Non-fungible tokens (NFTs) have become the latest obsession of the internet. Whether you are extremely online or rarely browse a social media site, it’s practically impossible to go through a whole day without the word NFT somehow making its presence known.
But NFTs are actually more than an internet meme or an overblown craze from the world of technology. When used correctly, they can give value to otherwise unappreciated digital content and smoothen out the problems in complex financial transactions.
In fact, they also hold the power to change the world of eCommerce as we know it. It’s all due to their highly secure technology and inherent qualities, which make these assets ideal for this extremely popular subset of online transactions.
If you are interested in understanding what these digital assets can do for your online shopping experience, here is a detailed lowdown on how NFTs can change eCommerce.
What is an NFT?
Before you move forward with understanding the role of NFTs, it is important to learn what they actually are in the first place.
To summarize, an NFT is a blockchain-based digital token that does not have a physical form. It is based entirely on a unique digital signature that can be accessed and transferred through the respective blockchain where it is created.
These traits of existing on the blockchain and being transferable between cryptocurrency wallets make NFTs seem like they are identical to cryptocurrencies, but that is where the similarity ends between these digital assets.
It is because cryptocurrencies are similar to other forms of currency, where an identical unit can be easily replaced by another unit of that denomination. For instance, if you have a Bitcoin, another Bitcoin will hold the same value and perform the same functionalities. It is also exchangeable on a 1:1 ratio. This also holds true for all cryptocurrencies such as Ethereum, Litecoin, and Dogecoin. This makes these cryptocurrencies fungible, which is a quality that they share with regular or fiat currency, as mentioned above.
In contrast, an NFT is a one of its kind token that has distinct attributes assigned to it. Each type of NFT is created only once on its blockchain and cannot be replicated by the same rules. While the NFT is transferable between cryptocurrency wallets and can be exchanged between the current and existing owner, it cannot be replaced by another unit that is exactly the same. This makes it non-fungible, which is the simple origin of its name.
How NFTs Can Change eCommerce
NFTs are created to represent unique values, assets, or property on the blockchain. This can range from digital pets such as Cryptokitties to digital trading cards such as NBA Top Shot. They can also represent other unique digital content such as tweets, articles, and artwork. In an ideal world, they will also be able to replicate physical property on the blockchain. Some small scale experiments have already shown that use case by creating NFTs for paintings and other properties.
Typically, whoever holds a particular NFT with the associated asset’s details worked into its digital signature can be considered the owner of the respective asset. For instance, if someone buys a tweet that has been turned into an NFT, they can get bragging rights about purchasing the tweet and having the transaction signed into the NFT. In most cases, the transaction is also digitally autographed by the asset’s creator. This also works for digital artwork and other unique content.
However, it is critical to note that an NFT may or may not give the owner the copyright of the content, which means that the work can be replicated or removed on the creator’s discretion in certain cases. That is why, those who buy NFTs often negotiate on these terms depending upon their own preferences.
How Does NFT Work in eCommerce?
NFT can work in the eCommerce industry by assigning a specific product or service’s attributes to a unique digital token. This represents said solution on the blockchain and can also define its owner in and out of the blockchain environment.
This particular arrangement can bring plenty of benefits to the table, which may include but are not limited to the following.
Proof of Ownership
NFTs can work as the proof of ownership of certain assets. While the finer details such as copyright transfer may depend upon the transaction agreement between the buyer and seller of the NFT, the ownership transfer can be treated as a primary phenomenon among all NFTs.
It’s mainly because an NFT’s attributes cannot be changed behind the scenes or without a record. This means that from the moment that an NFT is created to the minute it is transferred to its new owner, you can see a glaring and irrevocable record of transactions for the NFT’s life cycle.
If the NFT’s attributes refer to a particular asset, you can safely determine that the current holder of the NFT is also an owner of the respective asset. With more details such as the seller’s digital signature or details of transaction, this particular assumption can be authenticated further.
This means that an NFT can act as an undeniable proof of ownership. In eCommerce, this could create an incentive for people to buy certain products because they are getting an irrevocable certificate of ownership against it. This is particularly helpful for sites that sell bespoke, antiques, or other high value goods, where certifying ownership is as important to the owner as the tangible product itself.
Authenticated Record of Transactions
As mentioned above, the transactions that take place to validate an NFT before transferring it to an owner can also be seen on the respective blockchain. This means that typically, you are able to track the NFT to its source. This provides everyone and especially the buyer with a reliable way to determine the authenticity of an NFT as well as the history of its previous ownerships.
This particular quality has a stark difference from regular or conventional funds transfer or asset transfer agreements, where a buyer can typically know only as much information as the seller wants them to see. With an NFT, all the history is transparent, which tells the latest buyer if the property changed hands in the past without their knowledge.
This trait can come in handy in an array of situations where the novelty of an asset is highly related to its overall value. This applies to artwork, collectibles, as well as bespoke items such as couture or high fashion. If the accessory is exclusively sold on an NFT marketplace after its creation, the seller can show that it hasn’t been in possession of another previous owner. This can help those sellers who want to bank on the freshness of their products.
Token of Exclusivity
Another glaring benefit of NFTs comes in the form of their definition of exclusivity. Instead of brandishing certificates of authenticity by creators to outline how exclusive or special the asset might be, the buyers of certain NFTs of rare items can refer spectators to a digital signature.
This token of exclusivity can mean the world to those who own an NFT’s respective asset such as a trading card, a digital artwork, or a fashion accessory only for the sake of collecting it. Considering this, NFTs could be a highly sought after digital token for luxury websites where buyers might be quite pedantic about owning a unique product.
This specific sense of exclusivity can be incredibly helpful in those scenarios where buyers want to build or grow their collection with a specific story behind each item. This can work wonders for jewelry or premium offerings where this exclusivity allows them to appreciate the respective transaction even more than usual. It also holds true for unique gifts or artwork commissions, where the buyer might want a written record of their special purchase.
This exclusivity may also be beneficial where a buyer wants to resell the respective tangible asset in question. Since a buyer can reliably prove that the item was held by them for the specific dates and no one else, reselling it can become easier and may come with a higher return on investment (ROI).
Claim for Virtual Property
As eCommerce begins to harness different types of properties, the sector is not entirely dominated by tangible goods. From software solutions to custom artwork, the marketplace now holds various virtual assets that are ready to be sold, bought, and exchanged between interested individuals.
Since NFTs offer a never-seen-before way of assigning value to virtual property, they can support this side of eCommerce in a highly efficient way. Those eCommerce sites that want to sell distinct items can create unique NFTs for them; while those platforms that want to sell different ownership parts of a single asset can also go that route. The latter brings upon a more intricate ownership agreement, where an asset can be owned by multiple people at once.
This whole mechanism can change the game for eCommerce websites around the world. This especially holds true for those platforms that either exclusively sell digital assets or which sell a mix of physical goods and virtual solutions to their customers.
In addition to creating a way for virtual property to be sold, this also ties in directly with the proof of ownership, exclusivity, and transaction record traits of an NFT. When you put all of these qualities together, NFTs can become an excellent way of showing value across different types of transactions.
What Type of eCommerce Websites Can Benefit from NFTs?
While the current use of NFTs is mainly limited to digital artwork and content, they have the ability to be useful for a variety of other items. Due to their easy transfer of ownership, their exclusivity, and their accessibility, NFTs can help various types of eCommerce businesses.
Some of the examples in this regard include but are not limited to the following:
- Home Decor. Home decor pieces such as unique paintings or handcrafted tapestries can come with their own NFT. This can provide the owner with a sophisticated proof of ownership and the ability to easily resell the piece later on.
- Art. Art pieces such as sculptures and paintings can also be attributed to NFT. In some cases, a piece can have more than one owner, where all stakeholders benefit from having a shared piece of a sought after artwork.
- Apparel. Bespoke fashion can also benefit from NFTs, where each piece is sold with the designer’s digital signature. This can be ideal for high fashion designs. But it can also work for upcoming talent.
- Custom Software. A custom software solution or app by itself is a proof of ownership. But if providers who sell their services exclusively over the internet include an NFT with them, it can add another layer to the software license. It can also work for establishing the distributability of a software solution or app.
- Digital Collectibles. As mentioned above, this solution is already being used and currently remains the most widely accepted application of NFTs. When digital collectibles such as artwork pieces are sold online, artists and fans can perceive an NFT as a certificate of authenticity.
- Subscription Services. Contacting one of your subscription box services for inquiries and complaints can be frustrating. It is especially true if you have to locate your customer information among a plethora of emails. If the subscription comes with a unique NFT with unique digital signatures, you can locate the information and present it as a proof of purchase.
- Online Auctions. This encompasses digital and tangible collectibles alike. If a seller goes to an online auction site, they can make their offerings open to bidding instead of setting a fixed price to it. The highest bidder can then win an NFT along with the actual purchase, and save the digital token as a reminder of their transaction.
NFTs Have a Long Way to Go, But They Can Change eCommerce As We Know It
In their current iteration, NFTs have a long way to go in order to become a widely accepted offering for an array of purchases. But with frequent transactions, consistent exposure, and real-world demonstration of their features, these tokens can establish their importance to the eCommerce sector.
For now, we can keep an eye on NFTs and their larger market adoption to determine how soon they can unlock their true potential to the world. In the meantime, buying collectibles and toying with ideas in a responsible manner can help you assess whether or not NFTs are the right fit for you.