Below are some thoughts about NFT business models, use cases, taxonomies, NFT Marketing and future NFT trends. This blog post is by no means complete and is work in progress.
For a quick recap, check out the article 'What is an NFT' before reading the post below.
Form of NFTs
Technically speaking, these are essentially static pictures or animated gifs which are digitally signed and certified via a blockchain.
Examples are digital collectibles and art NFTs
Any physical good that is signed and certified by blockchain. Examples are original paper signatures from stars, exclusive luxury goods. The main issue here is to have a tamper-proof anti-counterfeit mechanism.
A very huge part of NFTs will be ticketing.
The combination of a static and physical NFT. The unique good has both phyi
Static vs. Dynamic NFTs
Most NFTs described above are static yet. Once they are minted and sold, they never change.
The next wave of NFTs will be dynamic by integrating oracles into NFT smart contracts such as random numbers through random number generators (RNG) which blockchains cannot supply securely. Other basic examples are weather (e.g. Daniel Arsham NFT), stock price, time zone data, etc. This will become exciting when data such as sports star performance. Examples: NBA Rookie LaMelo will drop NFTs which will reflect real-life events. In case he is selected as Rookie of the Year, this will be reflected in his Evolve Token. Another recent example is the 'Two Degrees NFT' which has a self-destruction mechanism, once global warming increases by 2 degrees. The data source is Nasa.
Autonomy & Intelligence
Most NFTs as of today have no intelligence whatsoever. They have been created and then do not change or react to the external environment or any external stimulus. In case of an NFT ticket, they even lose their value. I believe as NFT technology evolves, new NFT classes will emerge such as:
NFTs can also create fungible tokens out of the same ERC-721 token. A new standard that, for example, allows for the creation of ERC-20 tokens linked to ERC-721 tokens is ERC-1155 developed by Enjin. Use cases in games could be: a quiver (non-fungible) in an NFT game item could generate arrows (fungible). Buying and NFT plant (digital) could generate seeds (fungible).
Meta Data & Provenance
Meta Data in particular data on provenance of NFTs will be used increasingly in the future to increase storytelling of NFTs. Uploading a picture
In the future we will have chatbots as NFTs. Though chatbots have been around for quite some time, for instance FB Messenger Bots, they have not reached mass market. NFT technology will provide the missing piece: true personal identity of a chatbot. The first project that goes into this direction is called iNFT . It converges NFT, blockchain and AI/ML technology. The most interesting part: it is a self-learning chatbot and becomes smarter the more you interact with her.
The difference to chatbots is that avatars are digital representations of one-self as opposed to chatbots which are a third-party personality. The first avatars based on voxel graphics are the Meebits 3d avatars. The idea is to basically use them as digital avatars in metaverses, games and AR/VR simulations.
Utility & Use Cases & Users of NFTs
One of the most important and probably unexplored, at least academically, areas in the NFT space is the question of why people buy NFTs. While there might be NFT-specific idiosyncratic reasons, I believe there are some commonalities when it comes to utility and psychology.
Personal Value (Collectors)
In particular, digital NFT art purchases are grounded in the same personal value as to why people buy art. People value the artist and simply like the artwork they buy. The more known the artist, the higher the value. Storytelling and provenance increase personal value furthermore.
Financial Value (Traders)
NFTs have become an asset class of their own. Traders will buy NFTs for purely financial reasons. They hope that the NFT they buy will appreciate in value. What is new is that financial ownership does not only occur on an individual basis. NFTs allow for so-called group ownership where several people join forces to buy, own, sell, trade NFTs as a group. This concept is called fractional ownership and has been practiced in real estate economics for hundreds of years. In fractional ownership, each individual shares the same "usage rights, income sharing, priority access, and reduced rates."
Owning NFTs increase psychological value in two ways:
1. individual value. I have something that is of personal value that no one else has. (an NFT of a star, that I follow)
2. group identity. If I meet someone in social media, who also owns a Crypto-Punk, we are part of a special group. This is similar to product communities such as Mini-drivers, Harley Davidson bikers, etc. In the future, we will see more of that in Metaverses where users will connect better in case they share the same NFT community.
Metaverses and Blockchain Games
DApps like Sandbox, Decentralland and Axie Infinity cover all of the above. In addition, they introduce decentralized autonomous organizations (DAO) governance and play-to-earn mechanisms via native tokens into their game concepts.
Disruptive Business Models
NFT experiments like Eulerbeats which Marc Cuban called the most genius idea are here to disrupt entire industries.
Here is how it goes: 27 AI generated NFT audiotracks can generate 120 prints each. If you buy a print you can return it anytime by burning the token. The great thing is: Buying a print is quite risk free because you get back 90% of the print price. And now it comes: not the one that you spent, but latest one in the chain. So if you spent 1 ETH but the latest print price sold was 10 ETH, you get back 9 ETH and made 8 ETH profit. 8% goes to the original LP holder and 2% goes to the project. What it means for the industry is that you can support your artist directly in the future at a lower risk. All recipients of royalities can be baked into the smart contract itself. The future will even integrate oracles such as Spotify data. This means the exact number of streams will flow back into the NFT so that all royalty recipients will automatically receive their share - straight into their wallet.
NFT Marketing and NFT Distribution Channels
These are the main NFT marketing and distribution channels to date.
Often done prior or with ICO or IDO (inital decentralized exchange offering). Companies just "drop" free NFT's in combination with certain activities recipients have to do prior to the receipt (such as following the twitter account)
Paid NFT drops
This is done by companies like DapperLabs, Animoca Brands with games like NBA Top Shot, F1 Delta, and MotoGP. Users subscribe for a one-time NFT Drop and hope to buy a usually limited NFT pack.
Most NFT sellers also run a marketplace either on their NFT Portal or third-party marketplaces to drive secondary sales. In addition, there are agents such as Sotheby's who run live auctions.
I see tremendous opportunities in running live auctions on marketplaces in combination with strong Twitch and YouTube creators and celebrities.