So you have done your research and strung together some basic knowledge about NFTs. It’s now time to get involved! Welcome to the first step on your web3 journey: tokenizing assets.
But first, let’s break down exactly what “tokenizing” means and why it plays such a central role in the road to web3.
WHAT DOES “TOKENIZATION” MEAN?
Tokenization is the process of converting an asset into a token that can be stored on a blockchain. Virtually anything can be tokenized, be it a digital, physical or intangible asset.
WHAT ARE SOME OF THE BENEFITS OF TOKENIZATION?
There’s more to tokenization than just technology. It’s a new strategic direction where brands can tap into decentralization to deliver more value to their communities. Among the various benefits of tokenization:
In today’s world, everything consumers own is tied to their name, phone number, and credit card. In the process of tokenization, all those assets will be turned into random strings of characters that have no meaningful value, thus protecting your consumers’ private data and spare your company the risk of costly penalties by institutions.
In fact, last year, Apple gave users the ability to opt out of being tracked, and 96% of US users have already done so! Google also announced by 2023 they will put an end to 3rd party cookie tracking. This means that using third-party data for retargeting will no longer be an option. Businesses can no longer rely on these “rented relationships”. It's time to go out there, build your own relationships with customers and directly gather zero-party data.
Before NFTs, it was almost impossible to own and trade digital assets or fragments of them without friction. Tokenization makes this possible, allowing anything to be broken down into digital tokens that can be traded fully or in a limited way. As a result, owners can secure higher liquidity for their assets.
At the heart of NFT utilities are “smart contracts” which are simply self-executing computer programs that will trigger events if a set of predefined conditions are fulfilled. This eliminates the need for human interactions and numerous intermediate steps, resulting in higher transparency and lower transaction costs. Imagine being able to resell your luxury watch directly to the new owner without having to pay the e-commerce platform or the authentication service? NFTs make this a reality.
One thing NFTs do exceptionally well is giving brands the opportunity to speak to their customers on a much more personal level than ever before. As put by IWC CEO Chris Grainger-Herr during a panel on Watches and Wonders: “We are getting more and more digitally efficient, and at the same time people are longing for the exact opposite which is an in-depth physical experience. What’s really interesting is that while all this technology (NFT) is developing, it is also the biggest push to physical retail that I have seen in the last 15 years …in the middle of a pandemic.” We'll discover in more detail how NFTs enable brands to deliver hyper personalized service later in the article.
The metaverse is here, with or without your approval. And this time, tokens are the native data of the web. Users will curate their digital avatar, art collection, and increasingly embrace the hybrid physical-digital-immersive lifestyle. Therefore, the sooner you start tokenizing assets and distributing NFTs to your community, the sooner you reach your customers in their own turf, and the more you build your legacy.
As assets are turned into tokens, thanks to blockchain interoperability, data and value will be allowed to flow across different networks, giving consumers more choices and freedom.
In a world where overproduction is a big issue, tokenization is the enabler for brands to enter a world of services and uplift the brand's proposal. According to our Chairman, Co-founder Frédéric Montagnon: “Before the pandemic, the idea was to produce more to sell more. But now customers are looking for more value from the same product. This is where you can leverage NFTs to build on top of one product, adding more experiences and services to enrich their ownership.”
NFT USE CASES FOR BRANDS
The possibilities for tokenization could go on endlessly, but here are some thought starters:
Digital twin & services
The most obvious use case of tokenization is Digital Twin where real-world assets (e.g. fashion items, luxury watches) are tied to their digital counterparts which have unique properties: proof of ownership and authenticity, resistant to any attempt at tampering, following the product throughout its lifespan, even if it changes hands.
Because NFTs create a system of verifiable transactions on blockchain, digital twins can provide trusted service when it comes to sustainability. Through digital twins, brands can reveal their commitment to transparency and sustainability practices, giving behind-the-scenes visibility into the supply chain and bringing confidence in the certifications of the product. Digital twins allow product owners to better use their valuables, keep them longer, and eventually resell them with ease, while offering innovative services on top.
Besides, brands can envision using NFTs to project forward the roadmap of a project. According to Edouard Meylan - CEO of H. Moser & Cie: “The value of a watch is no longer the value you sell it for, but rather the value it’s reselling for. There is a lot of manipulation and speculation in this market and that’s where we can leverage NFTs to bring transparency and trust in. Of course we can give a lot of perspective about the past, but also we can use NFTs and blockchain to give our customers a peek into the future. For example, a manufacturer develops a new movement and launches the first product. For the customer who buys that watch, even if you say it's a limited edition, he is not going to know how many you're going to produce. By using blockchain and allocating a certain number of NFTs to that particular model, you could reassure the customer of the product quantity in the future and give him an idea of how scarce that product is.”
Thanks to tokens, for the first time ever, two features of physical life are now digital: Scarcity & Ownership. Put differently, the possession of valuable assets is no longer limited to physical objects. The best-known examples of digital-native assets are digital artworks, collectibles, trading cards, virtual clothing, and game skins.
With the emergence of social networks, gaming, and the metaverse, virtual life is now a subject that also concerns brands. This has opened up a whole new market and possibilities for brands to create added value for their users. For businesses that follow this route, it's essential to map out the project’s goal and long-term value.
NFTs can be very interesting when they are used to represent our digital identities and help us find a network of like-minded people. With on-chain histories, what NFTs we hold in our wallet, how long we hold them, their rarity, etc. can paint a vivid picture of our preferences, shopping behaviors, expectations, etc. Today this information is locked within the walled garden of companies like GAFAs, sadly not open to build upon. NFTs and wallets will make that possible.
Loyalty, community membership and access to exclusive experiences
Beyond digital collectibles and digital twins, NFTs can be leveraged by brands to reinvent their CRM practices in a meaningful way. Thanks to smart contracts, brands can bake features into an NFT and expand its purpose. NFTs can effectively function as digital membership cards, providing access to exclusive communities, events, sales, drops, or time-based privileges. This is called token-gated where ownership of a token unlocks exclusive perks that would be inaccessible otherwise.
It’s increasingly common to see brands organize online or IRL meetups with their community. In these cases, having a specific NFT in your wallet might be required in order to gain access to a chat room, scavenger hunt, or merch store.
On top of that, because blockchain is public, it’s possible for brands to know who owns what tokens, and send complimentary/personalized goodies directly to their wallets according to their holdings. This provides brands with a new way to expand the product ecosystem (e.g. Bored Apes and Mutant Apes) and engage with the community on an one-one-one level. Owning an NFT therefore turns you into an investor, a club member, a stakeholder, and a devoted customer all at once.
web3 is changing consumer behaviors. In the words of @gregisenberg:
“Instead of browsing, we're on quests
Instead of posting, we're collecting
Instead of joining, we're contributing
Instead of selling, we're staking
Instead of liking, we're voting
Instead of hanging out, we're vibing.”
Proof of attendance
NFTs are also reshaping the proof of attendance. Owners can attend any events or log directly into brand websites with the NFT being the only proof of ownership needed. For example, through the Arianee wallet, brands can send out digital invitations (in the form of a QR code) to their holders and time-stamp their participation.
In the same way when you keep a ticket stub of your favorite concert, or buy a magnet from a conference you attended, an attendance token is a digital version of these keepsakes, but superior because it is forever saved in a secure wallet and can be displayed in your collection in the metaverse. At the end of the day, it’s all the events and experiences accumulated in a product's life that makes it unique and more valuable.
As we move into web3, it’s important to remember privacy and decentralization are the driving forces of this movement. In a matter of a few years, the way we are marketing and acquiring users will be rendered obsolete. As business leaders, you need to start to wrap your head around these paradigm shifts in consumer expectation and technology.
Rather than the value of any single asset, it is the underlying structure of NFTs that allows them to be used for a variety of purposes. Therefore, the impact of NFTs will not be limited to one or two industries, and numerous use cases will continue to emerge, if not prosper.