2021 has definitely been the year of the NFT. If you have spent any time whatsoever reading tech magazines, or reading the latest tech based happenings on Reddit and Twitter communities then you will no doubt have at least heard of them.
While some of the content across those platforms can be quite radical in favour of the emerging technology and its impact on the world, speaking to people outside of those bubbles can be quite the opposite.
The general consensus seems to be that after reading so much about Apes and Punks, the whole thing is a bit pointless. Or worse, that the hype caused people to dabble and end up losing money. Even the most tech-savvy haven’t seemed convinced that NFTs aren’t just this year's fad that will imminently disappear. But I don’t think it is a fad, here’s why.
In every single article around NFTs you will read that it stands for Non-Fungible Tokens. It isn’t vital to remember those words, the key part is Token. It’s a way of tokenizing a product, so that it’s got a digital logbook of ownership. Non-Fungible means it refers to a specific entity of that product. Unlike a receipt we would get with a jumper, which logs the purchase of what could be any version of that jumper ever made.
Starting with the absolute basics, NFTs can often be bundled in and confused with the likes of Bitcoin, or other cryptocurrency. This is not the case. NFTs aren’t a currency, the only similarity is that they’re both utilising blockchain technologies - but more to come on that.
To go straight in with a football analogy - Bitcoin is the equivalent to a £, where NFTs are each of the footballers that exist in the league. The blockchain technology beneath it all is the paperwork system that each team maintains and submits to the league officials every time a player is transferred.
The NFTs or footballers, each belong to specific owners bound by a unique contract to them. All have a value, which can fluctuate based on demand, previous owners, reputation, market conditions, similar transactions etc. They can be sold at any time for a value that the buyer and seller both accept, or could be traded without any currency being involved if the conditions suit both buyer and seller. Lastly, they could just be held under contract by the owner. Importantly these contracts could potentially include any sort of clause, which may benefit the player, owner or a previous owner.
As touched on, the hype around NFTs is because they are built on blockchains. The specific underlying technology can vary - most commonly Ethereum is used but can also be one of the less established platforms such as Solana or Polkadot. The blockchain that the NFT exists on can impact the value, and also impacts things like effort and fees to buy and sell. So much like beginning any development project, selecting the technology underpinning it is a key consideration. This process is commonly referred to as Minting.
When the NFT exists, it can then be bought, sold and transferred on a range of different platforms - including being sold on Shopify stores now. To some extent this minting process can also be handled directly on Shopify. Although you do need a Shopify Plus subscription in order to use any of this functionality.
There is a lot of excitement that has built around the usage and potential of NFTs. But it's very much still a technology in its infancy, and we have seen other concepts have a lot of hype without yet becoming revolutionary (such as QR or anything requiring a headset). So why such excitement, these are some of the key points:
Each product being tokenised and unique opens up the potential for a lot of new things. It allows for an official digital ownership. A full service history is absolutely critical when buying a car, and the blockchain technology could allow that idea of a logbook to become commonplace digitally for any product.
Official transfer of ownership each time a product exchanges hands will update that logbook, so we can see how many owners, who has owned, and what has the value historically been.
Each token may have a Smart Contract tethered with it. This means the creator can insert clauses into the ownership, which could range from perks and rewards for the owner - to transaction fees or commission from each sale when ownership is transferred.
These points combined can lead to the ultimate trust signals to both customer and merchant when it comes to commerce.
Until recent weeks and months, you would likely have only seen discussion around NFTs on Twitter, Reddit or Discord and all of that discussion would have been around things like CryptoPunks, Bored Apes or CoolCats. Or a lot of noise around Gary Vaynerchuk’s VeeFriends. These would have been discovered and transacted on Opensea, the most commonly used NFT marketplace. Point being, until very recently (and still remains, just to a lesser extent) NFTs have been niche and haven’t offered any real world value to their existence.
However this has now started to creep into more mainstream channels, and the technology is starting to be positioned in a way that can offer real benefits to more of a mass audience. Here’s some of the examples I’ve noticed or been most interested in:
This was the first project that caught my attention which combined NFTs and Shopify, and so was instantly interesting. Our friends at By Association Only collaborated with Mint to deliver the functionality for the Chicago Bulls NBA team to sell their set of NFTs directly through their Shopify store.
The famous six championship rings, well known to anyone that watched The Last Dance, were digitised and released at a quantity of the year they were won. A competition was then created for whoever held all six rings.
This example again was quite an early adoption by an established brand, which I spotted on the BALR Instsgram feed early November. While they didn’t deviate far from the theme of other NFTs at this point with their ‘Cosmic Monkey’ range, I thought the early use of the technology embedded into their loyalty strategy was good and something new.
Within the space of a couple of days, both Adidas and Nike entered the NFT space in different but equally impactful ways.
Adidas released their ‘Into the Metaverse’ range, in collaboration with Bored Ape Yacht Club - who are potentially the most well known and rarest collection in the space. As well as owning the official Adidas x BAYC piece of art, there was a range of branded hoodies and tracksuits for the owners. Hoodie can be seen below, emblazoned with the unique blockchain code. This would have been seen as a big success overall, with Adidas selling over $22m in this release, which sold out in about two minutes. Needless to say I didn’t get one, but am on the lookout.
Without wanting to be outdone, Nike acquired RTFKT studios who specialise in NFTs and virtual footwear. So I expect to see a lot more brand positioning across digital channels, and it likely won’t be long before seeing someone officially in the new Air Jordans shooting at you in Fortnite. Either way, these two moves will ensure a lot more brands take notice and start moving into the space.
The last example of usage around eCommerce is Super Plastic, the creator of vinyl toys and collectibles. They have created collections of NFTs that fit with their range of physical products - harnessing Shopify for transactions of both. This demonstrates how physical and digital products could begin to be tied together as a combined offering.
The above examples are early adopters that already touch on a few of the following bullet points, but there are a range of areas in which NFTs and the underlying technology could impact eCommerce. Some of these include:
Let's start the list with the obvious one. There is going to be a continued surge in selling digital based products. Games like Fortnite alone have proven that there’s a multi-million/billion pound market for people buying outfits or accessories to express themselves (or to flaunt) via their in-game or online avatar. That’s before the impending topic of Metaverse, in the coming year or two. The likes of Adidas, Nike, Burberry, BooHoo have all started dabbling in the release of digital fashion products - and no doubt there will be a wave of other big brands planning to do the same soon (it will be a missed opportunity if not).
eCommerce gift card experiences have pretty much been the same for as long as I can remember. While there’s been good solutions to allow physical gift cards to be used online, in a smoother omnichannel way, there’s not been anything revolutionary on the topic. Shopify still can’t natively send gift cards to a different recipient to the purchaser, and apps to add this functionality offer little else.
Using NFTs and blockchain technology, it shouldn’t be long before email isn’t involved in this process whatsoever - gift cards will be purchased and delivered straight into someone’s digital wallet, for seamless use without having to scratch the back of a card with a two pence piece or type in 32 digit codes from an email.
In a similar vein to the above, loyalty strategies could be completely transformed using NFTs. And as per the BALR example earlier in this article, we’re starting to see the early signs of that. The ability for a brand to release a set of loyalty NFTs of a fixed amount, and give discounts, perks and rewards to the holders of those NFTs is going to become increasingly common. With it will come much cleaner ways to redeem loyalty, straight from the digital wallet.
An element that I find most interesting, is the potential in the smart contracts attributed to these NFTs. There is the ability to reward customers that hold the NFT longest (similar to offering dividends when holding stocks), but also the potential to allow customers to transfer and sell these to other customers, with a cut of the transaction going back to the brand.
This is a massive topic, because of the way NFTs naturally lend themselves to collectibles. Owning collectible digital art has been the early use case for NFTs, which will likely continue as more renowned artists create digital work.
However, the Chicago Bulls example of the limited edition rings is a good illustration of the direction things could head. Infact, the Adidas example of NFT that is linked with a physical product, each emblazoned with the unique blockchain digits of that token, is also a good case study. Luxury and limited edition products, such as collectible vinyls, watches and guitars could link each specific unit of physical product with an NFT which acts as the proof of ownership throughout its existence. Once again the use of smart contracts attached will only develop here, to insert clauses which benefit both the holder and the brand.
These are two topics that I think have been really trending in eCommerce across the past couple of years, but could be transformed further with some of the elements throughout this article.
For marketplaces, as can be seen when using OpenSea or Dematerialised to browse NFT artwork, the full documented history of transactions and owners is very powerful. It’s possibly the ultimate trust signal to a buyer having full confidence in a product and the value of it - especially again when it comes to limited edition or pre owned pieces, or official / signed merchandise. Similarly for recommerce (and returned goods in general) it can give that confidence to the merchant of value and expectations of a product.
There is a lot of hype and attention on the subject right now. But my opinion is that NFTs and smart contracts - in some form - will continue to grow, eventually to be a revolution to eCommerce and the wider internet.
The form that they exist in right now, jpegs (probably followed by music) being sold to the interested communities, is easy to dismiss as a fad. But as knowledge increases, and as more big brands start and continue to dabble in the space, it will undoubtedly grow and become more mainstream focused. This is when we’ll start to see the true impact on eCommerce. I’m really excited to see how the technology can eventually be applied more deeply into eCommerce around customer accounts, loyalty, gifting, luxury, limited edition, marketplaces and plenty more.
As always, I would love to hear your thoughts on any of the above - feel free to connect with me on LinkedIn for a chat, or email firstname.lastname@example.org. You can also see more of our ecommerce consultancy work here.