NFTs Continue to Gain Traction
Nearly three in 10 U.S. adults don’t know what non-fungible tokens (NFTs) are, but for businesses, it is a technology that is worth exploring.
NFTs are unique and non-interchangeable units of data stored on a blockchain, providing an independent and publicly verifiable means for rare collectibles and other digital assets, according to Forrester Research.
“NFTs will become far more interesting within the context of the metaverse once it’s actualized,” says Forrester vice president and research analyst Mike Proulx. “One-of-a-kind digital art can help decorate your virtual home. Limited-edition sneaker drops can customize your avatar. And NFT tickets will give you exclusive access to VIP events happening within the metaverse. This will make NFTs more accessible and useful over the next decade, with better ways for brands to provide meaningful value exchanges with consumers through virtual products as well as hybrid digital/physical brand experiences.”
A growing roster of major players, including Microsoft, Home Depot, Tesla, Whole Foods, and Starbucks, are already experimenting with the technology, which is expected to see increasing appeal as cryptocurrencies advance.
The NFT market is currently valued at an estimated $7 billion, according to Forrester data, and Loup Ventures expects it to grow between 4 percent and 7 percent annually for the next several years. One in five U.S. online male adults already own at least one NFT—nearly three times more than U.S. female adults (7 percent). In the United Kingdom, only 8 percent of online male adults and 2 percent of females responded the same.
“NFTs are poised to play an important role in the metaverse as it relates to digital ownership. Just about anything that can be owned in the physical world will be able to be owned in the metaverse,” Proulx says. “NFTs act as the authenticator to ownership. This creates a potentially big opportunity for brands to provide digital products—both goods and services. We’re already starting to see this happen based on brands like Nike patenting some of its IP as virtual products and its recent acquisition of virtual collectibles company RTFKT. And that’s where the current marketplace exists—within the niche collectibles community.”
Some of the most notable examples of NFTs are the following:
- The first tweet from former Twitter CEO Jack Dorsey sold for $2.9 million.
- The World Wide Web Source Code NFT sold for $5.4 million.
- The world’s first SMS recently sold for $149,729 at auction in Paris. Reading “Merry Christmas,” the message was sent by British programmer Neil Papworth from his computer on December 3, 1992, to Richard Jarvis, then director of U.K. telecommunications company Vodafone.
Although companies are experimenting with NFTs in droves, they’re up against a slew of growing pains, Proulx points out. The biggest among them is that blockchains, cryptocurrency, and digital wallets are still foreign territories to most consumers. In fact, 45 percent of U.S. online adults and 56 percent of U.K. adults have never heard of NFTs; and 28 percent of U.S. online adults and 27 percent of those in the United Kingdom still don’t understand NFTs.
Other challenges that NFTs face include environmental impacts, given that the underlying blockchain technology is energy-intensive, which is at odds with some companies’ growing sustainability pledges. There’s also an increasing amount of NFT fraud that’s tainting the real intent of NFTs to build communities of like-minded interests. And finally, legal ambiguity exists as to whether NFTs grant ownership of the actual digital asset or simply the token associated with the asset.