Digital Collectibles as NFTs: Should Your Brand Create One?
Non-fungible tokens (NFTs) first made headlines when Beeple’s crypto art piece “Everydays: The First 5000 Days” sold for $69 million in 2021. The same year, Sky Mavis, a game studio, released Axie Infinity — a monster-battling game with NFT characters and in-game items — further skyrocketing the popularity of NFTs.
Many other NFT collections and games launched that year and eventually, enterprise brands like Adidas, Nike, and Taco Bell started releasing digital collectibles as NFTs. Overall, the NFT market grew by 3,248% and sales volumes crossed $10 billion.
Amid the bear market in 2022, NFT sales on Ethereum dropped and the number of active wallets purchasing NFTs decreased. But brands continued strengthening their NFT strategy or venturing into the NFT space with digital collectibles. With the trend still continuing, there’s a common question brands keep asking: Should brands be investing in NFT digital collectibles?
This article answers the question starting from the basics — you’ll learn what NFTs are, how brands benefit from them, and how you can create your own brand’s digital collectibles.
What are NFTs?
NFTs are a type of crypto asset that enables the holder to prove their ownership of real-world assets and digital items. They point to the location of an asset or rights (in the case of a physical item) and contain information on the asset’s provenance and ownership – like a digital ownership receipt.
Unlike other cryptocurrencies, like Bitcoins, which are fungible and can be exchanged on a like-for-like basis, NFTs are unique (i.e., non-fungible). It’s not possible to exchange one CryptoPunk NFT with another CryptoPunk NFT, as each one has distinct information or attributes that set it apart from the other.
Understanding the Rationale Behind the NFT Hype
NFTs have garnered a lot of attention and stirred the conversation for several reasons. We’ve listed the most important ones below.
Verification of Ownership and Authenticity
Before selling NFTs, the highest that Beeple had ever sold a print for was $100. This is because digital content had been replicable until the advent of NFTs. Anyone could save a copy of the art, music, or video and there would be no way to distinguish it from the original piece. So, the concept of ownership, when it came to digital content, was murky at best.
However, NFTs encode ownership details on the blockchain, which is public, immutable, and tamper-proof by nature. That means they provide indisputable proof of ownership for that specific work. By extension, this also makes it easy to verify the authenticity of the original item.
Sense of Scarcity and Uniqueness
Recently, “The Goose”, a generative artwork NFT, sold for $6.9 million in a Sotheby’s auction. In 2021, Adidas made a whopping $22 million from their NFT drops and the value of a Taco Bell NFT shot up from 0.001 ETH ($1.79) to 100 ETH (~$180,000). The reason NFTs can net such a high price is that they’re unique and create real scarcity.
Each NFT is unique because they’re embedded with metadata containing specific information that sets them apart from each other. This also adds to the scarcity of the asset, boosts its value, and makes it more desirable to collectors.
How Do These Advantages Benefit Brands?
NFTs’ inherent ability to create scarcity helps brands sell exclusive, limited-edition goods and can generate ongoing revenue even after they’ve sold them through royalties. That means every time the brand sells an NFT, it will earn the specified percentage of the total sale value as a royalty.
Another way NFT collectibles help grow a brand’s business is by helping them engage their customers in meaningful ways and build a successful and long-term relationship with them. For example, Starbucks has built an entire loyalty program around NFTs where users can earn NFT badges and unlock access to unique experiences as they progress through various stages in it.
Create Digital Collectibles for Your Brand
Brands have multiple options when it comes to creating digital collectibles — they can either tokenize existing assets or create digital collectibles. Let’s look at some types of digital collectibles brands can create:
- Digital passes: Brands can create NFTs that serve as “tickets” or “passes” that provide access to exclusive content, events, or experiences.
For example, Louis Vuitton is set to release exclusive “Treasure Trunk” NFTs that will come with made-to-order physical Louis Vuitton trunks. The NFT sale will be open only to selected registrants, and participants who purchase the token will be able to access exclusive experiences and early product releases.
- Digital stamps: Brands can issue NFTs to commemorate specific events, achievements, or milestones and build communities.
For example, NBA Top Shot NFTs are linked to iconic moments in basketball history and enable fans to own famous shots and dunks.
- Avatars and digital art: NFT can also represent unique avatars or pieces of digital art which owners can use as profile pictures (PFPs) in various online spaces like social media platforms, virtual worlds, or games.
For example, Reddit released collectible avatars to use as PFPs on the platform and even collaborated with Ubisoft to launch the Rabbids NFT avatar collection for the Metaverse game.
Tokenize Real-World Assets
Brands should consider tokenizing real-world assets instead of creating digital collectibles when they’re primarily dealing with physical objects of value. Tokenization creates a direct link between the physical and digital world, enabling greater liquidity and utility for their assets.
For example, in April 2022, the Australian Open tennis tournament, in partnership with web3 studio Run It Wild, introduced a collection of 6,776 AO Art Ball NFTs. Each NFT was linked to a specific section of a tennis court and tracked match metadata. If a winning shot landed on the section associated with an owner’s NFT, the owner received a physical ball used in the game in a custom handcrafted case. Other sports brands have also tokenized assets like trading cards and created phygital experiences for their users.
Transition your Real-World Assets to Web3
All in all, creating digital collectibles out of real-world assets helps your brand create new revenue opportunities and engage innovatively with customers and Dibbs helps you tap into this potential.
Our Tokenization-as-Service (TaaS) platform helps you navigate the realm of tokenization as you build your brand’s community and potentially increase profit margins. Schedule a demo today to explore how Dibbs can revolutionize your asset management.