Ultimate guide to NFTs: Part 2
NFTs are the biggest topic in the tech industry right now, as we discussed in Part 1 of our Ultimate Guide to NFTs series. In Part 2, we’ll go over some of the primary benefits and potential downsides of NFTs, as well as some opportunities for your small business to utilise them.
Pros and Cons of NFTs
- Solves the licensing issue by clearly identifying who owns each token.
- Potential for profitable assets — Due to their scarcity, NFTs can increase in value, providing owners with the opportunity to benefit from their tokens in the future.
- Provides artists with better profits — NFTs give artists a chance to sell directly to consumers, cutting out a lot of fees that would typically have to be paid.
- Uncertainty about value: At the moment, an NFT’s worth is completely defined by its aesthetic and sentimental value, which means that if you buy one, there is no current purpose for it that can improve your business or personal life other than knowing you own it. It’s hard to determine how much it’s worth as a long-term investment, so for now it’s all speculation. There’s a significant risk that the recent surge in popularity of NFTs has caused them to become overhyped, which means that investments made now may not deliver the returns you expect once the buzz subsides.
- Environmental concerns: The blockchain technology that underpins NFT’s construction has a significant environmental impact, which is a significant disadvantage. Tokenizing digital files, like cryptocurrencies, necessitates a significant amount of processing power. The energy used to mine and run cryptocurrency systems via computers and servers, as well as cooling equipment, is comparable to a million transatlantic flights. As a result, increasing the use of NFTs will increase the existing energy requirements of blockchain technology, which is not in line with the global trend of major corporations looking to cut rather than grow their energy use.
- A significant issue is the security concerns raised with NFTs. While Ethereum can safeguard your copyrights and prevent others from copying your NFT, there have been reports of hackers taking NFTs from other blockchain exchanges. This is an area where classic artwork may have an advantage over NFTs because it is much more difficult to steal your collected works in physical form than it is in digital form, giving you a little more peace of mind while spending large sums of money on art.
How to use NFTs in your startup
Engage a larger audience
Individuals may be able to obtain NFT copies of your products instead of the more expensive physical versions. This allows your customer base to grow and your business to expand. This could be useful when the digital ‘Metaverse’ becomes more prominent and companies look to transition their business to digital platforms.
To encourage consumers to participate with your brand, hold competitions with NFTs as prizes. This raises your company’s profile while also increasing interaction with the brand.
Create your own GIFs
If this is relevant to your business’ consumer base, creating your own gifs can be a great way to gain traction to your business. Not only are they unique to your business, if they were popular then there would be an opportunity to sell them as collectibles. It is important to understand that this may not be a suitable option for a lot of businesses as it does not appeal to their target market and would be an inefficient use of capital and time.
Think to the future
While it may look like NFTs have no relevance to your business right now, the digital world is changing and it seems like NFTs are one of these aspects of said digital world that are here to stay for the foreseeable future. If the virtual reality that some of the biggest companies in the world are developing becomes the new internet, then making sure your business is adaptable to the digital world could be pivotal in survival.
You don’t have to act right now and start investing in or creating your own NFTs, but making sure you have a clear understanding about them and identify avenues where you could potentially incorporate them into your business could bode well for the future.
Originally posted on 7startup.vc