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NFTs are reshaping how brands are connecting with consumers, enhancing customer experience and driving engagement.
The digitization within companies worldwide has taken center stage over recent years, as consumers adopt new technology at a pace never before seen. As time spent online continues to increase, consumers, especially younger generations, strive to find their own voice, style, and personality across digital channels.
NFT’s, acronym for non-fungible tokens, are unique and non interchangeable digital assets that represent tangible or intangible assets such as art collections, fashion products, music, avatars, or even tweets, which can be “minted” by anyone. They commonly exist on the ethereum blockchain, and thus can not be copied, destroyed or tampered with.
From 2020 to 2021, there was a user increase of 5391% (Statista 2022) and a 4400% increase in NFT market value capitalization from 372 million USD to 16 billion USD (NonFungible and BNP Paribas, 2021). Projections suggest that by 2026 there will be 66.58 million users and market revenue will reach 8,184 million USD (Statista 2022).
After artist Beeple sold its 5,000 days digital collection titled “Everydays” for 69 millions USD in Christie’s Auction House in 2021 (the third most expensive piece of art sold by a living artist), he sparked a conversation on how physical and digital worlds are overlapping at an increasingly fast pace. NFTs can reshape how artists and collectors connect as well as brands and their customers.
NFTs are not only useful for consumers but also to industries and brands as they can be used to increase customer experience and engagement.
The fashion industry sees NFTs as a way to reinforce cross channel strategies (integrating offline and online), a way to celebrate creativity in a modern way, and, as it’s the case for Paco Rabanne, a way to raise funds for the future development of the physical brand.
Moreover, NFTs are a way to further develop existing, and to create new customer relationships with younger clients which value creativity, personalization, exclusivity and this is because:
“There is probably an underestimation of the value being attached to individuals who want to express themselves in a virtual world with a virtual product, [through] a virtual persona”
Robert Triefus (Gucci, CMO) (State of Fashion 2022 Report, McKinsey)
Fashion brands including Channel, Mango, Zara, Prada, and Bulgari have all joined the NFTs world. Twitter allows the use of an NFT as a profile picture, and Instagram is in the process of showing 3D NFT’s thanks to augmented reality.
One of the main characteristics of NFTs is their inability to be copied or falsified by third parties due to the technology behind them, blockchain technology.
Blockchain technology became famous in 2008 with the rise of cryptocurrency however, soon after, people saw the potential benefits that applying this technology to other sectors (healthcare, finance, transportation, retail and consumer goods, fashion, and manufacturing…) could bring, and today numerous industries are applying at within their processes.
In essence, blockchain allows groups of data, referred to as blocks, to be stored on independent servers, meaning there is no unique owner, and linked to previous blocks which have reached their storage capacity. Data is presented in chronological order as the new information is linked to the previous blocks and once it has been included in the chain it can neither be modified nor altered, which makes data irreversible. Even though NFTs are normally sold and purchased on the ethereum blockchain, recent NFTs have been built in other blockchain as Fast Box or HyperLedger, a type of blockchain directed to peer-to-peer transactions, called smart contracts.
Originally, NFTs became popular as they allowed artists to connect directly with their audience without involving third parties such as art galleries or auction houses. NFTs marketplaces, for example OpenSea.Io, Axie Infinity or CryptoPunks, have allowed them to monetize their art work directly without intermediaries, thus increasing their profit margins.
NFTs are valued by their owners not due to its use, as they have no intrinsic use, but because they represent a membership to a specific group, as is the case of owning Bored Ape NFT which provides access to the Bored Ape Yacht Club or The List NFTs which give you free access to exclusive night clubs over the world.
Nevertheless, their use has evolved from digitizing art with Earnst & Young (EY), global consultancy, asurrance, tax and transaction service company, believing that because they guarantee unique digital assets they could be applied to real estate, music and film, consumer goods, gaming, and the financial services industry.
Possibly, the most promising uses of NFTs rely on the consumer goods sector, as they could enable real-time tracking within the supply chain of pharmaceutical, wine bottles, and jewelry items and battle fraudulent use, and in the music and film industry as they could facilitate the payment of royalties to artists and producers.
NFTs can not be copied or falsified as they run on blockchain, nevertheless as they can be created or “minted” by anyone. Owners and companies should keep an eye on these key challenges:
Earlier in 2022, Hermès (French luxury fashion brand) sued Mason Rothschild after he created and sold in Open Sea the MetaBirkins NFTs without owning the trademark rights. NIKE followed Hermès footsteps and decided to sue sneaker reseller StockX for selling digital art featuring their goods without authorization.
Brands haven’t been the only ones to take legal action against third parties using their intellectual property. The film industry has also been involved in legal disputes to determine whether films (characters, script and famous lines) belong to the producer and distributor or to the screenwriter. This was the case when Quentin Tarantino was sued by MIRAMAX immediately after he made public that he wanted to create Pulp Fiction NFTs.
As new technologies continue to take the world by storm, companies have to rely on alternative technologies to protect themselves from IP theft across unregulated digital channels such as NFT marketplaces or Metaverse.
Intellectual property rights give owners the ability to exploit their creations (literary and artistic works, designs, symbols, names, and images) and extract financial benefits from them. However, the increase of IP theft and counterfeit scams are preventing legal owners from exploiting business growth opportunities, capitalize on their success or look for alternative financial opportunities. Companies should consider that the consumers’ motivation to purchase NFTs will decrease if they have to do their own due diligence before purchasing an NFT.
The first step companies must take before considering selling NFTs, or even entering into the metaverse, is to ensure that they have the right strategy in place to fight counterfeits and intellectual property breaches in the channels in which they currently operate.
At Smart Protection we remove fake branded products from the digital ecosystem, including Google search results, social networks, and digital marketplaces. Our third-party relationships allow us to submit vast numbers of takedown notices, acting quickly to limit the impact that such threats have on your product sales, reputation, and customer safety. This gives brands a 360 view of the threats which exist and emerge throughout digital channels, and allows them to continue innovating and adopting new emerging technologies with total peace of mind.