NFTs or non-fungible tokens are grabbing headlines globally with digital files of art, music, memorabilia or even tweets being sold for millions of dollars on the blockchain. In India, brands are jumping on to the bandwagon too. From celebrities to startups, everybody is selling their version of ‘limited edition’ assets through NFT. Experts suggest that the India market will grow by at least 50 percent in 2022 with more and more categories coming up with their NFTs.
Turns out, brands are not getting into NFTs simply to be a part of the trend. “Using NFT a brand can make money in each and every transaction. With NFTs revenue opportunity increases manifold,” says Piyush Kumar, Founder & CEO at game streaming and esports platform Rooter.
Rooter itself is in the process of announcing their NFT in the game streaming space in the next quarter.
But first, for the uninitiated, let’s recap what an NFT is.
NFTs are basically digital assets with unique identification codes and metadata recorded in a blockchain ledger representing the ownership and authenticity of an associated unique tangible or intangible asset.
An EY report says that the concept behind NFTs is to create a certain scarcity and shortage in the flood of the seemingly infinite supply of virtual items. Accordingly, NFTs bring the promise of creating a "digital original" that is one of a kind and can be clearly attributed to the respective owner.
A commonly asked question is why should one invest in buying NFT of a digital asset that can easily be copied or downloaded. The EY reports answers that too. It says, “With the caveat of existing IP rights, anyone can theoretically copy a digital file as many times as they want, including the art contained in an NFT. However, NFTs are designed to offer something that is protected from replication: ownership of the work. Essentially, the owner of an NFT owns the original piece of hex values signed by the creator. While other individuals may freely copy the raw data, they cannot claim ownership.”
Now, why are brands launching NFTs?
Brands are basically reinforcing the exclusivity of their offerings through NFTs. Globally a host of brands have been getting into the NFT space and not just selling but auctioning NFTs. Marvel Comics for instance, launched a series of Spider-Man and Captain America, then there was McDonald’s that created a limited number of NFTs in celebration of the McRib's 40th anniversary this October. There were also ultra-luxe brands like Gucci that sold NFT inspired by their fall-winter collection of the year at Christie’s. In August 2021, Coca-Cola’s first-ever NFT collectibles garnered a winning bid of $575,883 in an online auction.
Back in India celebrity brands have been taking to the trend quite aggressively. Popular names like Amitabh Bachchan, Sonu Nigam, Nucleya and Ritviz, Yuvraj Singh have all launched their NFTs this year. There are also brands like MG Motor India that also announced their foray into the NFT world. With this, the British brand has become the first carmaker in India to launch a collection of NFTs. The MG NFT collection went on sale with 1111 units of digital creatives as part of the launch collection.
There are comparatively smaller brands too. Like GO DESi, a confectionary brand that has launched NFT with NFT marketplace OpenSea. It is in fact the country’s first candy brand to enter the world of NFTs. Their aim is to create a futuristic brand in candy space.
“NFTs have become a contributing factor for brands to create their own identity,” says Harsh Rajat, Founder, Ethereum Push Notification Service (EPNS).
The intention for brands as experts say is to drive engagement and at the same time create exclusivity and help connoisseurs acquire what is called a ‘collectors’ item’.
Abhay Aggrawal, the CEO of Colexion that helped Yuvraj Singh launch his NFT says, “The premium NFT collection of Yuvraj Singh will be an opportunity for the fans to engage with their all-time favourite star. We are creating interesting digital spaces for him to engage with his fans who will also be able to 'own' special moments of his career.”
Colexion is preparing to launch an autographed cricket bat along with a 3D statue of the cricketer.
Fast-mover: Sport and NFTs
Sports in fact is one of the most active sectors getting into the NFT space. When CricFlix, RevSportz and Fanatic Sports got together to conduct their first-ever cricket non-fungible token (NFT) auction in December 2021 they saw biddings worth USD $335,950. Australia batsman David Warner’s 2016 IPL-winning signed jersey topped the chart with the highest bid of $30,000.
Elaborating on their offerings and their target audience, Anwar Hussein, Co-Founder of Cricflix says, “NFT is a new asset class for baby boomers and Gen X to invest in. Secondly, we provide rare and authentic “Rolex of rare memorabilia" assets inside a metaverse targeted to GenZ and millennials who are metaverse savvy, can purchase and show off inside their metaverse projects.”
The target for most brands in the space is to grab eyeballs and maximize revenue through sale of NFTs.
The crypto confusion
Another cricket-based digital collectibles platform Rario has tied with Polygon Studios, to curate fan engagement and grab attention of cricket fans around the world. Rario’s integration of Polygon in August 2021 coincided with Polygon’s launch of Polygon Studios, a NFT-centric gaming and metaverse hub designed to facilitate web 3.0 gaming, backed by a $100m fund to accelerate mainstream adoption of NFT projects.
Rario has popular faces like Zaheer Khan and Rishabh Pant on board as their brand ambassadors and though the platform is optimistic about starting a virtual cricket academy where NFTs can be played, Ankit Wadhwa, Member of Blockchain and Crypto Assets Council (BACC) and Co-founder and CEO of Rario says awareness building around NFT is important as people confuse it with crypto.
“Crypto is a digital currency and NFTs are digital goods. They both use the same blockchain technology but they are not the same thing,” Wadhwa says.
Is NFT a bubble or is it here to stay? How is it regulated?
These are questions many marketers are asking themselves.
“Tokenization as a concept is the way forward so NFT at a concept level is not a bubble. This is the future of commodity trading,” Mihir Mehta, SVP, Ashika Capital tells us. But according to Agarwal how the concept is adapted will determine the fate of the concept.
“It shouldn’t lead itself to a place where it becomes a highly speculative asset like crypto where a bunch of tweets could drive its value down up or down. NFT hasn’t reached that point yet. There are companies that are attaching certain token value to assets to intellectual properties and they are doing it very well. Some amount of regulations could keep the virility factor of this trend in check,” Mehta suggests.
Speaking of regulations, Wadhwa says since NFT is nothing but a commodity and there is some tweaking in existing regulations that is needed to account for a new format of goods.
“Some clarity on this format of goods in terms of regulation will definitely be needed and it will be helpful for the entire ecosystem but NFT is not a new category that is not regulated. It is a digital category of goods and goods are already regulated by various laws,” he says.
From a legal perspective however, Atul Pandey, partner at Khaitan and Co says that as of now, there is no legal backing or any regulation governing NFTs and accordingly NFT investments are risky.
“The risks get aggravated by the fact that all the NFT transactions being in the nature of crypto assets are carried on marketplaces set up by cryptocurrency exchanges,” he says.
Therefore, there is a hope that the Cryptocurrency Bill would provide some clarity regarding the future of NFTs as cryptocurrencies and NFTs are based on the same technology.
(Edited by : Ajay Vaishnav)