BY UMESH AGARWAL

You probably would have heard about NFTs by now. If you are one of those who thought, what the heck is this, then read further.

What is NFT?

NFT is “Non-Fungible Token”, which plainly means “something which is one of its kind or unique and can’t be replaced with something else”. In technical terms – “NFTs are the “one of its kind” assets (non-fungible) available in the digital format that can be traded against a digital certificate (token) which has a monetary value attached to it”.

In common sense – NFT is nothing but making money out of an asset which one believes has value and there are buyers out there who will buy tokens against it to sell it further to fetch more and more value in future, while the actual physical asset remains with the original owner.

How does it work?

NFTs are generated by having the Tokens (contract/certificate) issued against the unique asset one owns.  Each token records the details like identity of the creator, owner(s) of the piece and the reserve price. So for example someone owns a painting, they can digitalize it and list it on one of the block chain platforms. You mint it to buy NFTs against it and it also gets listed for others to bid/buy/view. Any future buyer just buys the token in the price it’s selling at that point of time and the original owner keeps the original copy with him/her. Once the asset gets sold, it shows the owner and if it gets resold, it will show all the previous owners as well as the current owner.

How NFT helps the owners and buyers?

For the original owners of the assets –

·       NFT gives another way of selling something unique which otherwise might not have any value in the market or does not have the market itself.

·       NFTs also allows the original owner to receive a percentage on every time it’s sold further – also referred to as royalty in different cases.

For the buyer –

·       Buying an NFT gives you all rights to use the digital asset in whichever way you want, like post it online etc. which otherwise might have been a victim of copyright violation or piracy or simply drawing an ire from the owner for using his/her creation without his person.

·       NFTs works like any other speculative asset where you buy it in the hope that it’s value goes up every day and one day you make a profit by selling it.

Who is buying NFT?

NFTs can really be anything in digital format. Everything which is unique or exclusive like a digital artwork, luxury fashion, event tickets, digitized tweet, toy, video clip, signature, memorabilia, watches, event tickets, memes and gifs etc. can become an NFT. This is particularly valuable for those whose work can easily be copied in the online space and change hands without any record of it.  NFTs are designed to give you something that can’t be copied which is the ownership of the work. While you can copy the digital file as many times as you want, but the copyright and right for the reproduction still remains with the original owner.

More and more people are working from home due to the ongoing pandemic hence using internet to dispose off the extra bucks they have at their disposal and thus the sudden rise in NFTs. A digital artwork was sold at the Christie’s auction for $69 million recently. The world’s first digital couture dress was sold on the Ethereum block chain by The Fabricant; DressX and Nike has got patent for Crypto Kicks, its block chain-compatible sneakers. Musician Grimes and Twitter’s founder, Jack Dorsey have also sold NFTs for millions of dollars. People are even trying to offer additional perks for owning NFTs for their assets which could be in the form of entry to some special events, concerts, sports extravaganza, meeting with a celebrity etc.

NFT – What does it mean for Retailers?

Some of the firsts who saw an opportunity for a more widespread use of NFTs were fashion designers and luxury fashion brands who are now creating unique digital pieces. Eg. GUCCI came out with a GIF and put in on sale at $16,000 which they acquired it for $3,600 back in February.

The trend for digital clothing has been gathering pace, with the likes of DressX selling non-unique digital fashion pieces that it overlays on to customers’ pictures for between $40 and $250. By adding NFTs to the equation, they are now able to elevate the proposition and promise unique, exclusive digital products to each customer.

In the real world, NFTs are also starting to be linked to physical objects as a way to prove authenticity and fight against counterfeits. To that end, Nike has patented a blockchain-enabled system for its sneakers called CryptoKicks. The cryptographically secured digital assets will be used to track ownership of the physical shoe and also give its owner a digital replica of the shoe to be used in virtual worlds.

As speculative fiction author William Gibson said: “we are the last generation to make any distinction between online and offline”. The great convergence he has been prophesying might finally be here and NFTs and crypto-tokens could become a key weapon in every brands’ arsenal.

For those not well versed in the world of cryptocurrency, it may seem overwhelming and hard to see any real long-term applications for NFT, but I believe they are part of a much broader change, a new ‘token’ economy, a revolution that is ready to have an impact on retail.  NFTs has certainly provided a platform to get some extra value for the products and protected them from reproduction and cheap selling.