In 2021, a little known three letter acronym previously reserved for subreddits, discord servers and clubhouse rooms of crypto enthusiasts entered the mainstream. ‘Non-fungible tokens’ or ‘NFTs’ became the buzzword of of the year after this form of unique digital certificates that records ownership of a digital asset, hit a whopping $25b in trading volumes.
Over the last year, we have seen watershed moments at art auctions, a proliferation of illustrated jpegs on twitter and a rush of brands, sports leagues, celebrities and venture capitalists jumping onto the NFT bandwagon. Much like the early days of the internet, we’re straddling between wild optimism and deep skepticism. But irrespective of which side of this passionate debate you are on – there is no denying the fact that we are witnessing a new wave of experimentation and innovation in IP owned businesses such as gaming, music, art, films, fashion, sports and media & entertainment at large, like never before.
Now, before we move any further, this might be a good time for a quick, obligatory recap of what NFTs are and how they work. If you have some time, I highly recommend watching this video by journalist and YouTuber Johnny Harris. If not, here’s a textbook definition: a non-fungible token is a certificate of ownership of a unique digital asset. The operative words being – ownership, unique and digital assets. This means, you can now attribute value (say a cool $69m in some cryptocurrency) to derive ownership (through a certificate recorded on a blockchain) to a unique digital asset (like a tweet, gif or digital art).
What’s important however, is what this might mean for us as creators and consumers, going forward. While there is no doubt that the last 12 months have led to a lot of hype and speculation around NFTs, that’s probably in some way the whole point. We see these hype cycles with new technologies all the time – it starts with a breakthrough in some technology – which triggers early excitement driven by some initial success stories followed by a bunch of failures. Soon, the newness goes away, interest starts to wane and speculation starts to fade. This is when more instances of used cases around the technology begin to emerge and its utility starts to be more deeply understood. Second and third generation versions start to see success and eventually mainstream adoption begins to take off.
While industries such as art, gaming and sports have benefited as first movers in NFTs already, we’re beginning to see the wider entertainment ecosystem across music, films and animation be the next in line to experiment with NFTs by transforming the way content is produced, distributed and monetised.
New models of funding
From films to animated shows led by emerging production teams, these projects provide a way to develop new funding models to produce content via NFTs. How? NFTs allow for content producers to distribute part ownership of the movie to viewers by not only raising the required funds in the process, but also including the community in the decision-making, building a loyal fanbase and marketing the project beforehand.
Building brand extensions of IP
More so, for larger studios and IP owners, NFTs are providing new streams to extend their franchises and solidify their fandom. Everyone from Warner Bros to Disney and Lionsgate are crafting their NFT strategies to deepen fan engagement, build experiences and introduce brand & IP extensions. Closer to home, Viacom18 and a partnership between T-Series and Hungama are just a couple of examples of some of the NFT marketplaces that have recently launched to interact and engage with web3 communities in India.
Powering the creator economy
And finally, for individual creators, artists, musicians and filmmakers, while NFTs not only open up opportunities to engage directly with fans, it also opens up monetization opportunities for individual creators in ways that were never possible before. We’re living in a time where content creation could potentially be decoupled from the ad engine that has subsidised the cost of content creation, distribution and consumption over the last seven decades.
While it’s still in its early days, NFTs are pushing us to think differently about the economy of the internet – it is driving us to reimagine how we validate things and engage as communities online. At Kulfi Collective, we see a bunch of interesting opportunities for broad uses of NFTs and building communities among brands and IP owners that we collaborate with. Typically, we’ve seen great NFT projects comprise three core attributes:
Awesome Content – This is the primary, unique digital asset that could be in the form of any digital IP – from artwork by an emerging digital artist to a newly released track from a talented singer songwriter to a character from an animated show to a clip from an epic basketball match or anything in between.
An Engaged Community – The basis of a successful NFT project lies in the strength of its community. A group of people that come together around a shared interest or passion. Interactive, engaged communities create rewarding experiences and lead to network effects that push the project and brand forward.
Solid Utility – The value of a good NFT project is derived from its tokenomics or the functional utility (both online and offline) that it offers to the owners of the token. This could include various forms from rewards, discounts, access, memberships, experiences, events and giveaways among other benefits that bring the community together.
This is a crazy moment in time where we are getting our heads around this technology and what it means. Eventually, we’ll adapt and this won’t seem as crazy anymore. The hype will die out but the tech that got us all here in the first place will probably still be around.
And at that point, which side of the token would you want to be on?
Article is authored by Advait Gupt, Co-Founder & CEO, Kulfi Collective
