Non-fungible tokens or "NFTs" are projected to continue to grow as an integral part of branding strategies during 2022. NFTs are unique and verifiable digital assets that, like cryptocurrency, are stored on a digital ledger or "blockchain" (such as Ethereum) and can be traded via online platforms that support NFTs (such as OpenSea). Unlike cryptocurrency that can be traded or exchanged one-for-one with a like kind (i.e., one bitcoin equals another bitcoin), each NFT contains a digital signature that renders it "non-fungible" or one-of-a-kind. NFTs are generally digital representations of real-world items such as music, audio, video, text and art. NFTs first garnered widespread media coverage in March 2021 when the artist Beeple sold an NFT representing a collage of 5,000 digital images at auction at Christie's for over $69 million.
NFTs were increasingly used in 2021 by brand owners, talent, athletes, influencers, artists and others to increase awareness through content creation and consumer engagement. NFT sales rose to $10.7 billion in Q3 of 2021, an eightfold increase from the previous quarter, as tracked by DappRadar and reported by Reuters. 2021 saw use of NFTs to expand brand recognition and product offerings. In October, Mattel announced its launch of a Hot Wheels NFT Garage, releasing 40 new NFT designs for fans and collectors. The Hot Wheels NFT collectables allowed fans and collectors access to rare digital art, and offered the chance to own limited, real, die-cast vehicles when certain NFTs are collected. Brands also increasingly used NFTs to promote products while simultaneously engaging in purpose driven marketing and giving back to their communities, including Taco Bell's sale of NFTs depicting art of its Spicy Potato Soft Tacos. Taco Bell donated the profits from those NFT sales to the Taco Bell Foundation, which empowers youth to discover and pursue career and educational pathways. More recently, in December 2021, NFTs were used by winemaker Robert Mondavi to authenticate a limited series of wine sold to collectors, while also providing art depicting the wine bottle itself.
NFTs can be used to surprise consumers and to create cache and suspense around product launches and to give back to customers and communities. NFTs offer consumers and buyers transparency and security in the ownership and acquisition of NFT rights. When applicable, brand owners that mint and then sell NFTs can embed royalty structures in NFT technology, ensuring recurring delivery of royalties and monetary return each time the NFT is sold. NFTs can also enable expanded generation of revenue by turning elements of more traditional advertising into NFTs. The spectrum of uses of NFTs will only grow in 2022, and continue to become more mainstream.
Takeaway: As use of NFTs grows, advertisers are cautioned to ensure that their intellectual property rights underlying their NFTs are protected and that NFTs are properly minted through smart contracts embedded in the NFTs that will assign NFT rights as to ownership and transferability.
Originally published December 8, 2021
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