NFTs can pave the way for transforming commerce experiences

Many companies and big brands have already jumped on the non-fungible token (NFT) bandwagon, including Nike, the National Basketball Association, Pepsi, and even Taco Bell. But is it just for show, or do these NFTs create value? Just as digital services have become essential for all businesses in and outside of technology, I believe that tokens – and, in particular, NFTs – are likely to become equally crucial in the emerging web3 economy for at least two reasons.

First, my view is that NFTs symbolize ideas at an atomistic level, creating rivalry and exclusivity around goods or services. Markets cannot form when goods and services are not rivalry – when one person’s consumption does not compromise with another’s – or when they are not exclusive – when there is prohibitive to access a good or service with a price mechanism. NFTs, on the other hand, create rivalry and exclusivity by leveraging smart contracts on the blockchain that deliver NFTs to people’s digital wallets when they make a purchase.

Second, I also believe that organizations can use NFTs to effectively attract and engage different levels of customers, each in their own way. While traditional marketing involves selling goods and services at a discount, perhaps for a limited time, NFTs allow brands to target specific customers and reward those who are willing to engage. For example, perhaps a fashion brand decides to distribute discount codes or special offers that are not available anywhere else for NFT holders. Normally this would cost too much to do on a large scale, but NFTs offer a way.

Related: Why are major global brands experimenting with NFTs in the metaverse?

Build a community

To date, however, most NFT apps have been among the biggest brands – or so it seems based on media coverage. But either way, small organizations and even independent business owners will benefit from NFTs for years to come if they invest the time and energy in understanding how they work. In fact, just think about the types of businesses that are most likely to benefit from NFTs: it is precisely the smaller organizations that do not have as much marketing budget to implement large-scale campaigns and discounts. who benefit from cost reductions. that NFTs provide to target consumers and invite them into a community.

Forget the thousands or hundreds of thousands of dollars spent buying mailing lists, building sales funnels, and conducting surveys and market research. Understanding the competition and knowing your consumer will always be important, but the landscape is fundamentally different when you think about reaching people on a blockchain based on their buy-in and the ability to track what people are actually buying and interacting with seamlessly. .

That’s not to say that marketing doesn’t matter. Marketing and visibility matter because consumers need to know more about the goods and services being offered. But the mechanism behind all of this is changing – just having a big budget won’t be as successful as a small organization or independent business owner who has a clear community of loyal customers. NFTs are simply a new technological mechanism for conveying rival and proprietary goods and services to people who value them – they are not a substitute for creating valuable goods and services in the first place.

Related: Web3 relies on the participatory economy, and that’s what’s missing — Participation

Take, for example, the positive effects of airdrops and governance tokens, which I previously discussed in Cointelegraph Magazine, citing Gary Vaynerchuk and 3LAU. When used with intention and caution, Airdrops are a great way to reward early adopters and build a close community. Then, as momentum builds, the community grows and enters a new phase.

Improve B2B services

While it’s easy to see how NFTs can enhance the consumer experience, ranging from fashion to content creation, what about businesses that sell services to other businesses?

The principles are the same. Imagine, for example, a consulting firm where companies over time bid with different consultants buying their NFTs. Then the consultant income would fluctuate based on market demand and supply, giving each person more incentive to carry their weight and add value in the process, as well as an opportunity for business to hire their favorite top talent.

The same could be true for a higher education institution where faculty produce NFTs of their content and can license it to companies as an additional revenue stream, reducing the need for tuition increases. Such an approach would also encourage teachers to create content that actually responds to market demands, rather than just talking about it.

Beyond the outward-facing component, consider the impact tokens could have on an organization’s internal labor market. One of the greatest challenges within organizations is the lack of a prize mechanism, dating back to the contributions of the late Nobel laureate Ronald Coase in a 1937 paper, as well as another Nobel laureate Oliver Williamson in a 1981 article.

Since prices in a market function to allocate supply and demand, a problem exists within organizations: there is no price! Instead, internal labor markets and organizational decision-making operate through hierarchies. But these are inefficient, and there are a wide range of transaction costs – or factors that drive a wedge between what people want and need to trade.

Related: Demystify the business imperatives of the metaverse

These frictions can be resolved through the use of an internal economic system where tokens are used to facilitate trade. For example, increasing an employee’s salary can be a gamble, but paying it in tokens creates additional in-game skin and performance incentives since tokens can only be redeemed if the employee stays in the game. organization. Obviously, building such an internal ecosystem isn’t straightforward, and there are costs and benefits to be weighed in more detail, but at their core, tokens have the potential to fundamentally transform the conversation about transaction costs.

Take stock

It’s easy to get carried away by the buzz about NFTs – and even fungible tokens – without knowing why. Clearly, there’s something special about the Web3 revolution we’re in, but sometimes it’s hard to put your finger on why. I believe the secret sauce lies in the ability of NFTs to create atomistic-level rivalry and exclusivity around ideas – and this has profound implications worth exploring further.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Christos A. Makridis is a research affiliate at Stanford University and Columbia Business School and the CTO and co-founder of Living Opera, a web3 media art and technology startup. He holds doctorates in economics and management science and engineering from Stanford University.

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