NFTs: Understanding the Basics
With mainstream news of digital apes, kitties and moonbirds selling for millions of dollars, and scammers hacking NFT collections valued well into seven digits, NFTs are no strangers to the spotlight. But what exactly is an NFT?
According to Merriam Webster’s dictionary, an NFT is an abbreviation for non-fungible token and is defined as: “a unique digital identifier that cannot be copied, substituted or subdivided, that is recorded in a blockchain, and that is used to certify authenticity and ownership (as of a specific digital asset and specific rights relating to it).”
Still scratching your head? Let’s break it down.
- Fungible: This word describes something with parts that are mutually interchangeable. For example, money is fungible because you can exchange five one-dollar bills for one five-dollar bill.
- Non-fungible: This adjective describes things that have unique properties that affect its value. Assets like diamonds are non-fungible because the particular characteristics of a stone, like cut, color, weight and grade, impact how much it’s worth.
What can I do with an NFT?
Our previous blog on Brands in the Metaverse explores some of the creative ways that brands have leveraged NFTs to integrate real-world experiences with metaverse activations. While NFTs have been popularized by their fun applications, the power and security of the blockchain allows their use in more functional ways as well.
Understanding that an NFT is a secure certificate of authenticity immediately opens up a world of utility. They can be used for a variety of practical applications, from verifying the authenticity of documents to preventing ticket scalping. Here are some thought-starters:
- Event Tickets: Using NFTs to ensure accurate ticket sales and access to events reduces the risk of counterfeiting. NFT tickets work just like traditional paper tickets but include event access tags. Because the NFT ticket is stored on the blockchain, the owner does not need a physical ticket to verify authenticity.
- Documentation Authentication: NFTs can also be used for document authentication, allowing governments, businesses and individuals alike to verify the authenticity of important documents. One example is NFT-based vaccine passports, which verify the owner’s medical history.
- Academic Documents and Diplomas: Universities will be able to provide non-transferrable academic documents and degrees in the form of NFTs. Because their authenticity will be verified in the blockchain, they will be recognized by other institutions and third parties.
- Proof of Attendance: A Proof of Attendance Protocol (POAP) NFT proves attendance at an event or experience in the physical or digital world. POAP NFTs can prove an individual’s participation in a specific academic course, a business seminar or even a sports marathon.
NFT utility for brands
One useful application of an NFT for brands is verifying attendance at an event. Bob Bonniol, Chief Creative Officer at Mode Studio, suggests issuing participants NFT tickets that prove their attendance at your event. “This can be particularly important for an event whose objective is to convey critical information or training,” he adds. “It’s not art; it’s not music—it’s an accreditation.”
The public is still exploring NFTs. While some people view them as simply fun, digital collectibles, others are excited about their practical use in our everyday lives. As the initial NFT hype begins to simmer, the value of NFTs to brands will likely become directly related to their utility. We still have a ways to go, but the potential is vast and intriguing.