Non-fungible tokens (NFTs) are unique pieces of code that can't be replicated and don't have a traditional value associated with them. Secured by the blockchain, NFTs are singular assets in the same way an original Picasso painting can't be replicated or replaced. In fact, the art world is one of the primary places you'll find NFTs, with many visual artists creating art for sale in NFT form.
NFTs have made headlines beyond the art world, and as a result, many business owners are curious about creating and offering their own NFTs. If you're interested in understanding more about the NFT market, this guide can help you get started.
[Read more: What Businesses Need to Know About Non-Fungible Tokens]
The business opportunity of NFTs
The fact that NFTs cannot be duplicated or replicated is what might make them appealing to a small business owner. Fans of NFTs argue that these assets can help raise funds for your business, foster customer loyalty, and make it easier to host events.
What are some ways your business can use NFTs? Some experts recommend integrating NFTs into your loyalty program.
"Consider a digital NFT loyalty card. Once customers sign up for it, they download it to their mobile device. Every time they visit your business, they scan the loyalty NFT code to accrue loyalty points," suggested Tor Constantino, a cryptocurrency contributor at Inc.
Event tickets can also be issued as NFTs, allowing your business to better track who has access to which events and market to participants in the future. Since NFTs are nontransferable, you have more insight into who attends your next product launch, store opening, or workshop. Likewise, NFTs can be used as entries into sweepstakes and giveaways, ensuring there's no room for fraud in your next promotion.
Some businesses have started exploring using NFTs as fundraising vehicles. Because NFTs are hosted on the blockchain, every transaction is tracked and recorded. NFTs can be configured such that your business receives revenue every time it is sold — and the blockchain makes it easy to track sales.
"A CPA could sell NFTs that allow the owners to get one hour of consulting. The holders could resell the NFTs, and the CPA would gain new clients every time they are resold," wrote Forbes.
Alternately, business owners in a creative space (such as designers, writers, or interior decorators) can simply generate and sell their own NFTs to earn additional income.
Some businesses have started exploring using NFTs as fundraising vehicles.
What's the downside to creating NFTs?
The market for NFTs has declined rapidly since its peak in the fourth quarter of 2021. NFTs gained a lot of attention in previous years, but that's not to say they’re considered mainstream today. The customer base for NFTs is limited to those who are active on the blockchain, understand how to buy and sell NFTs, and can see the value in owning one.
At the moment, most experts agree that NFTs are still speculative. Investing in NFTs is considered riskier than applying for a loan, for instance. Not only is the market for selling NFTs smaller, but the value of an NFT fluctuates fast and often.
"As the popularity and relevance of certain interests and fandoms fluctuate, so too does the value of the NFTs associated with them," wrote Forbes. What may have been worth a lot to your business one month could be worth far less the next.
Offering NFTs could negatively impact your brand reputation, too. Today's consumers are becoming more concerned with the climate crisis and will abandon businesses that are seen as harming the environment. NFTs, along with other blockchain assets, are not environmentally friendly and could do more harm to your business (and your community) than good.
[Read more: What Small Businesses Need to Know About Blockchain]
Are NFTs right for your business? It depends — but for most small businesses, it might be wise to wait and learn more about the market before diving in. Studying the NFT ecosystem can demonstrate where the opportunities lie for your specific venture and provide something that has real value to your customers.
CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.
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