NFTs & Blockchain: What It Means for Financial Institutions
By Umar Akhtar
It has been a blockbuster time for blockchain technology and cryptocurrency of late as a new alternative to investing, NFTs, became the talk of the town.
EVERYDAYS: THE FIRST 5000 DAYS sold for $69.3 million in March 2021 through British auction house Christie’s. Other notable transactions include CryptoPunk #5822 and CryptoPunk #7523, selling for $23.7 million and $11.8 million.
But why are these major transactions happening? What exactly are NFTs? And what do they mean for the future of financial institutions?
What are NFTs?
Non-fungible tokens, commonly abbreviated as NFTs, are the modern collectibles of today. They are unique units of non-interchangeable data that represent any digital asset.
Non-fungible refers to the fact that each token is unique. It can’t just be swapped for something else of the same value. This makes NFTs different from other blockchain-based assets like Bitcoin or Ethereum, which are fungible, meaning that if you swapped one Bitcoin for another, you’d still have one Bitcoin. NFTs, on the other hand, are like one-of-a-kind trading cards.
Tokens are minted from digital objects that can be linked to tangible and intangible items from art and collectibles to avatars, GIFs, and more. Aside from the uniqueness of each NFT, the token also links ownership to unique physical or digital items, such as real estate, art, music, or videos. Most of these digital assets are part of the Ethereum Blockchain, which allows tracking and transferring ownership of a digital or physical asset, but other blockchains can be used as well.
As a reminder, a blockchain is a decentralized and distributed ledger for recording transactions and tracking digital assets. It is a shared and immutable ledger, so a transaction can’t be altered once recorded on the blockchain.
Why Should Financial Institutions Care About NFTs?
Financial institutions have been aware of cryptocurrencies for a few years now. While they are used to facilitate payments in a few areas, changes haven’t been as widespread as many in these communities might have expected. NFTs are onto something different, however, and will have a tremendous impact on what the brands across all industries are doing.
Examples of NFT Hype
NFTs are transforming the world as digital art, tweets, unique characters, logos, and more, and the sales of these tokens are exploding, making them impossible for brands to ignore. NFT marketplace OpenSea recently closed a $300 million Series C in early 2022, sending its valuation to $13.3 billion. With the transaction volume happening on the platform it’s clear that NFTs are something brands can no longer ignore.
We pointed out some of the major NFT transactions that have occurred, something which showcases NFT as the next digital art revolution. However, NFTs are more than just an art auction. Twitter creator Jack Dorsey sold his first tweet as an NFT for $2.9 million, while Nike acquired RTFKT, a company that creates virtual products and experiences by leveraging blockchain technology. Transactions such as these show that NFTs are being supported by major brands and tech entrepreneurs, giving them increased visibility and credibility.
What NFTs Mean for Today’s Brands
Exclusive brands are looking to build and launch their own NFTs to increase customer engagement. These brands are discovering that making a diverse set of engagement tools and applications by leveraging technology like blockchain while blending physical and digital experiences can help boost brand loyalty and improve transaction verification and supply chain efficiency. Plus, they can create trends, build communities, and launch additional revenue streams.
Increased adoption and utility trends mean NFTs are slowly becoming a major part of our lives. As people increasingly spend their time and money in virtual spaces like the metaverse, NFTs will continue to establish themselves as a key component of the next (and current) digital era.
4 Key Steps to Launch an NFT Project
If you’re considering launching your own NFT, then there are four steps to making it happen:
- Create a compelling story and choose an item
You need a great story that accurately captures your brand voice and vision to entice people to your NFT project. This story forms the backbone for developing your tokenized NFT and helping you to create a community around it. Once you have that story, you’ll need to link it to the item that will be turned into an NFT. A custom collectible, picture, painting, or meme are good examples of things that can be tokenized.
- Choose your blockchain and set up your digital wallet and smart contract
When you’re ready to mint your NFT, you’ll need to pick a blockchain. Ethereum is the most popular option, but other blockchains like Cosmos, Polkadot, and Binance are also great options. After that, you’ll need to select and set up a digital wallet. Cryptocurrency is required to mint an NFT, and you’ll need to store that in a digital wallet like Metamask or MyEtherWallet. You’ll also need to set up smart contracts to manage the transactions. A smart contract is simply a self-executing contract on the blockchain, so when your NFT is sold, it automatically gets delivered to the buyer and recorded on the blockchain.
- Choose your marketplace
Once you have an NFT idea ready to go, you’ll need somewhere to mint and then sell it. That’s where your marketplace comes into play. The previously mentioned OpenSea is a great place to start given its popularity, but Rarible and Foundation represent suitable alternatives.
- Promote your NFT
If you want your NFT drop to actually draw attention and improve your brand, you’ll need to promote it. Create a Twitter page and launch a Discord server for your NFT project. Giving your community members somewhere to discuss the project is essential for a successful NFT launch.
Diving Into the NFT Market with Content Bloom
Financial institutions must be ready to accept that the latest brands will be ready to pour their time and resources into developing NFT projects. If you’re a brand ready to distinguish yourself from competitors in your industry, then forging a deeper connection with customers is essential. NFTs can provide an opportunity to increase brand affinity and generate new revenue streams through sales. Even giving away NFTs can be a great promotional tool for gaining new customers.
Cryptocurrencies and NFTs continue to grow in adoption as they become easier to use, and establishing your brand in this new digital era means embracing these concepts. The scarcity of NFTs can increase urgency and desirability for the products, which benefits your brand even more.
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