Moving from the hype of exchanging digital artworks – not all of the same, high quality, of course – to creating a tool for consumer engagement and protection. Here is a brief history of NFTs.
An NFT, or a non-fungible token, is a digital unit registered on the blockchain that certifies the passage of an asset. The NFT is, therefore, the digital, certified representation of something, the movements of which we can finally trace virtually, to defend its authenticity and prove the goodness of the exchange between two actors. It is not a property contract, as we understand it, and it does not put a product or service inside the blockchain, to guarantee its storage, which takes place on decentralized and protected servers anyway. Associated with a smart contract, it simply contains a ‘pointer’ (a link) to retrieve purchased goods and benefits, and redistributes the proceeds of each transaction, automatically and forever, as per the agreements codified at its creation, according to the ‘code is law’ principle.
Having become popular with ‘crypto-kitties,’ or two-dimensional digital images used on social media or sold on Open Sea, a popular marketplace, NFTs have become enriched with content, benefits and rights, going on to govern the relationship between any company and its fans, but more importantly allowing brands or artists to benefit from the huge secondary market, now in the hands of speculators and platforms such as eBay or Amazon.
What has occurred in the last 12-18 months is the shift of the NFT from being a vehicle for the protection of purely digital assets, to the care of both physical and digital, i.e., phygital, assets. Renault unveiled during Viva Tech the ‘Human 1st’ project, i.e., an electric car, which is accompanied by a dynamic NFT, capable of taking in and protecting all the car’s information, from mileage to certified repairs, resolving once and for all the information asymmetry that occurs at every change of ownership and, ultimately, making certain the residual value of the vehicle throughout its existence. Renault becomes the arbiter of each ‘H1’s’ existence, transparently sharing the data of its creatures, every single second, with the first owner, the second, and so on, and streamlining the entire insurance and used-vehicle market network, as well as stimulating the return of the car to its dealers for each significant step in the car’s existence. An entire industry is reclaimed and made more efficient through a tool that protects brand and fan. The NFT became a B2B, or entreprise, tool once early speculators abandoned the ‘crypto-kitties’ hype bandwagon.
NFT is a tool that needs regulation and will develop further, but it has already changed our world. ‘Power is nothing without control’ went an old Pirelli tire slogan. NFTs are fluid and fast tools, powerful in all their most varied applications. And that is why they need rules, especially in the consumer communication part, to be clear about their promises, and to better manage potential speculation in the secondary market, through a proper set-up of the smart contract. Checks on user identity (KYC, Know Your Customer) and anti-money laundering (AML) rules are a must. Then, clarity on intellectual property of an asset, the presence of an insurance program on NFTs against any mistakes, and excellent customer service. Rules are needed, but without slowing growth, and eventually even operators need to understand that not everything needs to be an NFT.
Let the kitties pass, if they bring traffic and business, but NFTs can be refined to become a tool for sharing value, and managing marketing expenses efficiently, with confidence. Art has taken a step forward because of NFTs, if we think of the royalties that artists can continue to collect, without the filters of gallerists and with secondary market visibility. Trade will develop because of a more direct relationship between brands and fans. NFTs have the potential to streamline and speed up all markets, from finance to energy or mobility, if we think of dynamic digital twins, connected with AI and IoT to the physical world, of apartments, pipelines, complex systems like highways and air traffic, and so on.
