizing the hype, such as Arizona Iced Tea’s acquisition of an incredibly famous Bored Ape NFT or Fox Corp.’s creation of NFT memorabilia to promote a show known as “Krapopolis.” But some businesses are taking a more long approach, implementing strategies that show the potential for change this technology could become.

Profiting from the growing popularity of NFTs, Arizona Iced Tea bought an Bored Ape NFT to promote its products in August 2021.

The Rise of NFTs

NFTs were a major topic of discussion in 2017 following the introduction of CryptoKitties which is a game on blockchain that is based on Ethereum. In the wake of Bitcoin becoming a bull market that following year, media frenzied was created as the prices for permission to use images of huge-eyed cartoon cat breeds that can be traded and bred increased to over 100,000 dollars per. Prior to that NFTs were only the realm of technologists who were hip However, investors soon came in and entrepreneurs set up exchanges that helped establish an actual market for these assets.

The industry’s top players have emerged. In the year 2020 the NBA joined forces in partnership with Dapper Labs to launch NBA Top Shot an online platform that has allowed the exchange in excess of $780 million worth of basketball-related collectibles. The platform grew 300% by 2021 with more than 13 million transactions being recorded. In Europe Sorare, the French company Sorare has formed partnerships with soccer clubs from all over the world across the globe in dozens of leagues and allows fans to trade unique digital cards to stars on its blockchain-powered global fantasy platform producing revenues that total $130 millions.

The NBA’s Top Shot platform allows users to purchase and trade unique video clips of NBA games.

A market for art that is digitally native has also been growing and auction houses such as Sotheby’s and others getting in on the scene. In March 2021 Christie’s auctioned a digital collage titled “Everydays: The First 5000 Days” by Mike Winkelmann, known as Beeple the piece, for $69 million. It was the third-highest price ever paid for art by an artist living today. It’s no surprise that the NFT market has now reached record heights after cooling for a short time in spring, as prices for crypto-tokens such as Bitcoin fell from record-setting levels. The interest in NFTs hasn’t waned however: One of the largest platform, OpenSea, has now exceeded 26,000 users and recorded greater than 3 billion of transactions in August 2021. This is an increase of tenfold over July. Evidently, the public believes that NFTs remain relevant.

I’m a bit tolerant of the argument that these prices don’t make sense. In their most extreme form, NFTs are peddled by individuals who convert images like JPEGs or GIFs in crypto currencies through uploading files to a blockchain, generating an electronic token, which is an evidence of ownership and then auctioning the token off. What is the value when anyone can still view the video clips without cost, or copy those images for thousands of dollars? What is the reason why the record on a blockchain give worth to an otherwise unimportant asset?

These are legitimate questions. It is crucial to comprehend however, is that the actual worth of these crypto assets lies in the strength in the Blockchain. Since the digital ledger is kept by a multitude of computers across the globe, it’s impossible to falsify any evidence of ownership that is stored in the ledger. The blockchain is the only digital document that identifies ownership in the blockchain, which can be purchased and sold. This results in a scarcity of NFTs and creates value.

They are also gaining traction due to their ability to satisfy the needs of people as per the tech-savvy blog writer Eugene Wei, who in his essay of 2019 entitled “Status as a Service” investigated the interaction between the human condition and social networks. The people, Wei wrote, are “status-seeking monkeys,” searching for “the most efficient path to maximizing social capital.” Seeking recognition, he wrote they gain trust and authenticity through the acquisition of rare or unique tokens, thereby creating crucial social capital within their networks.

This knowledge is crucial in understanding how market prices for such assets are likely to continue and thrive in an ever digital world.

More Than Just Marketing

In 2021, Coca-Cola auctioned its first NFT collectibles in aid of charity, netting more than 575,000 dollars for four loot boxes with NFTs and custom-designed jackets which can put on by people of the Decentraland 3D virtual platform, which is built upon the Ethereum blockchain. This was a tactic to promote its brand however it also provided the company an opportunity to introduce itself to the key industry players such as developers, marketplaces and agencies, and also strategic insights into the upcoming technology.

Decentraland is a virtual 3D platform built on the Ethereum blockchain that lets users interact with each other and participate in virtual events, such as concerts. Coca-Cola auctioned off a variety of boxes featuring branded jackets that avatars of the users are able to wear on Decentraland. Decentraland platform.

There are many consumer brands who are testing similar forms of digital marketing. These include Taco Bell, Nike, and Campbell’s Soup. A small segment that has significant intellectual property has launched new products that utilize a futuristic, new digital channel based upon blockchains, and has formed partnerships with digital platforms and finding NFTs as a fresh and lucrative revenue source. That’s what NBA has been doing through it’s Top Shot business.

Other companies in this sector comprise Marvel, Time magazine, and Lionsgate in addition to the most prestigious professional soccer teams in Spain as well as Germany. They have a few traits that make them perfect early adopters:

  • They have highly valuable intellectual property, with wide appeal and a large and loyal following.
  • They can create their intellectual property in a format that is similar to products that are already in existence. For example, comics or trading cards can be replicated in a format that is similar to the current product.
  • They have commercial processes to license this IP to make money.

These attributes allow businesses to swiftly convert their assets to NFTs and partnerships strategies allow them to gain access to markets. The competitive advantage they benefit from moving fast over the less profit margins that are associated when you lease infrastructure owned by someone else.

Marvel’s strategy for NFT includes selling variant covers that are popular collectibles for comic book enthusiasts.

Of course, finding the ideal partner is crucial and there’s no simple guideline for doing it in a market which is just beginning to emerge. The year 2021 saw Marvel has partnered up with the startup from New Zealand, Orbis Blockchain Technologies Limited, that runs VeVe, a VeVe digital collectibles application. Time magazine is working with the company behind Cool Cats. Cool Cats community. Entertainment giant Lionsgate signed a contract with Autograph the startup founded by NFL quarterback Tom Brady that also signed several individuals who are sports stars.

The NBA and its Players Association began working with Vancouver-based Dapper Labs in 2019 after Dapper Labs was spun off from the company that created CryptoKitties to create a more secure blockchain, called Flow. Its Top Shot platform shares revenue with players and the league whenever digital trading cards capture moments such as dunks or blocks are dropped. It also collects fees from the secondary markets it operates. Top Shot typically offers packs of three minutes that are available for sale for as little as $9, and it was the LeBron James dunk which was a tribute in honor of Kobe Bryant sold for nearly $400,000 on the platform.

Another important market, The Nifty Gateway , generally has daily drops by two creators in which each release is between five and 10 pieces. Nifty Gateway additionally facilitates second-hand trading and buying in the open market, which creates liquidity.

Keys to NFT Success

Financial models I’ve developed for clients who are working on NFT opportunities are based on the great unit economics that Top Shot suggests. Top Shot, and all contain at least one of these components:

A low cost of production. One of the main benefits of digital trading cards or comics in comparison to traditional physical counterparts is that they have a less margin cost for production as well as distribution. Both require upfront costs for artists, selling assets via a digital channel can save thousands or many hundreds of thousands in the production cost to print, and managing channels for retail to deliver products to retailers. Converting digital artwork to NFTs means paying what’s called “gas fees” to mint tokens on blockchains, that can range from $150 to $150. You also need an annual fee of around $0, based on the platform or marketplace you select as your outlet.

Improved customer engagement. NFTs are able to expand or increase customers’ bases, allowing businesses to interact with the digitally native generation. I believe this will improve customer retention and create an effect that spills over, particularly for sports teams, encouraging increased attendance to games.

Recurring revenue potential. When Marvel began to drop thousands of in comic book cover images in the VeVe marketplace earlier this year the sticker price was $6.99. But in the contract was an licensor fee of 6 to ensure that the comic book company is profiting from the rise in prices for some of the NFTs that are on an alternative market.

Know the Risks

So , what’s keeping your business from dipping into this NFT pool? Anyone who is a believer acknowledges the fact that it is an unproven and unregulated market. To begin there are many differences between the NFTs. Not all NFTs are all created in the same way. True, the proof of ownership that is stored in the public blockchain ledger cannot be changed and is not duplicated. However, it is important to keep in mind that this certificate is just the connection to the digital file that is stored on the server. Not all servers are made identical.

A significant threat is link rot, which occurs when hyperlinks fail. Most often, this occurs because the target file is transferred to a new server, but without updating the link, or the server is shut down. When purchasing or creating an NFT take note of which server the file kept. Local storage is a significant increase in the possibility that the NFT might be lost in the future. A cloud that is accessible to the public minimizes the risk, but better is a server that is decentralized such as that of the InterPlanetary File System (or Arweave. You should ensure whether the metadata of your token is stored on an uncentralized server, too.

IP rights for intellectual property are important to think about, even though this area is in the process of evolving. There is no lawful precedents in the US regarding NFT ownership implies that a variety of crucial questions regarding the rights to commercial use by creators as well as future licensing remain discussed or require to be refined, according to Sarah Bruno, privacy, advertising as well as IP director with Reed Smith.

The environmental impact is an important aspect to take into consideration. NFTs are mostly bought and sold through the Ethereum network, which produces more carbon than some smaller nations. It’s due in large part to the level of computing power required to run the decentralized consensus mechanism that it employs to verify transactions, referred to as Proof of Work. Artists, as well as individuals in particular, could be at risk of losing business or being rebuked from customers who are concerned about climate change.

However, there is an increasing interest in the world of blockchain to decrease or eliminate the carbon footprint of mining. For instance, Ethereum’s owners have pledged an upgrade in 2022 which they claim will reduce emission by nearly 99%. This will be accomplished by using the so-called proof-of-stake operating system which requires much lesser computing capacity. Certain marketplaces, such as the NBA’s Top Shot, which operates on the Flow blockchain, have already incorporated networks that utilize the more eco-friendly method of proof-of-stake.

The Potential Is Limitless

Even if you don’t have valuable IP The applications of NFTs are so vast that possibilities are bound just by the imagination of your employees. The future possibilities include sports and entertainment tickets that were once stored in scrapbooks. They could be used again, albeit in a virtual. Bluetooth-enabled devices could be a step into the crypto world too, as they come with an irrevocable NFT warranty that is included along with a product once it is resold.

Early evidence suggests that the technology that supports NFTs is a real disruptive factor from a user experience standpoint and a broad range sectors will have the ability make use of this technology to share rewards. The number of companies that operate within this sector is not expanding, but it is also converging as evidenced by the alliances between tech startups as well as established businesses with huge quantities of IP. While price volatility is to occur, NFTs are poised to take a prominent role as the internet grows and digital ecosystems expand.

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