Analyzing the NFT Craze

Illustration by Neha Marina

In recent news, non-fungible tokens (NFTs) have taken the internet by storm, becoming the next cryptocurrency phenomenon to go mainstream. Non-fungible tokens (NFTs) operate using the same technology popular cryptocurrencies like Bitcoin operate with: blockchain technology. Blockchain technology is a system used to store online information safely through a series of codes and unique cryptographic signatures. However, unlike Bitcoin and Dogecoin, being an owner of an NFT allows you to be the rightful owner of a one-of-a-kind digital asset. This digital asset can range from unique tangible and intangible items, from Nyan Cat GIFs to digital NBA trading cards. 

The Art Community and NFTs

Although critics argue that the rise in NFT art would join Gamestop as this year’s “meme stock,” many digital artists who have had years of efforts going unpaid and unnoticed on social media platforms like Facebook and Instagram are taking part in the craze. With the advent of the internet making it easy for people to copy and paste graphics without paying or giving proper citations to its owners, digital art has long been undervalued. Furthermore, the pandemic has limited the number of art gallery exhibitions. NFT trading sites allow these artists to be fully compensated for their work; they can now sell artwork directly to a global audience of buyers in digital form without using an auction house or gallery, allowing them to keep a significantly greater portion of the profits from sales. Likewise, by allowing artists to be fully compensated for their work, NFTs transform their creative processes and how the world values art. 

NFTs Revolutionizing Marketing and Advertising 

NFTs are also being used by businesses as a marketing tool and a revenue stream. Some businesses use NFTs encoded with insights about customer demographics and lifestyle from customer relationship management (CRM) data to personalize a program better and strengthen brand loyalty. For example, Taco Bell recently hopped in the NFT craze by selling its taco-themed GIFs and images on an NFT marketplace. To ensure brand loyalty, Taco Bell gifted electronic gift cards to the original owners of the NFTs.

NFTs have also been proven to boost sales for sports organizations. The NBA has recently launched an online virtual trading card marketplace, Top Shop, which reportedly increased $200M in the firm’s sales with over 65,000 buyers involved. This virtual trading card market has proven to be helpful to the organization, especially with the pandemic restricting on-court games. One of the most expensive recorded NFTs was an NBA digital collectible card of basketball star LeBron James sold for $100,000. 

NFTs and the Fashion Industry

Luxury brands are eyeing to join the NFT party as well. One of the early brands to adapt to the trend is luxury watch brand Jacob & Co. Last April 4, they recently launched the first-ever NFT luxury watch on the NFT platform ArtGrail. With a starting bid of US$1,000, the “NFT SF24 Tourbillon” resembles a watch that displays different types of cryptocurrencies in a short 10-second animation. Although the auction will have a limited business impact since only one customer will take full ownership of an NFT, it can jumpstart the fashion industry’s move towards digitalization. 

In other news, RTFKT studios, a virtual sneaker brand, made a total of $4.1 million after reportedly selling 600 shoes. Before the shoe bidding, one could try the virtual sneakers on Snapchat Furthermore, “winners,” or the highest bidders, could also redeem a physical pair of the ordered sneakers. Another online retailer, Clothia, utilized the same marketing tactic by auctioning NFT dresses. The winning bidders will receive the corresponding real-life dresses. 

NFTs are a big hit due to the exclusivity of luxury items and certain digital assets. Although some may buy luxury or rare items for their utility, most of its consumers purchase these goods because of the brand’s value. People buy a particular brand that has built culture, and that culture is what collectors want to be a part of. Furthermore, NFTs structure itself allows for exclusivity; it is essentially a digital asset that can be copied, but the key of the proof of ownership is unique, easily eliminating the existence of “fakes.”

This year saw the rise of several cryptocurrencies becoming mainstream with NFT as a major one in particular. As businesses are increasingly establishing their presences online, how the world of marketing, advertising, and consumer behaviors will change accordingly is certainly something to look out for.