The Non-Fungible Tokens, since they have entered the business strategies of individuals and companies, have highlighted a whole series of advantages that can hardly be ignored. At the same time, some problems were also highlighted by the insiders.
Here you will find some of the reasons why creating and selling NFTs is beneficial, but also what are the risks to pay attention to in your strategy.
The benefits of NFTs for businesses
For brands and creators, NFTs are a godsend. It is, moreover, a new billionaire market born out of thin air in recent years: the possibilities of profit are practically unlimited, and the costs for companies and individuals are minimal.
The application fields are equally endless: everything can be sold as NFT, just create a digital copy of what you want to sell and the game is done. You can tokenize individual products or digital works of art, or create collections of thousands of objects.
In addition, NFTs incorporate all the classic advantages of blockchain:
- immutability of the register
- traceability and verifiability of content, movements and transfers.
In fact, an immutable register of ownership with the rights of the interested parties is incorporated directly into the token, allowing sellers and investors to discover details such as the original owner of the token, the current retailer, etc.
In addition, you can automate the settlement and settlement of send and receive transactions, allowing for transactions that last a few seconds, rather than the hours or days you need earlier. As a result, the management of tokenized assets improves market efficiency and optimizes the exchange of goods and services.
NFT: New revenue at low cost
Another advantage is the costs for creating NFTs: a few hundred euros, as well as the cost for creating the same digital asset. In addition, the sale of an NFT can achieve very high margins, if the idea on which the initiative is based is in line with the medium, is creative and there is already a fanbase. By creating collections of thousands of items you can manage sales. You also earn royalties every time your NFT is sold.
In fact, another advantage is the possibility of earning even from second, third, fourth, etc. level sales: in short, every time your NFT is resold to third parties, you are paid for your rights. All thanks to the fact that on the blockchain every transfer of ownership is traceable. In other words, you will create a continuous and unlimited revenue stream over time.
For brands, investing in a strategy that incorporates NFTs allows them to attract new young and enthusiastic customers: a new brand image that is more innovative and modern will allow the company to change its position in the market. In addition, always with regard to the relationship with customers, NFT collections are able to involve them in the long term, thus retaining them to your products and services offering them new exclusive advantages.
Finally, it should not be forgotten that the creation of NFT allows brands and individuals to enter the world of cryptocurrency investments, from which many companies have obtained considerable economic advantages.
The challenges that NFTs highlight
Despite the above advantages, asset management in the token economy is not risk-free.
For example, investors may suffer significant losses in the case of illiquid assets/low liquidity, as market prices can be highly variable and can deviate substantially from the fair value of a company or investment opportunity.
The risk of volatility of virtual assets is further increased by regulatory changes, cyberattacks and cryptocurrency robberies.
Risk of attracting unprepared actors
Whenever a new technology is imposed on the market, new companies improvise to offer solutions and services without having the tools, putting the resources of their customers at risk. The blockchain has attracted numerous patrons. To avoid running into danger, the only way is to trust the major players in the market and be supported by companies that are already successfully active in the blockchain market.
Beware of environmental impact!
If implemented incorrectly, NFTs can elicit critical reactions in an environmentally sensitive audience. The impact of first-hour blockchain technology, which needs large amounts of energy to track and store transaction information, is well known.
It is therefore good to choose blockchain technologies that mitigate the environmental impact of your operation, for example by using green and renewable energy for mining, or by setting the purpose of the initiative to recover funds for the protection of the planet.
Limits to direct control
A limit on NFTs is now linked to the role of intermediaries.
Today, most brands or a creator who wants to create and sell their NFTs turn to two third parties: the blockchain, on which to undermine their token, and a marketplace, where to put it on sale. In this way the brand does not have full control over its initiative, purchasing operations, experience, customer data and so on.