The returning CEO of Starbucks, Howard Schultz, announced that he would “start an NFT business within the year” in a town hall meeting with his employees on April 4, 2022. Also, domestically, Hyundai Card declared that they plan to expand the customer experience by issuing NFTs for branding activities, including concerts and albums. They issued NFT tickets for performances held in their concert hall, Understage, which were more expensive than normal tickets, but came with various benefits, such as a backstage tour or a digital arts experience. Cheil Worldwide has made an agreement with the artist group, SMATh, to promote their intellectual property rights business and new marketing development. NFTs were once a concern for being the second item of virtual speculation following Bitcoin which aroused suspicion for its transaction value. Then, why did NFTs become the hope of conventional companies all of a sudden? NFTs may be either personal speculation or investment, but why are companies interested in them? What effective value do enterprise NFTs have and what do we need to actualize them?
If you can say 2019 was all about the hotbed of speculation under the mask of investment in cryptocurrencies and ICO which started from the blockchain, it won’t be an exaggeration to say the fever passed on to NFTs in 2021. It wasn’t quite clear what they were worthy of or where they could be used, but when celebrities started showing interest in NFT collectibles and artworks, transactions were made for tens of millions to hundreds of millions of won, making it a hotbed for speculation. Sure enough, skepticism about the NFT market emerged and cold criticism turned the temperature down from 2022 and the value of NFTs has been plummeting. On the other hand, good and bad were distinguished in the process, and a solid community around NFT owners was built and parts of them with various benefits and services were reevaluated.
The first tweet of Jack Dorsey, the founder of Twitter, was sold at 3.5 billion won in March, 2021. It was on sale again a year after on April 17, 2022 with the highest bid coming in at 20 million won. The price plummeted to less than 1/100 in a year!
Domestically, quite conventional companies are now entering the NFT market. Samsung Electronics and LG Electronics are working on partnerships to display NFT works or load the NFT store on smart TVs. Cheil Worldwide and Hyundai Card have made up a team dedicated to NFTs and are planning a business to make NFTs out of their own content and various IPs. Also, SK Square is starting a token business based on its affiliations with Korbit and SK Planet. You can see that conventional companies are aggressively pursuing business innovations driven by blockchain. Unlike ICO three to four years ago, conventional large conglomerates are entering the NFT market. What does that mean?
I was into collecting stamps and coins in the 1980s. It wasn’t just me, grown-ups as well as teenagers were into such hobbies during that time. It was quite costly to collect dozens of stamps and coins every year, but like antiques, I had a belief that it would gain higher values over time. However, the stamps and coins I found in the garage after 20 years were worth much less than how much they were back then. Of course, three or four of them became more expensive, but they were as scarce as hen’s teeth, and the remaining 99% of them were worth so little, or had no demand at all to be exact, that it was a huge loss in total. The stamps and coins I bought at a high price were just collectibles that couldn’t be actually used, and they weren’t even the one and only, so the price didn’t go up as much as I hoped.
Those old memories came back with the NFT collectibles. The artworks you can never understand, the pictures, and the game items you buy as NFTs make you think that you might be on fool’s errand. However, it should be made clear that not all collectibles are worthless. Most stamps are of no use now, but some of them have greater value for scarcity or historical reasons, and some of the NFT artworks might be meaningful. You don’t have to criticize all of them.
In addition, just like how the cash we used to buy stamps was innocent (the problem was the ignorance of value), NFTs are innocent. NFT is a technology that grants the right of copyright holder over a digital file whose ownership is usually unverifiable and makes it transactable. It’s on people to make it valuable.
On OpenSea (https://opensea.io), where typical NFT works are bought and sold, you can find information on many sales, like on websites, such as Auction or 11st. The difference is that they’re digital artworks, not physical products, with owners and an open and transparent transaction history. That means you can see who the original artists are and who transferred or sold the works to whom. NFT made it possible to transparently manage the transaction history and ownership of digital files. You can also see from the transaction history that a significant number of them are just highly priced with no buyers. Plenty of them are out on the market, but no one is interested in buying them.
The information on NFT transactions include the title, the date the information was first registered as an NFT (called minting), the wallet address of the owner of the work, and the URL where the data that proves ownership in the NFT is stored. The registered information tells you who transacted the ownership of the NFT and when they did so.
The information registered in an NFT is just the transaction history and the current wallet address of the owner. It’s the data the NFT points to, a certificate that proves who owns the asset, it doesn’t prove the uniqueness of the file. Digital artworks or data that are transacted through NFTs can be copied or saved by anyone. So, it proves the ownership of an asset that anyone can have anywhere.
That leaves us with two questions. Why do you need ownership to a digital file that anyone can copy and save in a smart phone or computer to see? Even if you need ownership, is the file worth it?
Whether or not the file is worth it depends on the file. It’s the same as asking if stamps are worth it. Some may be worth it while others are not. It depends on the fame of the artist who made the file or the quality of the work. There are many reasons for the incomprehensible price. It may have been made by an artist who started NFT work early in the market and initially got attention, or a famous celebrity might have bought the work and it was then noticed by a lot of people. Of course, among them are great works you can’t find from Googling them. What's clear is that digital files connected with NFTs can be copied indefinitely, but the ownership to those files can be restricted for a few, like making limited amount to celebrate a historical event.
However, those digital files can still be copied for use by anyone. In fact, there’s nowhere to use them, so there must be a reason to pay such a price to buy them. Recently, Twitter came up with a service called NFT profile picture, which lets you set the NFT work you bought as your Twitter profile picture. It’s a service you can use your NFT ownership for. You can download any picture from Google and set it as your profile picture in Twitter, something that anyone can do with a picture. On the other hand, the NFT profile picture connects to your cryptocurrency wallet, such as MetaMask, and only allows works minted on Ethereum and owned by each person to be used, so not just anyone can use them. Only the owners are entitled to set them as their picture. You can still copy the work and upload it on Twitter, but it shows it’s not minted, which will diminish your standing, and there’s a copyright issue as well.
Also, like LinksDao who issued NFTs to raise funds to buy a golf course and had the buyers purchase a membership to the golf course for benefits, such as discounts, there are possibilities for NFTs to be closely linked to the real economy. Previously, golf courses or condos were invested in through huge capital in advance, and the grounds and buildings were built before membership was issued, but now with NFTs, multiple individual investors can raise funds together and participate as investors in physical assets and get benefits like membership in return.
If we get to use minted NFT files more widely in more services and on next-generation internet platforms, such as the metaverse, their value will naturally grow along the way. The stamps and coins you collected are put in a drawer for hibernation until they’re sold, having little value in use, but NFT works can be used in many ways like this. Then, NFT works that provide features or properties which increase in value in various ways would be worth more. That’s why content providers, brands, or large companies with IPs are interested in NFTs. In addition, they can also secure communities with strong loyalty beyond fandoms, attracting B2C companies who want to engage customers.
As NFTs go beyond just the transactions of digital works or artworks and are used in many ways for asset transactions or in conventional industries, the need for companies to develop NFTs and solutions for them is expanding. To provide NFT services, you basically need: ①blockchain networks, ② the wallet to save and check NFTs ③ a marketplace for NFT transactions, and ④ Dapp to enable companies to implement and offer services to its customers who own NFTs.
Not all NFT businesses require the above four, though. They can select from the four items above as per the purpose of using NFTs and building a unique system, or rely on the widely used solutions that already exist. When implementing NFT services, which blockchain to depend on or whether to configure a unique mainnet matters. Now they choose the infrastructure, system, or module they need and quickly build internet services based on a pre-verified cloud, whereas previously everything from A to Z were independently internalized. Likewise, not all four need to be internalized or independently built. They can select them if needed and decide whether or not to internalize or proceed externally.
The most important is ① to select the blockchain network. Developing your own mainnet for NFT services, which is the basis of the blockchain network, is like the tail wagging the dog, so generally, the universal mainnet is chosen. But of course, using an external mainnet brings pressure on gas fees and the limitations on its flexibility of customization, so you need to make your choice based on the business goals you have for the NFT service. ② As for the NFT wallet, it’s used for user authorization, NFT issuance, proof of ownership, or signatures for transactions. Mostly, wallets used widely, such as MetaMask, are adopted. If your NFT service is for a wide range of objects, has many assets for transactions, or requires a unique NFT ecosystem, you’d better make your own wallet. ③ It’s effective to use popular markets, including OpenSea, rather than building your own NFT marketplace. Presenting to customers with lots of minted NFTs means higher opportunities for transactions, so use multiple marketplaces to provide your NFT services to more users. ④ Dapp performs a great role in implementing the values that a company wants to provide to users, artists, or shareholders through the NFT service. NFTs of conventional companies generally seek to provide new experiences or value to the customers by using the intellectual property rights, brands, or competitiveness they are equipped with. Dapp helps optimize those experiences. It can also play a huge role in making communication easier by building a community among the company's employees, NFT owners, users who are interested in the transaction, and shareholders.
Conventional companies have a lot of difficulties in the course of the business since understanding the system itself is hard enough, but they also need to use blockchain technology, which is not yet widely used, and NFTs, which are perhaps excessively in the spotlight. Therefore, it’s advisable to get help from professional SI companies with experience in cloud technology and developing solutions for various companies, as well as in understanding the blockchain.
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He’s interested in and studying how technologies make changes in our daily lives and society, and how they can be used for BM innovations in companies.