The first currency goes back to 3000 B.C. when the world’s earliest civilization developed in Mesopotamia. The retail store, on the other hand, appeared further down the road in ancient Greece, where merchants sold goods in the Agora city center. Thousands of years later, in 2009, the market for digital assets arose. As these digital assets became prevalent, so did fraud. In 2014, NFTs (non-fungible tokens) were introduced. These digital identifiers made buying, selling, and trading digital assets efficient and reduced the possibility of illegal activity.
What is an NFT? Simply put, “NFTs are baseball trading cards, or collectable postage stamps, in digital forms,” writes Steve Sarner in his book Web3 Simplified. The artwork is original and the owner is verified on the blockchain.
Today NFTs are reportedly on the decline — well, their value is. And, some major publishing companies are closing shop on their NFT marketplaces. What was once seen as a burgeoning opportunity is now being positioned as a bad investment. But why? NFTs will bridge the gap between the real world and the metaverse.
Selling digital products to consumers is not new. Advertisers have been buying digital products from Facebook and Google for years. Consumers buy digital services from Netflix. But the difference between a digital product and an NFT is critical to the retail experience. When a consumer rents a movie, it’s the same movie that any other consumer can rent. On the other hand, when a consumer purchases an NFT it is unique and only has one owner.
Due to the global financial crisis, advancements in blockchain technology as well as the proliferation of digital assets available built momentum for NFTs. However, an inflated market and an insatiable demand for NFT collectibles created too much hype. The NFT bubble subsequently is starting to burst, providing an opportunity for brands to step in and offer value to consumers.
Regardless of the recent millions lost by collectors, retail brands from Gucci to Walmart are applying for NFT-related trademarks. More than 5,000 trademark applications were filed in 2022, which is more than double the previous year. Following this trend, a number of prominent brands also expanded their trademark portfolio to protect their digital assets.
Currently, NFTs are not subject to regulation. There’s no legal protection for anyone who buys, sells or invests in them. In the U.S., the Securities and Exchange Commission (SEC) views NFTs as a security. Regulators have also been confused distinguishing between NFTs, stablecoins, and cryptocurrencies.
Of late, the high price of NFTs has piqued the interest of regulators. The folks at Yuba Labs, best known for the Bored Ape Yacht Club NFT, are facing an SEC probe over unregistered offerings. The investigation is not necessarily nefarious but a way for policymakers and regulators to “learn more about the novel world of Web3,” Bloomberg reported.
Earlier this year, the Treasury Department’s Financial Crimes Enforcement Network (FINCEN) jumped into the discussion after witnessing the $69 million sale of Beeple’s Everydays: The First 5000 Days NFT at a Christie’s auction. FINCEN’s report ultimately determined cause to doubt any regulatory action for NFTs, or any cryptocurrency, and concluded that no regulatory action was a priority of the agency at this time.
NFTs are most often talked about as digital art objects. Opportunities exist beyond the digital wall. By data structuring through NFTs, digital assets are linked with real objects. Real estate, cars, branded shoes or even gift certificates that are purchased in the “real world” can receive a virtual good to authenticate their purchase and tag the rightful owner of the original product. For example, Nike applied for a patent to make the authenticity of sneakers traceable with an NFT system.
The automotive retail industry — comprised of those that sell automotive parts and accessories — will become more customer-centric and create a less painful retail experience with NFTs. If the car owner and mechanic share NFTs after servicing. both parties will retain a record for all eternity. The NFT will state who owned the car, for which period, and detail the condition of the car. Governing bodies will have access for any context and keep indefinite records.
Another idea for the retail sector includes inviting key customers to receive digital NFT innovations that allow them to access specific rooms in a metaverse with special features. The “invitation only” exclusivity pairs like-minded customers who can network. This approach will improve customer loyalty and retention.
The opportunities for NFTs are endless. Much more than digital art, NFTs can be used to enhance and stimulate retail environments. Also, the technology may be utilized to reduce fraud. Companies should consult with General Counsel and outside trademark attorneys for guidance on understanding the burgeoning digital space.
Casey Jensen is VP of US Sales and Marketing at rooom.com. He has spent the last 15+ years working in sales and management for some of the most innovative technology companies in the world, including Google, and helped these companies secure and manage clients including Hilton, American Airlines, Dell, HP, Neiman Marcus, Michael Kors, Gucci, Apple, Paramount, Hotels.com, Travelocity and Adidas. From launching new markets for existing and new products to building sales and operations teams, Jensen helps companies find and capitalize on markets for their products and services quickly and efficiently.