NFTs Explained + NFTs and Ecommerce

Have you heard of non-fungible tokens? Or perhaps their better known acronym, NFTs?

Of course you have!

NFTs are all the buzz and have been for quite some time. But what are they, exactly? And how do they impact the future of ecommerce, if at all?

By the end of this article, we’ll answer three big questions about NFTs and ecommerce:

1. What are NFTs?

2. How can NFTs potentially be useful for your ecommerce business?

3. What does the future hold for NFTs and how can you position your ecommerce business for success?

NFT Explained: What are NFTs anyway?

What comes to mind when you see or hear the word “NFT?”

You might immediately think of ridiculously expensive JPEGs or digital art.

And for good reason.

So far, mainstream news about the NFT world has been dominated by stories of these crazy expensive art sales. They’re often met with awe and confusion. Because, to most people, it sounds ludicrous to pay thousands, or, in some cases, hundreds of thousands (even millions!) of dollars for something so obscure.

And that’s the key word here: obscure. For so long, NFTs have eluded the average person as some sort of obscure oddity that rich people indulge in. But this isn’t necessarily the case.

So we’re going to demystify the NFT world as best as possible. And tell you how it may or may not affect you as an ecommerce store owner.

JPG image that sold for $69 million in March 2021, courtesy of The New York Times

Let’s begin with a simple definition of what an NFT is. In its most basic terms, understanding NFTs requires you to first define the word fungible:

Fungible (adjective): a good or service that can be replaced or is replaceable; mutually interchangeable.

In other words, fungible means that there are many identical items to the one in question. So, for example, if you buy a pair of Adidas sneakers in size 10, you can be certain that they’re fungible. Because Adidas has probably made hundreds of thousands or millions of pairs of the same ones.

That’s fungible in a nutshell.

So the opposite of fungible — non-fungible — means there’s only one, and it cannot be replaced.

Starry Night by Vincent Van Gogh, for example, is non-fungible. There is and always will be only one original of this masterpiece, which is why it has vastly more value than a print copy of Starry Night.

It’s pretty obvious why the original Starry Night would cost a fortune. But why should a token of Starry Night cost obscene amounts of money? After all, a token, or a thing that serves as a representation of something else, does not have inherent value. Its value is based upon whatever it represents.

And that’s the confusion surrounding NFTs. Why are these intangible tokens, which can be virtually anything, selling for so much money?

NFTs and the blockchain

The answer to this question requires at least a fundamental understanding of the blockchain.

The blockchain is essentially a decentralized ledger of global transactions. It’s a public record of money transfers from one person to another. Rather than banks verifying the legitimacy of transactions, the global community of transactors, so to speak, does so in the blockchain.

What does this have to do with NFTs, you might be wondering?

Well, the only thing the blockchain verifies is that the buyer in a transaction has sufficient money, or coins, to pay for whatever he or she is buying. And that can be anything. So people with insane amounts of cryptocurrency started buying these made up things called non-fungible tokens, which can be virtually anything.

And because NFTs are on the blockchain, they’re verifiable, secured, and transferable. So buyers and sellers of these tokens can be assured that they aren’t getting ripped off. For the first time, people can actually own digital assets — an exciting prospect for those of us in ecommerce.

In a sense, non-fungible tokens have created value in things that have no inherent value. And in this way they’ve sparked a whole new type of alternative economy.

So, how does all of this impact the ecommerce world?

NFTs and your ecommerce business

Now, on to the question that you really care about: How might NFTs impact your ecommerce business?

While they probably won’t in the near term, NFTs are something that ecommerce store owners should be aware of and stay up-to-date on. That’s because they’re more commonly bought and sold than most people realize. And indications show that a solid NFT economy is emerging.

Did you know that over 4 million Americans have bought or sold NFTs to date? And in Q3 of 2021, NFT sales totaled $10 billion — a huge increase over NFT sales from just one quarter before.

This number indicates that the NFT market isn’t only for the ultra rich. In fact, more and more it’s becoming a place where regular people transact to buy and sell digital assets.

So, here are some strategies if you’re an ecommerce store owner who sells physical products, but wants to explore NFTs:

Use NFTs to drive demand for your physical products

NFTs can be used to create exclusivity around your products. Some brands are using NFTs to “gate” certain collections of their products. In other words, only NFT-holders can access products in select collections.

Ecommerce stores can also create NFTs for the metaverse with the sole intention of driving traffic to their physical product catalog. Simply participating in the world of NFTs and the metaverse doesn’t mean that it needs to be the bread and butter of your business.

Rather, it can contribute to your bottom line simply by driving traffic to your store. Sometimes keeping up with the trend helps you to maintain business as usual.

NFTs and the future of ecommerce

It remains to be seen what NFTs and the so-called metaverse portend for the ecommerce sector.

For the time being, it’s important for ecommerce business owners to, at the very least, be aware of NFTs and their potential benefits. As we see an increase in interest in these tokens, think about ways that you can use them to help your current online business flourish.

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Learn more about how customers use Kliken to grow their businesses online here.