The New Era of NFTs: Connecting Digital and On-Product Elements

2021 was the year of the NFT. Non-fungible tokens burst onto the scene, dominating the headlines and popular consciousness. By the end of the year, NFTs had amassed $44 billion in sales. In 2022, non-fungible tokens have continued to dominate. With $37 billion in sales from January to May, 2022 NFT sales will likely eclipse last year’s.

Non-fungible tokens have taken many forms, from gaming skins to video reels. Whether static images or video clips, most NFTs were digital assets. But NFT trends are changing. Brands are now exploring whether a different kind of NFT is possible. One that connects the digital with the physical, like a mixed-media artwork.

Before we explore the possibilities, let’s recap why non-fungible tokens were so popular in the first place.

What is an NFT?

A fungible token is interchangeable. For example, one Bitcoin holds the same value as another. By contrast, each non-fungible token is inherently unique and characterized by a distinct set of metadata. This means that NFTs are not equivalent in value, and are one-of-a-kind assets. Like cryptocurrencies, NFTs are stored on the blockchain. Or at least they are once they have been ‘minted’, a digital process that converts digital data into digital assets recorded on the blockchain. Whilst an underlying image can be duplicated, the non-fungible token and its metadata remain copy-proof. That’s because the blockchain provides a transparent record of transactions, which denotes the true owner of the non-fungible token.

Why are NFTs so popular?

As non-fungible tokens are unique, each asset is exclusive. And with exclusivity comes appeal. By owning an NFT, fans have the ultimate one-of-a-kind collectable. For brands, NFTs provide endless ways to connect with customers, with assets ranging from music clips to virtual handbags. Just as limited-edition physical products are popular because of their scarcity, digital non-fungible tokens have generated serious revenue for brands. Just ask Dolce & Gabbana, whose NFT collection sold for $5.6 million. And non-fungible tokens can be the gift that keeps giving. Repeat royalties, which can be set during the minting process, occur when an NFT is resold and provide ongoing revenue streams for brands and artists.

Proceeding with caution in the new frontier

Despite the opportunities, brands should proceed with caution. Due to the meteoric rise of non-fungible tokens, bad actors have seized the chance to profit. Before many brands have released their own NFTs, they may find that bad actors have already released NFTs that impersonate their brand.

This happened to Hermes when MetaBirkin NFTs sold out online. These NFTs had no legitimate association with the Hermes brand but bore a visual likeness to the brand’s Birkin bag. And this infringement was lucrative. A physical Birkin handbag has a starting price of $9,000, but one MetaBirkin NFT sold for $46,000. So, non-fungible tokens can generate more revenue than physical products. But this only benefits brands if non-fungible tokens are authentic – not sophisticated imitations. To benefit from non-fungible tokens, brands must eliminate these bad actors. Infringing non-fungible tokens reduce brand revenue and damage the identity brands work hard to preserve.

Fusing the physical and the digital

Despite these risks, the opportunities of NFTs are too good to miss. Just one NBA Top Shot NFT, an iconic Lebron James dunk, sold for more than $200,000. Potent money-makers, non-fungible tokens can also amplify physical product sales. In October 2021, Nissan released a Nissan GT-R NFT on the RubiX Network NFT marketplace. The buyer of the NFT would also receive the keys to a physical vehicle, a limited-edition GT-R NISMO. Listed with a starting price of $280,000, the Nissan non-fungible token sold for $2.3 million. In the world of fashion, big brands like Adidas and Gap have also released digital non-fungible tokens that unlock exclusive physical products. But this link could work both ways.

A physical link to the digital realm

By working with an authentication expert, a physical product can become a portal to the digital realm. Say a brand wants to release a range of 100 physical sweaters. To enhance sales, one of these 100 sweaters can unlock an NFT. So, how can this work? A visible link, like a secure QR code, can be printed on a product hangtag. After buying the product, the fan can receive a unique ID number. The fan can scan the product QR code, enter their unique ID, and if they have picked the winning sweater, unlock their non-fungible token. For fans who did not choose the prized sweater, all is not lost. These fans may not receive a non-fungible token but can instead unlock other exclusive branded content.

Many brands are starting to push the digital and physical boundaries in this way. Wearable NFTs are another example. Fashion brand Overpriced has released a real-life hoody with an embedded code, allowing the person to physically wear the hoody with their NFT displayed on the garment.

The benefits of digi-physical products

Beyond driving sales, connecting the digital with the physical has many benefits. When a fan unlocks their NFT, a digital footprint is created. The QR code or Unique ID can link to a digital Track and Trace Platform, like OpSec Insight. From there, real-time technology can constantly monitor the movements of the physical product, whilst NFT infringement takedown technology protects the non-fungible token in the cyberspace. For brands losing $32 billion to counterfeits, this adds an extra layer of protection from IP infringement. For fans, additional security features protect their possession. But they also capture the appeal of NFTs: reminding them of the asset exclusivity.

Leveraging the new NFT trends

Non-fungible tokens provide infinite opportunities for brands. Many brands are already experimenting with fusing digital and physical elements to enhance sales. But brands only benefit if they can safeguard their intellectual property. Physical product hangtags must be tamperproof, and NFTs must be protected from infringement on all 55 online marketplaces. To safely tap into new NFT trends, brands can partner with a business that protects physical products and digital content.

For more than 40 years, OpSec Security has protected intellectual property for brand owners. OpSec safeguards physical products with over 120 patented authentication technologies. To protect brand IP online, OpSec’s global analysts use automated technology to constantly monitor marketplaces and shut down infringers. Using these proven techniques, OpSec now detects and takes down unauthorized non-fungible tokens that infringe on brand IP. In just over a year, this technology has already achieved results. With coverage of all NFT marketplaces, OpSec has taken down 87% of unauthorized NFTs for its clients.

With OpSec’s protection in place, businesses can focus on elevating their brand by tapping into new NFT trends.

Ready to push the boundaries of what’s possible? Contact OpSec to find out more about our NFT Infringement Takedown: https://go.opsecsecurity.com/nft-threat-analysis