It’s time for NFTs to shake the stigma and show what they can do.
Ever since the phrase “non-fungible token” entered the general lexicon (along with “Zoomer,” “deepfake,” and “murder hornet”), NFTs have had a bit of a reputation problem. The stigma wasn’t entirely unearned; early NFT projects often served more as proofs of concept, vanity projects, or get-rich-quick schemes than functional, worthwhile collectibles, leading critics to call them everything from “overpriced JPEGs” to flat-out scams.
These days, NFTs are so much more, but the technology’s branding problem is still holding the concept back. In 2023, NFTs are often tied to rare physical items, exclusive events, or one-of-a-kind artwork (in image, video, or music format) — but you wouldn’t know that if you only listened to the critics. It’s time to re-examine the negative stigma around non-fungible tokens and put their utilitarian uses in the spotlight.
Confronting the NFT Branding Problem
At its most basic, a non-fungible token is simply a unique digital identifier recorded on a blockchain to guarantee authenticity and ownership. So, what went wrong?
First, the NFT market experienced rapid growth in 2020, leading some to compare it to the dot-com bubble of the late 1990s. The expectation was that NFTs would rise dramatically, making a lucky few wealthy, then crash just as sharply, leaving financial wreckage in their wake. After all, aren’t bubbles doomed to burst? For some opportunistic minters, NFTs were simply a means to an end — a way to make some quick cash before early NFTs inevitably lost their value. Unfortunately, the strategy backfired; even though a DexterLab Twitter survey showed that 64.3% of respondents bought NFTs solely to make money, over half of the same respondent pool actually lost money.
One industry where NFTs were poised to make a big impact was video games. Players dreamed of being able to actually own their virtual items and take them from game to game — a concept that developers repeatedly said would never happen on a grand scale. Gaming’s biggest NFT success story was Axie Infinity, a Pokémon-esque online game with a play-to-earn mechanic that allowed players to earn the cryptocurrency Ethereum while collecting adorable creatures for their battle lineups. While Axie Infinity was meant to show the value of NFTs and cryptocurrency in gaming, it instead exposed vulnerabilities in the system; a 2022 hack led to losses of $615 million, while the value of its AXS coin dropped sharply with every crypto crash.
Finally, there’s a perception that NFT adoption is riddled with frictions at every step of the way and simply too complicated. In a Dibbs survey of 227 NFT enthusiasts across the globe, over a third of respondents listed either “purchasing crypto” or “setting up a wallet” as the greatest challenge to entering the market. Combine that with exaggerated claims of NFT functionality and it’s not hard to see how the technology developed such a muddled reputation.
The early history of NFTs may not have instilled confidence, but that’s the past. Now that the initial hype cycle has died down, it’s time for NFT creators to look beyond these early stumbles and find more creative uses for the technology that are actually worth the fanfare.
Giving NFTs New Meaning
Remember what we said about NFTs mirroring the dot-com bubble? Well, true to form, the bubble burst — but that might actually be a good thing for NFT creators. As Rolling Stone put it, “While the hype cycle has died off, creators, investors, and brands continue to invest in NFTs. For creators, it all comes down to aligning their own incentives with those of their fans.” In other words, going forward, NFT creators should worry less about chasing trends (and a quick payout) and more about cultivating unforgettable brand loyalty-enhancing experiences. That’s why individuals and businesses are now exploring more practical uses for NFTs, adding more to their value than simple digital scarcity.
We analyzed the top 100 NFT collections of all time and found that 64% have two or more types of utility. Additionally, 73% of collections traded during the survey period had two or more utilitarian uses.
What might these utilities be? That’s where things get exciting because the possibilities are almost limitless. Here are the top three categories we discovered in our research:
- Physical collectibles: Members can exchange their NFT for a corresponding object, like a rare trading card.
- Access to exclusive events: This might include backstage access at a concert or the ability to visit the locker room at a sporting event.
- Exclusive merchandise: Brands like Nike and Adidas are tying NFT production to rare apparel and footwear drops.
As NFT technology continues to evolve, we can expect to see even more uses for these tokens, which makes them far more appealing to the general public.
The Future Is Phygital
“Unless it solves a unique problem innovatively, NFTs are of minimal merit to the real world.”
This is something Brad Hart, Chief Technology Officer for software developer Perforce, told Game Developer in 2022. Hart’s comment highlights a common public perception: Without pragmatic uses, NFTs are a solution in need of a problem. That doesn’t have to be the case, however, as physical-backed NFTs have proven.
One of the most interesting data points from our survey is that 84% of respondents said they would purchase an NFT if it were redeemable for a physical item. NFTs as a token of ownership is a concept tech enthusiasts can get behind, and with the right partner, the process actually makes it easier to sell, trade, and store unique (and often quite valuable) physical items.
For example, let’s say you wanted to sell a guitar that once belonged to a famous musician. Sure, you could have it authenticated by an expert third-party, list it on an auction website, and handle the shipping yourself while hoping to find a buyer who can safely store such a treasure, but that requires a lot of logistical challenges–– time and a non-insignificant upfront cost.
Alternatively, you could partner with an exchange like Dibbs and let the experts handle the hassle. The right NFT partner should be able to mint (register onto the blockchain) the token representing ownership, store the corresponding item in a secure vault, and handle royalty payments every time the NFT changes hands in the future. That way, you wouldn’t have to worry about your rare guitar getting damaged in transit, while the buyer can choose to keep it safe in the vault as long as they need to.
Considering that two out of the top three functional preferences for NFTs (as shown above) are physical items, it’s clear that this concept has enough potential to help the public see NFTs in a new light. Once we get over the idea that NFTs are nothing but overpriced digital artwork, we can cast aside the stigma and explore even more ways to use the technology to create unforgettable experiences and connect consumers with rare, high-quality phygital (using technology to bridge the digital world with the physical world with the purpose of providing a unique interactive experiences for the user) experiences. It’s time to give NFTs another look — they’re just getting started, and the future looks bright.
About the Author
Ben Plomion is Chief Marketing Officer at Dibbs. He is responsible for creating value for partners, developing go-to-market strategies, as well as growing Dibbs’s consumer marketplace. Before joining Dibbs, Ben was Chief Growth Officer at GumGum, a contextual advertising company. Ben led the North American sales, customer success and operations teams which include 150+ employees and annual revenue in excess of $200M.
Ben successfully launched GumGum’s In-Gaming division as well as a suite of Connected TV and Social media products. Prior to that role, Ben led the global marketing and communications team as Chief Marketing Officer. Before GumGum, Plomion was Head of Marketing for the programmatic advertising company Chango, where he established the business development and marketing organizations and helped guide the firm to its acquisition by Rubicon Project.
Earlier, he held a variety of marketing leadership positions at General Electric, where he helmed the company’s global digital media practice. Ben is a French native and a graduate of GE’s Experienced Commercial Leadership program and McGill University’s MBA program. He is a regular marketing contributor for Forbes and sits on the Board of the MMA. Ben lives in Venice Beach, CA with his wife and son, and is an avid surfer and skateboarder.