The NFT bomb that exploded in 2021 has left us all in shock. NFTs or Non-Fungible Tokens for small business are ubiquitous now. The NFL, Snoop Dogg, Burger King, Shakira, and many other household names have dipped their hands in the NFT rush. With everyone jumping on the NFT bandwagon, it seems highly unlikely that even a layperson has not heard of them. However, the best part is that NFTs are not just for just for superstars or celebrities; it is a perfect opportunity for small businesses as well.
Before eliciting the wonders and potential benefits of NFTs for small-medium business, let us first understand what they are and how they work.
NFT or non-fungible token is a digital asset that represents virtual or physical elements that cannot be substituted, altered, or imitated in any manner. The basic premise is that NFTs are locked in on a blockchain and can always be traced back to the original owner or creator. NFTs can be anything. However, primarily they are digital arts, photos, music, videos, collectables, memorabilia, contracts, and coupons. They can also be certificates of authenticity, ID files, health documents, and much more.
NFTs were novelty items back in 2017 when they started to gain traction. It was pretty evident that they were likely to go mainstream when their sales topped $40 million in 2018. Soon after, their sales crossed $330 million by the end of 2020. However, that was just the beginning, and there are a few NFTs that have been individually sold for more than $50 million each. The digital assets, after purchase, are stored in secure digital wallets either online or offline.
NFT Growth Curve
The NFT has followed an exponential growth curve in 2021. The first quarter observed trades valuing over $500 million, and the second quarter saw an additional 40% increase. The Q2 of 2021 NFT trades were marked at over $700 million. The number of active wallets increased as well to 175,000. Moreover, the number of buyers and sellers are increasing by the minute. Specifically, the number of buyers (38%) have increased by a greater percentage than the number of sellers (25%). This means that the demand for NFTs is greater than the supply.
Experts have attributed two things as the reason for the growing popularity of NFT. Firstly, humans like to collect things, and secondly, NFTs are designed to be scarce. The basic economic mantra states that scarcity of nearly any product will lead to a rise in its price. Moreover, NFTs are permanent as they are built on blockchain, and they’ll last as long as the chain exists. Therefore, it cannot be faked; proving the true owner and identifying the original is not a tedious process, unlike other valuable collectables such as paintings.
NFTs for SMBs
The information provided earlier presents an excellent opportunity for businesses to take advantage of and improve their profits. However, to make things clear, our experts have compiled a list of the top five ways by which small businesses could use NFTs to grow and retain business.
- NFTs cannot be tampered with and cannot be counterfeited. This attribute allows businesses to issue single-use promotional tools such as coupons, discount tokens, event tickets, etc. QR codes turned into an NFT will serve as an uncopiable access code that can be used for a wide array of use cases.
- Establishing customer loyalty programs using NFTs is another application. NFT loyalty cards will be generated by the business that can be downloaded by individual customers. Then, every time they visit or interact with the business, they will gain loyalty points that can be redeemed for benefits after clearing certain predetermined thresholds.
- NFTs can also be used as a cause-related marketing alternative or for charitable purposes. For example, NFTs were used to help raise money for Afghan women after the recent US exodus.
- It could be used to secure funding for future expansion projects. An NFT campaign could be an alternative to traditional bank loans. It would act as a crowdfunding campaign where the donors know and track the money. Moreover, the money will be issued only if predetermined milestones are reached.
- Promotion through gamification can be another application of NFTs. This suggestion would work for larger firms and can be very expensive. Businesses could launch an NFT scavenger hunt that would involve locally-owned businesses. This would result in an increase in the customer traffic at each location and increase customer engagement.
NFTs are the new buzz in town, and if you are tech-savvy and keep up with the evolving landscape, you can make the most of it. You can also hire a freelancer to complete NFT projects for you if you don’t have the time or the patience to learn the possibility. Remember, the only limitation to the application of NFTs is human imagination.