Many businesses and big brands have already jumped on the non-fungible token (NFT) bandwagon, including Nike, the National Basketball Association, Pepsi, and even Taco Bell. But are these just for show, or are they generating NFT value? Much like digital services have become essential to every business in and out of the technology sector, I believe that tokens – and, in particular, NFTs – are at least two reasons for the emerging Web3 economy. is likely to be equally important.
First, I am of the view that NFTs embody ideas at the atomic level, creating rivalry and exclusivity around goods or services. Markets cannot be created when goods and services are non-rival – when one person’s consumption does not trade with another – or when they are non-exclusive – when gate access for a good or service with a price mechanism prohibitively expensive. On the other hand, NFTs create rivalry and exclusivity by taking advantage of smart contracts on the blockchain that deliver NFTs to people’s digital wallets when they make purchases.
Second, I also believe that organizations can use NFTs in their own unique way to efficiently attract and engage different levels of customers. Whereas traditional marketing involves selling goods and services at a discount, perhaps for a limited time, NFTs allow brands to target specific customers and reward those who want to engage. For example, perhaps a fashion brand decides to broadcast discount codes or special offers that are not available to NFT holders elsewhere. Normally, doing so on a large scale would be prohibitively expensive, but NFTs offer a way.
related: Why are major global brands experimenting with NFTs in the metaverse?
community building
However, to date, most NFT applications are from big brands – or at least, so it seems based on media coverage. But either way, small organizations and even independent business owners will benefit from NFTs for years to come if they invest the time and energy to understand how they work. In fact, think only of the types of businesses that are most likely to benefit from NFTs: it’s actually smaller organizations that don’t have the marketing budget to implement massive campaigns and discounts that cut costs. benefit from. That NFTs offer to target consumers and invite them into a community.
Forget the thousands or even hundreds of thousands of dollars that go into buying email lists, building sales funnels, and doing surveys and market research. Understanding the competition and knowing your consumer is always important, but the scenario is fundamentally different when you think about reaching people on the blockchain and based on the ability to track what people are actually buying. and connecting in a transparent manner. ,
That doesn’t mean marketing doesn’t matter. Marketing and visibility matter to the extent that consumers need to know about the goods and services that are being offered. But the mechanism behind it is changing—simply having a bigger budget won’t be as much of a blast as owning a small organization or independent business that has a clear community of loyal customers. NFTs are a new technological mechanism for making rival and exclusive goods and services accessible to those who value them – they are not a substitute for creating valuable goods and services in the first place.
related: Web3 Depends on Participatory Economics, and That’s What’s Missing
Take, for example, the positive effects of airdrops and governance tokens, which I covered earlier in Cointelegraph magazine, citing Gary Vaynerchuk and 3LAU. When used intentionally and with discretion, AirDrop is a great way to reward early users and build a close-knit community. Then, as the momentum picks up, the community grows and enters a new phase.
Growing B2B Services
While it is easy to see how NFTs can enhance the consumer experience, what about businesses that sell services to other businesses, from fashion to content creation?
The principles are similar. For example, imagine a consultancy where businesses bid with various advisors over time by buying their NFTs. Again, consultant income will vary based on market demand and supply, providing each individual with a strong incentive to increase their weight and add value to the process, as well as an opportunity for businesses to hire their preferred top talent. will also provide.
The same can go for an institution of higher learning where faculty produce NFTs of their own material and can license it to businesses as an additional source of revenue, reducing the need for increased tuition. Such an approach would also encourage faculty to create content that is actually connected to the demands of the market rather than just talking about them.
Beyond the external aspect, think about the impact of tokenization on an organization’s internal labor market. One of the biggest challenges within organizations is the absence of a value mechanism, which relates to contributions from the late Nobel laureate Ronald Coase in a 1937 paper, as well as another Nobel laureate Oliver Williamson in a 1981 paper .
Since prices in the market act to allocate supply and demand, a problem exists within organizations: there is no price! Instead, organizational decision-making functions through internal labor markets and hierarchies. But these are inefficient, and there are a wide range of transaction costs – or factors that drive a wedge between what people want and need for exchange.
related: Destroying the Business Essentials of the Metaverse
Such friction can be resolved through the use of an internal economic system where tokens are used to facilitate exchange. For example, raising an employee’s salary can be a risky bet, but paying them in tokens creates extra skin in the game and incentives to perform because tokens can only be redeemed if the employee resides in the organization. Clearly creating such an internal ecosystem is not easy, and there are costs and benefits to be assessed in more detail, but at its core, tokens have the potential to fundamentally change the conversation about transaction fees.
Assessing
It’s easy to discuss NFTs – and even exchangeable tokens – without knowing why. Obviously, there’s something special in the Web3 revolution we’re in, but sometimes it’s hard to lay our finger on it. I believe the secret sauce for NFTs is the potential for creating rivalry and exclusivity at the atomic level around ideas – and this has profound implications worth exploring further.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research when making a decision.
The views, opinions and opinions expressed here are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Christos A. makaridis He is a research associate and chief technology officer at Stanford University and Columbia Business School, and co-founder of Living Opera, a multimedia art-tech Web3 startup. He holds doctorates in economics and management science and engineering from Stanford University.
