If you thought “NFT” was the name of a band the first time you heard it, you’re probably not alone. There’s still a lot of ambiguity around what NFTs (non-fungible tokens) actually are.
As big brands start using NFTs as marketing tools, digital marketers are wondering: is this the next big thing, or is it just another online fad that’ll quiet down in a year’s time?
What’s an NFT?
In simplest terms, NFTs can be summed up in three words: unique digital assets. What makes them more complicated is that they can be literally anything, from digital pixel art to items in a video game, and include real-life assets, such as real estate, as long as they also exist digitally.
Fungible vs. non-fungible
The term “non-fungible” refers to the asset’s uniqueness. When something is non-fungible, it means it can’t be replaced with anything else.
Let’s compare it to Canadian dollars. A Loonie ($1 coin) is fungible, meaning you can trade a Loonie for another Loonie and have exactly the same thing.
Similarly, bitcoins are fungible. Trade one bitcoin for another bitcoin, and there is no difference between what you have now and what you started with.
NFTs, on the other hand, are wholly unique, like a signed first-edition book or the original Mona Lisa. Nothing else in existence can replace it.
How do NFTs work?
NFTs exist in the metaverse on the Ethereum blockchain. (We know that sounds like something from a Marvel movie, so bear with us.)
Ethereum is a cryptocurrency just like bitcoin or dogecoin. Basically, its blockchain supports and stores NFT ownership information. Why does that matter? Since we’re dealing with non-tangible digital assets, there’s some debate about what quantifies “ownership.” The data stored in the blockchain is the sole proof of ownership, rather than, say, a screenshot.
NFTs and digital art
NFTs appeal to collectors the same way that rare baseball cards or sneakers do. (Check out this example from luxury brand RTFKT.) So, even though NFTs can technically be anything that exists digitally—including a person’s consciousness uploaded as AI—they’re making the biggest splash in the digital art space.
Think of it as fine art collecting for the digital age. You can’t own the Mona Lisa, but you can own Jack Dorsey’s first-ever tweet. (Fun fact: Dorsey turned his first tweet into an NFT and sold it for US $2.9 million in 2021. Now, it’s only worth around $10,000—a true indicator of just how questionable NFTs are as investments.)
How do you market an NFT?
NFTs are certainly marketable, and are useful marketing tools—the RTFKT digital sneaker is a solid example of that. But not every brand is going to see such a return on its investment.
NFTs as branded digital content
It all comes down to perceived value. Jack Dorsey’s tweet sold for $2.9 million because the man who bought it thought it was worth that much (and that he could sell it for a lot more), thanks to its association with such a big company. NFTs work a lot like stocks, in this way. Their value can ebb and flow based on a variety of factors that the shareholder has little to no control over.
So, one of the questions that creators or, in our case, digital marketers need to ask themselves is whether or not their audience would invest in their NFT. For a brand like Marvel or Adidas, it’s a no-brainer. It would be a lot harder for a brand with less pop-culture appeal to justify the investment.
It’s still too early to guess NFTs’ longevity, so if you’re going to jump on this digital bandwagon, do it cautiously.