It was only in February of this year that RTFKT Studios teamed up with 18-year-old artist FEWOCiOUS to create a whole range of digital NFT sneakers. The team sold all 600 pairs in seven minutes for $ 3.1 million. At Christie’s auction house, a successful bidder paid $ 69.3 million for an all-digital work of art and received no painting, sculpture, or print. In the first quarter of 2021, the trading volume of NFTs (Non-Fungible Tokens) was an impressive 2 billion USD.
While the debate about NFTs, blockchain & Co is classified by some as pure speculation, others see it as a digital revolution. This digital revolution has long since dawned and NFTs have become beacons whose radiance also appeals to a less technically interested target group. How sustainable this development will be remains to be seen? However, many companies, artists and “creators” wonder what the digital revolution means for them.
What are NFTs?
NFTs (Non-Fungible Tokens) simply represent ownership of an object. An example of a fungible asset is money, where units can easily be exchanged for the same value. However, if something is non-fungible, this exchange is not possible because it has unique properties.
Technically, NFTs exist on the Ethereum blockchain. The ERC-721 standard is used to create an NFT. According to the ERC-721 standard, NFTs must meet the following properties:
Unique: Each token has a unique and permanent identifier in the ERC-721 Smart Contract. When its identifier is paired with a contract address, the NFT becomes a unique, fully qualified asset on the Ethereum blockchain that can be assigned to a specific owner.
Transferable: ERC-721 contains standardized functions that only allow the owner of an NFT to transfer it. These functions are built into the smart contract and the parties can be confident that the smart contract will execute the transactions correctly as the smart contract’s code can be verified.
Because of these properties, NFTs can be used to claim and transfer ownership of any unique good.
The value of the token
The value of an NFT results from supply and demand or, to put it another way, from what other buyers are willing to pay for it. NFTs have no intrinsic material value and derive their value from an artificial shortage. In addition, the value of an NFT depends on other factors, such as the awareness and importance of the issuer or the visual representation of the token. Ultimately, however, artificial scarcity is always a main driver of the value of an NFT.
Potential of NFTs beyond speculation
We believe that NFTs have much greater potential than many think. Apart from the purely speculative value due to an artificial shortage, NFTs can solve important problems. Using NFTs, for example, the authenticity of products can be guaranteed and checked. In this way, brands, producers and retailers can protect entire industries from counterfeiting and offer designers added value for their creative work.
This ID is stored in the form of an NFT on the Ethereum blockchain and then assigned to the rightful owner, buyer of the product. In this way, every NFT in the collectID system represents a suitable physical product without a doubt. This combination of NFTs with physical products opens up numerous exciting opportunities for companies. Blockchain technology is still difficult to grasp for many people and buying and trading NFTs is not intuitive. By linking the NFT with a physical product known to customers, NFTs are easily accessible to a much larger target group.
In addition, NFTs gain an intrinsic value – that of the linked physical product. This not only makes NFTs more valuable in the long term, but also the real products. On the one hand, their authenticity is guaranteed and easy to prove at all times, and on the other hand, physical products also have a digital dimension. This allows companies to develop new business models (e.g. secondary trade) and sources of income and to make their products as a bundle more valuable in the long term.