Article number nine of a series of blog posts. As a heads up, I don’t claim to be an expert, I don’t have a Fidenza, nor a Bored Ape and at that I’m not a Cool Cat. I am a market participant who has been in a handful of discord servers, minted many cool NFTs, engaged with numerous artists, etc. At the end of the day, I identify as an artist, a designer, and somewhat of a marketer.
It’s through these lenses that I intend to shine some light on artists, developers and creators to provide some insight or behind the scenes into how their journey has been so far. Through learning from each other, by trial and error, I believe we can create an even better space for years to come.
So you want to start an NFT business or want to bring NFTs to your current organization?Let me give you a hand with what I would call a "Framework for a Successful NFT Business."
In this article, digested and condensed and translatde into 7 steps the Visa NFT paper "NFTs Engaging Today's Fans in Crypto and Commerce" so that you don't have to read the boring 17 pages. They have created a surprisingly clear (but long/boring) paper describing what NFTs are. If you want to go back to the basics of what NFTs are, check this article.
Additionally, they are cryptographically associated with the owner. Therefore, the NFT ownership can be proven with the public key and private key, just like any other cryptocurrency.
Unlike cryptocurrencies, NFTs are non-fungible, meaning that they are interchangeable or divisible. In other words, one Bitcoin is the same as another Bitcoin. Also, a Bitcoin can be divided into 2x 0.5 Bitcoin without losing value.
NFTs have unique properties and cannot be divisible. For example, you cannot switch a Mona Lisa with my painting. Additionally, you cannot cut the Mona Lisa by half and expect to keep the same value.
Because of this, they can appeal to collectors, fans, teams, and they are a great way to capitalize on unique assets, engage with fans and create additional revenue. Listed below is a breakdown of these points:
- Fan engagement: NFTS can better connect brands and fans by giving them exclusive items, exclusive offers, or voting rights.
- New revenue streams: well, just look at NBA top shots! NFTs enable digital scarcity, and brands can sell unique or limited editions of digital items. Additionally, NFT smart contracts allow programming the NFT to pay future royalties to the NFT creators every time the NFT is sold.
- Customer relationship: one of the properties of NFTs is that they are traceable, and it's possible to see what wallet address they belong to. This can open doors to better customer segmentation and more tailored customer engagement. Types of NFTs owned by the wallet, quantity, duration and other metrics can now be used.
- Identify the NFT use case
- Determine the appropriate Blockchain technology for your digital asset
- Mint the NFTS
- Decide how and where to store the digital asset in a safe and sustainable way
- Store and access NFTs securely and easily
- Distribute across an applicable marketplace of your choosing
- Identify additional engagement opportunities
Identify the NFT use case
How do you plan to use the NFT?
Depending on the use case, there are different technologies, platforms and mechanisms to design an NFT.
Your use case doesn't need to exactly fit into the categories that I've listed below but these are currently the most common cases that you will find NFT's in when online.
The 3 most prominent use cases are:
- Collectibles — NFTs enable digital scarcity, which is great limit the supply of digital items. Some of the most well-known examples are Cryptokitties (some are worth close to 1 million dollars), Cryptopunks (some are worth several million dollars). More recently, the NBA Top Shots basketball cards were one of the most successful NFT platforms. I'm sure you can imagine why: you can have a digital card with a 5-second video of Lebron James... no wait, I prefer James Harden dunking, and you own the thing thanks to the NFT technology!
- Art - I've been talking a lot about the NFT applications for the digital art industry (and sometimes also physical art). NFT allows digital artists to sell artwork as unique, and they can receive a cut for any secondary sales, which is really cool. Musical artists are also coming strong to the NFT market. Some Art NFT marketplaces already surpassed 1 billion dollars in sales in 2021!
- Gaming - What about having real ownership of in game items? This is how NFTs are revolutionizing the gaming industry: by allowing an independent secondary market for in-game items. There are some really successful cases like Axie Infinity, the Sandbox and even Decentraland, where you can buy land/ property in the game world. And yes, people pay a LOT of money for virtual land (I would also like to know why).
You can check more NFT use cases here: What are the NFT use cases other than Cryptokitties and where to find them.
Determine the appropriate Blockchain technology
There is a trade-off between the different technologies available that you need to understand before selecting the blockchain you want to work with. In addition, you need to consider variables such as scalability, transaction costs, ecosystem, interoperability and decentralization.
Ethereum is the blockchain with the most NFT activity, but other blockchains are gaining traction with NFTs, like Flow.
Ethereum, Rari, MATIC, WAX, Tezos, BSC (Binance Smart Chain) are some of the blockchains that support NFTs. However, I would say that probably 90% of the NFT market runs on the Ethereum blockchain. The ERC721 is the most common Smart Contract standard for NFTS.
I think it all comes down to the fact that Ethereum is a very mature technology.
There are more than 5 million. active Metamask users (one of the wallets compatible with Ethereum and NTF), and this helps to bring big network effects. In addition, a lot of layer 2 solutions such as MATIC/Polygon are helping to lower the Etehreum transaction fees.
When choosing a technology other than Ethereum, consider that the transaction fees may be way lower, but the ecosystem, infrastructure and community may also be much smaller. Additionally, there are approximately 400 thousand Ethereum developers, making it easier to build applications and smart contracts using Ethereum.
Mint the NFT
Once the NFT is minted, it will be immortalized in the blockchain.
According to Visa (and I would agree): In creating NFTs, companies are well-advised to find providers who will mint NFTs according to custom smart According to Visa (and I would agree): In creating NFTs, companies are well-advised to find providers who will mint NFTs according to custom smart contracts so that companies have as much control as possible over the parameters of the NFT, including provenance, attributes of the NFT, and storage of the underlying media asset.
Decide how to store digital assets in a long-term sustainable
Where is the NFT file (for example, the digital artwork or Basketball card) be stored? There are different ways to do it, but you should choose a more sustainable and immutable way to store it. If you store it in a centralized server, it may be lost. If you store it on Google Drive, the file URL may be changed. The best way is probably to choose a decentralized storage option.
- Blockchain storage: storing your NFT file directly on the block would be ideal, but blockchains were not made to store large files. Storing 1MB file on the Ethereum blockchain would cost approximately 20 ooo dollars. So let's forget this option.
- Centralized storage: in this case, the NFT would be pointing to the URL of the digital file stored in a centralized place like a server or cloud. The problem is that if the NFT creator stops hosting that file (because he forgot to pay for the storage, for example), the NFT will be pointing to nothing. So this option is not ideal.
- Decentralized storage: this is where the amazing world of IPFS comes into play. IPFS stands for Inter Planetary File System, and storage files are spread across a distributed network; there is no dependence on a single entity. This is much in line with the blockchain immutability spirit.
Store and access NFTs securely and easily
Like their cryptocurrency cousins, NFTs are also stored in crypto wallets, and they are associated with a public/private key pair. There are many wallets available, and they offer different levels of security. For example, Metamask is a very convenient way to connect to NFT marketplaces. Still, it may also be seen as slightly less secure considering that it may be exposed to attacks (just by the simple fact that your computer is connected to the internet).
Other platforms, such as Nifty Gateway, offer custodial wallets, wallets, meaning that the customer is not responsible for the wallet security. This option may be easier for the broader audience.
Pro-tip: if you own any valuable NFT or crypto asset, buy yourself a cold storage wallet to keep your assets safe!
Distribute across an applicable marketplace
You will also need to choose your marketplace (assuming that you want to sell your Picasso NFT!).
Different marketplaces accept different forms of payment (some accept only crypto, others accept credit cards). They may use different blockchains, have different integrations with exchanges, have different communities, or be specialized in different kinds of assets. Make sure you select the right marketplace to distribute your NFT.
Identify additional engagement opportunities
Use your creativity. One of the biggest advantages of NFTs is composability. You can add any added benefits to NFTS:
- Physical objects: as part of the NFT, the buyer can receive a physical item (Beeple was doing this)
- Ticketing: NFTs may be combined with tickets for an event or concert
- Loyalty and Gamification: NFTs can be used as loyalty rewards to incentivize a certain behaviour
- Fan governance and community engagement: NFTS can give their owner voting rights
- Enhanced utility in the metaverse: NFTs can unlock features or have enhanced utility in the virtual world or in games
The NFT world can enable huge growth opportunities. However, the first-mover advantage is on the side of the ones jumping to the market in 2021. Position yourself for long-term opportunities and maximize the value of your business with NFTs!
Additional considerations
NFT is not a sea of roses. Some additional considerations may be a show-stopper if you are not aware of them and if they are not properly considered:
- Risk management: volatility risks, fraud risks, security risks (when security practices are not in place)
- Licensing and T&Cs: make sure there's regulatory and legal clarity in your NFT sale/purchase! You may need to abide by whatever is the T&Cs of the marketplace that you are using
- Legal and regulatory: different countries will have different copyright laws. Make sure you understand them
Can/should NFTs be seen as an investment?
Have you minted any NFTs? If yes, leave a comment! I would love to know more about it! If you’ve enjoyed this, feel free check out my website Prince of Cavan Creations or to follow me on the social medias, where I can be found under @princeofcavan. As always, let me know your thoughts!
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