NFTs represent a breakthrough in the perception of digital art, its uniqueness and authorship, and bring new trends and challenges to the field of branding and digital marketing.

The digital world is a dynamic environment with endless waves of news, hits and trends. What was “in” a while ago, is now “out” and hitmakers decide today what will be “in” tomorrow. In the last year, and especially the last few months, the NFT, or non-fungible token, has developed into a hit sensation in both the digital and the art world. But what is an NFT, and what is it good for?

The NFT is of particular interest to those who are at least partially oriented and invested in cryptocurrencies, but the trend is making increasing inroads into general public awareness. An NFT is a unique digital asset that uses blockchain technology to define and guarantee its ownership. Classic examples of NFTs include digital works of art, collectibles, game items, or even domains.

NFT in Marketing

The NFT is also gaining notoriety among marketing specialists and in branding. NIKE is one of the first brands to leverage NFT for promotion. The company started selling NFTs in 2019 together with sneakers called “CryptoKicks”. The customer buys his NFT sneakers with “real sneakers” and the “crypto-token” of their own sneakers is then directly paired with its user.

In a bizarre twist on social media monetization, in addition to advertising on social networks, profit is also generated from direct use in the form of creating and selling NFT GIFs and tweets, posts on Facebook and other channels. For example, Jack Dorsey’s first tweet as an NFT was sold for $2.9 million. This is a completely new approach to using social networks when it comes to advertising. Instead of placing ads to generate income, specific content can be sold.

Fungible and Non-Fungible Token

NFTs first originated back in 2017, but they have remained in obscurity until this year. Shockingly, some NFT digital works have sold for tens of millions of dollars. The original NFT relies on the Ethereum cryptocurrency network, but as their popularity grows, more and more blockchains have been created to manage NFTs.

An essential aspect of the NFT is as a unique piece,  managed using blockchain technology. This is even though the creator may decide to make numerous copies of the work of art. Each copy will be inherently different from the original. This concept can be compared to classic photography. There exists only one negative, and each copy will be a little different, especially if photos are enlarged manually.

Use of Blockchain

There are a myriad possibilities for growth for NFTs. Ultimately, anything that can be digitized and managed on a blockchain can be transformed into an NFT, but at the same time, not everything on a blockchain is non-fungible. For example, cryptocurrencies like bitcoin or Ethereum are fungible. One bitcoin or Ethereum is the same and has the same value as another bitcoin and Ethereum.

It is important to understand how blockchain works and its benefits, to truly be able to appreciate the potential for NFTs. Imagine the blockchain as a sequence of individual blocks that have a certain capacity and at the moment when the capacity of an individual block is used to the maximum, data that would exceed the original block is moved to the next block and remains connected to the original block. Every time we want to change something on an individual block, it would require changing all those that preceded it. This is nearly impossible and would prove a too difficult operation. Thus the blockchain is a  secure medium that is virtually impossible to tamper with.

Pros and Cons

The clear advantages of NFTs include simplicity and transparency. It is relatively easy to create NFTs, it is always a unique piece. It is always clear who owns the piece. These aspects make it quite easy to trade with NFTs, NFTs present endless possibilities, especially in terms of profit. In March 2021, an NFT was created by the digital artist Beeple’s artwork and was sold for $69 million.

One of the biggest challenges is reducing the NFT’s carbon footprint. NFTs are very demanding on data processing, thus a burden on the environment.

NFTs are only at the beginning of their journey, and it is difficult to predict whether the concept will be a passing trend or will be able to create lasting value. However, it is already clear that this represents a breakthrough in the perception of digital art, its uniqueness and authorship.