NFTs Explained + NFTs and Ecommerce
Have you heard of non-fungible tokens? Perhaps you know them by their better known acronym, NFT?.
If you pay attention to the digital marketing space, you undoubtedly have!
NFTs have been all the buzz for quite some time. AndBut while you may have heard of them, do you know exactly what they are, exactly? And how, if at all, do they impact the future of ecommerce?
Once we are done, we’ll have answered 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.
Mainstream news about the NFT world has been, mostly, dominated by stories of 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.
Obscure. That’s the key word here. For so long, NFTs have eluded the average person as some sort of obscure oddity that rich people indulge in. But there is more to NFTs than that.
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, a non-fungible token is a unique digital asset. The next question you may have is: What is 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 — also known as a non-unique item. For example, if you buy a pair of Adidas sneakers in size 10, unless they are a 1 of 1, you can be certain that they’re fungible. They are fungible because Adidas has likely fabricated hundreds of thousands or millions of pairs of the same ones.
To recap: Fungible = Non-Unique
Therefore, the opposite of fungible — or 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 printed copy of Starry Night.
It’s obvious why the original Starry Night would cost a fortune. But why would a token of Starry Night be worth an obscene amount of money? At its basic level, a token, or a thing that serves as a representation of something else, has zero inherent value and its value is based upon whatever it represents.
Therein lies the confusion surrounding NFTs. Why are these intangible tokens, which can be virtually anything, selling for SO much money? Keep reading to find out.
NFTs and the blockchain
The answer to the question of why tokens, an inherently invaluable asset, can have such large values requires at least a fundamental understanding of the blockchain.
The blockchain is 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 does so in the blockchain.
What does this have to do with NFTs, you might wonder?
For starters, 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. The type of product or service being purchased doesn’t matter. So, people with insane amounts of cryptocurrency (the coins we mentioned above) started buying these made-up things called non-fungible tokens, which, as we also mentioned, can be virtually anything.
NFTs are on the blockchain, and therefore are verifiable, secured, and transferable. That means that the 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. That is why they’ve sparked a whole new type of alternative economy.
The next question is: how does all of this impact the ecommerce world?
NFTs and your ecommerce business
Let’s discuss the question that you really care about: How might NFTs impact your ecommerce business?
While it’s unlikely they will affect your business in the near term, NFTs are something that ecommerce store owners should stay up-to-date on. The reason is 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 solely for the ultra rich. In fact, more and more, it’s becoming a place where regular people transact to buy and sell digital assets.
If you’re an ecommerce store owner who sells physical products but wants to explore NFTs, here are a few strategies to consider:
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. Keep in mind that 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, NFTs can contribute to your bottom line by driving traffic to your store. Keeping up with the latest purchasing trends 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 increased interest in tokens, think about ways that you can use them to help your current online business flourish.
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