The irrefutable token hype and price bubble may have already peaked, but more interesting and enduring business uses are just beginning.
NFTs upended the art world: Beeple’s Daily: First 5000 days sold for $69 million, making Bored Apes the new status symbol to grace social media profiles, metaverse Avatar. Sports organizations have begun embracing his NFTs as a way to increase fan engagement. NBA top shot To exchange video highlights for NFTs in each small square of the Australian Open Mint Tennis Court. With the latter, the owner receives an important video replay of those squares and, in the case of the championship shot, the ball itself. Champion Rafael Nadal’s winning shot hit the NFT’s bid, which immediately saw him soar more than 4,000%.
Do some of these investments constitute a bubble dependent on the “big idiots” who come to buy the next investment? Business luminaries such as Warren Buffett and Bill Gates believe so. , denounces rushing cryptocurrency speculation.
But let’s put aside for a moment the massive spending on JPEGs in arts, sports, and entertainment, and the recent crash in cryptocurrency prices. More relevant and promising for consumer businesses are the underlying technologies. NFTs offer an ideal set of capabilities for businesses to reimagine the way they engage with their customers in other creative ways, not just rewards and loyalty programs.
Skeptics should keep in mind that the first NFTs appeared in 2014 and the first NFT standards were proposed in 2017. Thus, the ride-on-demand concept combined booking, mapping, payment and rating functions into his single mobile app. The opportunity is just beginning, but it is real.
Not Your Dad’s Loyalty Program
Think of NFTs as programmable digital tickets that give someone traceable, verifiable, and tradable rights to assets. Owners can add content over time and NFT authors can control its behavior with pre-designed rules. As NFTs are uniquely gameable, stackable, tradable and programmable, this opens up many possibilities for innovative ways to attract and reward customers.
Game available: NFTs can easily turn into “loot boxes” full of consumable virtual items, in gaming terms. Certain sets of activities may guarantee the consumer a minimum amount of rewards, while loot boxes contain varying amounts of others. For example, after 10 purchases, flights, or hotel stays, a consumer earns her NFTs redeemable for gifts. Some of the company’s customers may shop randomly, upgrade their seats, or win a bottle of wine at check-in.
Stackable: NFTs can later attach content to confirm participation and capture memory. One of the dining platform’s rewards may consist of an upgrade to a chef’s table, and the NFT may include a menu and a photo of the party with the chef attached as a keepsake.
Tradeable: Easily share NFT-based rewards with friends and family, groups can save together for group experiences, and timeshare owners can exchange weeks at a vacation condo.
Programmable: If a business wants to impose a small transaction fee on sales, it can. If you want your rewards to expire on a specific date, or if you want to offer richer perks during off-peak hours, you can include them in advance in your smart contract.
what needs to be fixed
While experimental buds are blossoming, many components of robust NFT systems are yet to be developed, limiting mainstream adoption. In particular he has to pay attention to three areas, which will not be an obstacle for long.
The user experience is still clunky. Users have to buy cryptocurrencies on exchanges, move them into self-custody wallets, connect wallets to applications, and then engage in marketplaces and smart contracts with little room for error. That takes him three apps, each with its own learning curve. It simplifies the user experience to the point that all transactions can be easily completed in a single wallet without any jargon or technical requirements, reducing the risk of hacking and account recovery experienced by users. Once mitigated, recruitment will begin.
Early regulations are not standardized. Uncertainty remains about NFT laws and regulations. However, the U.S. Treasury is working with foreign regulators (which are ahead of the U.S. in some jurisdictions) to address risks and take advantage of the potential benefits of digital assets and their underlying technology. We have already published a fact sheet outlining how they work together.
High transaction (“gas”) fees and a large carbon footprint Plague NFT. Both problems stem from the intensive use of computer servers to mine cryptocurrencies through a proof-of-work process. These concerns Ethereum Recent Upgrade Moving the chain consensus mechanism to Proof of Stake could almost completely mitigate the carbon footprint problem. Other blockchains exist that allow users to create NFTs without engaging in energy-intensive proof-of-work mining.
Make your brand more memorable
The mainstreaming of NFT is in sight. View tickets for events such as 2024 Olympics— looking at using NFTs as a gateway to broader adoption and relevance.
Traditional points-based rewards and loyalty programs are doing well in airlines, credit cards, and other consumer industries. they are not dead Amazon and Rakuten have already demonstrated stronger models.
Starting a new loyalty program with a clean slate doesn’t look like the old points-based system. Adopting NFTs with solid business outcomes in mind opens up a whole new wave of innovation to customer loyalty. NFTs also make it easier for brands across industries to be remembered by consumers through much more effective two-way engagement.
Gerard du Toit, Alexander Mitscherlich, Nikhil Ojha and Kelly Pu are partners at Bain & Company. Bain & Company is a partner of: luckbreakthrough series.
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