Non-fungible tokens – or simply NFTs – are digital assets that allow you to prove ownership of a store of value. Here’s everything you need to know about this new phenomenon – in 5 easy steps.
Step 1: What are NFTs
NFT (“Non Fungible Token”) is a collection of digital data stored on the blockchain. ‘Non fungible’ means that it can’t be broken down into smaller pieces. A blockchain is a distributed digital ledger that stores data of any kind. For example, it can record information about cryptocurrency, or ownership of non fungible tokens.
Your next question might be – why store data on blockchain? After all, we already have other tried-and-tested ways to store our data… The biggest advantage of a blockchain is that it supports immutability – permanence – and its public nature. Traditional databases, on the other hand, don’t exhibit immutability, and are therefore more prone to being manipulated. Once the data is recorded on the blockchain, it can not be erased or replaced, it’s there forever. That is one of the reasons why bitcoin, the world’s first decentralised cryptocurrency, and the underlying blockchain technology is already being adopted by several corporations and central banks.
Step 2: How it all started
The first NFT was created in May 2014, but the technology slowly caught up with the world in 2015 when the Ethereum network launched, now the main network for NFTs. The most popular NFTs on the Ethereum Blockchain are CryptoPunks (a collection of pixelated portraits) and Bored Ape Yacht Club (a collection of somewhat more detailed pictures of apes wearing different outfits).
There are 10,000 unique CryptoPunks (6,039 male and 3,840 female), all of which are made digitally scarce through the use of blockchain technology. Each one was algorithmically generated through computer code and thus no two characters are exactly alike, with some traits being rarer than others.
The Bored Ape Yacht Club collection exists on the Ethereum blockchain and contains 10,000 unique NFTs derived from 172 unique assets. The NFTs function dually as a membership card to Yacht Club. The NFTs were originally sold for 0.08 ether each, around $190 at the time of their April 2021 launch and were sold out in 12 hours.
However, it wasn’t until 2020 that the world took more notice of NFTs and some of these Punks and Apes started selling for millions of dollars – just because they have a more unique/rarer skin colour or a peculiar hat. Widely publicised attention of such celebrities as Eminem, Justin Bieber and Madonna also didn’t hurt.
Step 3: How NFTs are used in the ‘real world’
Fashion brands are among the bigger players experimenting with NFTs. The likes of Nike, Adidas, Gucci, Crocs, Prada, and Dolce & Gabbana are trying to use NFTs to their advantage. And seemingly, modern gamers love the idea of buying a virtual hoodie from Adidas for their game avatar with an exact physical copy of it being sent directly to their house. The virtual hoodie could then be used in a game or, more generally, in an online metaverse. Having spent hundreds of pounds on micro transactions in a game you love, it can be incredibly satisfying to be able to literally take those items out of the game and officially own them in the ‘real world’.
Moreover, those NFTs can then be further sold on, and at a profit, if someone else deems them valuable. Big gaming companies such as Ubisoft and Activision are already looking into this. In Fortnite, huge amounts of money are spent on ‘V-Bucks’ with the only purpose of buying in-game items that you then don’t really own and definitely can not resell. But with the merging of virtual and real, those profits of re-selling digitally owned goods can potentially be shared with the gamers themselves. Even now, with some companies already using the blockchain technology in their games, there are cases of people quitting their jobs as taxi drivers or shop assistants to play games full time. Selling the NFTs and cryptocurrencies that they earn in-game allows them to earn more than their previous average wage.
But is that all?..
No, the ‘real world’ use cases are much more exciting than just buying a digital ape picture or a virtual Adidas hoodie. Blockchain can be used to authenticate documents, real estate ownership, medical records and IDs, intellectual property and patents, academic credentials, tickets, votes… the list goes on. Just imagine participating in an election where no one can manipulate votes! Or having a concert ticket that is impossible to lose because it is stored in your virtual wallet forever.
Step 4: How sustainable are NFTs
Digital goods can help reduce consumption and waste, but many critics object saying the carbon footprint is too staggering. Even though NFTs themselves, being 100% digital, do not cause any environmental impact, the impact on our climate is directly linked to how an NFT is produced.
Most NFTs are minted using the proof-of-work operating method, which uses large amounts of electricity, thus adding to the atmosphere’s carbon dioxide emissions. However, other, more environmentally friendly ways to mint NFTs, exist – in particular, methods using proof-of-stake, rather than proof-of-work operating method. The impact can be further reduced if miners use renewable sources of energy and both miners & buyers invest in renewable energy and in experimental technologies.
Step 5: Why Salesforce NFT Cloud
So why Salesforce and NFTs? They are not a fashion or a gaming company after all…
In April 2021, Salesforce partnered with Vechain, a cryptocurrency, to build an application on their version of the blockchain. Every month, more and more companies operating in different industries are experimenting with NFTs, and some of them might already have a Salesforce implementation. Offering those companies an opportunity to continue using Salesforce for managing their NFTs with NFT Cloud, Salesforce provides the pickaxes and shovels to them – to help build this potential future.
The metaverse trend is clearly on the rise, and the blockchain will inevitably lead to the creation of many online worlds. Salesforce NFT Cloud is going to help launch already existing and thriving brands into these new digital worlds with new communities, digital wallets and huge amounts of data to gather, manage and process. Closing the gap between physical and virtual worlds could be made even easier with Salesforce. Moreover, Salesforce is only working with the more sustainable and carbon neutral miners – to ensure that one of the Salesforce core values, Sustainability, is being observed.
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