WHAT IS AN ANYWAY?! N F T

NFTS ARE HERE, BUT WHAT VALUE –IF ANY – DO THEY HAVE FOR BRANDS?

NFTs – one of a kind digital assets – are being created in their droves and routinely selling for hundreds of thousands. Now everyone from Pepsi to Coca-Cola, Dictator Rum to Budweiser want in on the action. But what the hell are they anyway? And what value do they have for brands?

When NFT was named as the Collins Dictionary’s word of the year for 2021, 99.9% of the world’s population went ‘eh’? Intended as a barometer of culture — a snapshot of the zeitgeist — previous examples have included ‘podcast’ (2007) and ‘twitter’ (2009). Though in 2016 it was ‘democracy sausage’, so let’s agree it has a varied degree of success.

Yet the year has seen a flurry of high-profile NFT activity. In March, the founder of Twitter sold an autographed tweet for $3 million. And Grimes sold $6 million worth of digital art as NFTs. Youtuber Logan Paul made over $5 million selling NFTs in February. And in March, digital artist Beeple sold an NFT at renowned auctioneers Christie’s for $69 million. The work ‘Everydays — The First 5000 Days’ was the first purely digital art ever offered by a major auction house.

On a smaller scale, everything from a looping video clip, a digital flower, image of a sock and even digital drawings of kittens and puppies have routinely sold for multiples of thousands. Now even the genetic code of Covid-19 has been turned into a variety of songs that are available to own as NFTs. But it is the use of NFTS in the sale of digital art that has been generating most headlines recently; there’s now even a Museum of Crypto Art in which to display it.

WHAT IS AN NFT?

But what exactly is an NFT? There’s nothing that quite makes you feel like a grandma trying to work an iPhone, than highly conceptional new technology. Put as simply as possible, NFTs or non-fungible tokens, allow buyers to purchase ownership of a unique digital good, a one-off. This good is sort of like digital intellectual property and can be an image, video, illustration, animation etc. In fact, anything digital. It exists as a unique digital token living on a blockchain (a digital ledger of transactions), specifically the Ethereum blockchain, meaning ownership can be proven. Following?

One major flaw is that digital files can be copied and shared. What’s in it for a buyer? In short, bragging rights and a speculative investment. Just like art, there is only one original, which a buyer owns. Yet, copies are as good as the real thing and creators can retain copyright. The kudos is in ownership then and as NFTs are being hailed as the dominant method for future digital art trading, the possibility to resell for a higher value is what is driving the market.

SO WHY DO BRANDS CARE?

With money rapidly flowing over something that can freely be created, no wonder brands are interested and jumping on the trend. November and December in particular saw a flurry of activity, from luxury brands such as Gucci and Dolce & Gabbana, through to McDonald’s, though with varying degrees of success. Showing the lack of understanding by brands of the pitfalls as well as perks of this new technology, McDonald’s was caught out after the early transactions contained a racial slur, inscribed directly on the blockchain.