An NFT (or non-fungible token) is a signifier of authenticity for a collectible, original artwork or digital product. It is also a seal of ownership over the original version of that product.
Current NFT headlines cover the sale of artwork by Grimes for $6 million, an original iPad drawing by John Cleese – currently at auction with a reserve price of $36 thousand (source: The Verge) – and the sale of Twitter CEO Jack Dorsey's first tweet for $2.9 million.
Meaning, the NFT has become the digital equivalent of the autographed trading card.
How it Works
The buyer of these artworks would receive the token attached to that piece of artwork, meaning that the buyer is the owner of the original image and logged in a digital ledger called a blockchain.
If the NFT does not include copyright in the sale, the artist is free to replicate and sell copies of the work with the NFT holder owning the original. If the original NFT also includes copyright in the sale, that artwork is fully owned in perpetuity by the holder of the NFT; this is the rarer of the two circumstances.
The main issue here is the ease with which web users can copy digital artwork and assets, driving a world of conversations around the viability of big-ticket collector's items.
However, the NFT holder is the certified owner of the original regardless of replicated or downloaded images.
What it Means
NFTs are an indicator of bitcoin culture and a digital off-shoot of the increasingly digital way we live our lives. An NFT is the ultimate collector's item, and its applications across the brand landscape are exciting.
“The idea of ‘ownership’ and owning a digital asset… that is new and interesting and the foundation for NFTs and their existence,” says Trevor George, chief executive officer, Trevco and co-founder of a new NFT-focused company, Recur. “However the most intriguing potential for licensing is the idea of a recurring royalty. Imagine… a physical action figure or collectible sells today, and then sells on EBAY 10 years later for $10,000. The brand does not participate in that secondary transaction. Thanks to NFTs and the blockchain, this is now possible. The brand can participate in the recurring transaction, every time an item sells… forever. Imagine the same for a comic book, or even a ticket to the Super Bowl. Imagine if the brand could participate in the re-sell, every time… forever? The company is called “Recur” because we are actually developing the code base for the recurring royalty standard, that will be used industry wide.”
The sensational sales of multi-million-dollar deals are just the headlines, as any digital artwork, collector's item or brand asset can be tokenized.
NFTs are a new way to release content, provide fans with originals and test consumer product engagement boundaries for brand owners.
For example, Matt Kindt's sci-fi comic MIND MGMT: The Artifact will be sold at auction, whipping fans into a frenzy to read its exclusive meta-narrative and become the ultimate fan of the property (source: IGN).
NFTs are also a new opportunity for licensees to delve into entirely new areas of digital commerce. Digital collectibles platform Curio has opened new originals from "American Gods" and comics like Concrete Park and provides a place for fans to exchange NFTs and collectibles.
"NFTs are exploding in popularity, yet the space has struggled to provide an accessible user interface that enables everyone to engage in a more meaningful and modern way with the brands and content they love," says Juan Hernandez, chief executive officer, Curio. "This new Exchange is the most inclusive and accessible avenue for musical artists, brands, and fans to enter the NFT space."
Whether or not the bubble will burst, only time will tell, but the NFT trend is on fire across the web and its real-world applications are fascinating for the brand licensing community.