Business Model for NFT, the world, nowadays, is crazy about the business model. And it is clear that NFTs are big business, really big. However, there are skeptics who think that the NFT bubble may soon burst. Real estate companies, luxury fashion labels, sports leagues, and ……. are selling NFTs. Sotheby’s, Christie’s, and Phillip; even these legacy Jewelry and art auction houses have entered into the business. This is, therefore, a trend worth exploring. Mark Cuban, a billionaire, is enthusiastic about NFTs. It can provide important new revenue streams for creators and small businesses, according to him. He advises to jump into the business. And what is the best time for it?
Now! It’s time to act on to start with the right business model for NFT.
NFT Business Model: How to Make Money?
It’s time to understand the business and how to earn money using NFTs. We know that purpose of any business is to earn money. A business model helps in creating, developing, and maintaining a business. Hence, we are starting a discussion on the ways of revenue generation in the business model for NFT.
Selling NFTs is the most common means for businesses to make money in the ecosystem. NFT business model is an indisputable and undeniable choice as there is ample demand for virtual goods. It also works very well.
As mentioned earlier, selling NFTs directly to users is the most popular method for companies in the NFT ecosystem to generate revenue. Likes of video game publishers and game developers have already entered into the NFT business. Revenue earned from the NFT business has a lion’s share in the total income. Experts opine that selling NFTs directly to users will create money for the foreseeable future.
A new way of monetizing the internet with digital collectibles
You need an NFT marketplace to start your business. An NFT marketplace is very similar to eMarketplaces likes Amazon, eBay, and Itsy. Sellers sell their goods in these marketplaces. Similarly, NFT owners sell their NFTs in these NFT marketplaces.
NFTs are Etherium (Cryptocurrency) based smart contracts for a digital asset. These are unique, verifiable, indivisible, and immutable tokens created using blockchain technology. These NFTs represent ownership rights of a digital asset, artworks, etc. An NFT seller sells his or her NFTs in exchange for a cryptocurrency in the NFT marketplace. The marketplace owner charges a commission, usually 2.5 to 5 percent, from the NFT seller. There are plenty of sellers and buyers of NFTs. Hence, the NFT marketplace owner earns a handsome revenue as commission.
Business Model for NFT: An Overview
According to the English dictionary, Fungibility is the ability of a good or asset to be interchanged with other individual goods or assets of the same type. Fungible assets simplify the exchange and trade processes, as fungibility implies equal value between the assets. And, as per the Cambridge dictionary, non-fungible means not easy to exchange or mix with other similar goods or assets.
Non-fungible or non-fungibility are not new concepts for the business world. However, non-fungible token (NFT) is a rather new business idea. Blockchain technology has converted the idea into big businesses. Hence, there is a need to know about the NFT business model.
What Do You Need to Know About NFTs?
Understanding Non-Fungible Tokens
Fungibility is a rather simple concept relating to the things people own and use in daily life. Dollars or rupees are simple examples of fungible assets because one can easily replace them with something identical. To clarify, you can replace a 100 rupees note with one serial number with another 100 rupees note of a different serial number. Both notes hold equal value. This fungibility of fiat currencies lays the foundation stone to exchange. And this exchange system is the basis of any business. Hence, all classic business models are based on the fungibility of fiat currencies.
Inversely, non-fungible assets are unique in nature. These are not mutually interchangeable. An art piece of a famous artist is not interchangeable with another art piece of a different artist. This very nature of non-fungible assets leads to the blockchain-based new business model of NFTs.
Non-Fungible tokens contain identifying information about these unique assets. Also, there was a problem of a lack of unity in traditional digital assets. Non-Fungible tokens solve this problem too, Blockchain technology helps in creating a unique and immutable identifying system of these unique non-fungible assets. Thus providing a simple way to transfer ownership and manage access to these NFTs.
Non-fungible digital assets have been existing since the digital era started. However, the tokenization of these unique assets has the potential to pave a way for new business model for NFT. It is essential to know about the characteristics and unique abilities of NFTs that differentiate them from traditional cryptocurrencies before we understand the NFT business model.
Characteristics of Non-Fungible Tokens
UniquenessMetadata describing the uniqueness of a digital asset differentiating it from all other assets are the basis of NFTs. The owners can describe large numbers of attributes in rich metadata that make the NFT special and identifiable. In the blockchain, this record is permanent and unalterable. As an outcome, one can validate the authenticity of the asset using this feature.
Validating authenticity is a challenge for high-value non-fungible assets in art, gaming, collectibles, and other virtual or real-world assets. There are, always, fakes. The original function of NFTs was to verify digital art because they can function as certificates of authenticity. NFTs, help to protect these fraudulent activities. The very characteristic of blockchain helps negate counterfeiting and deceptive behavior. This reassures purchasers that their acquisition is authentic and original.
Validating the authenticity and Uniqueness characteristics of NFTs leads them to create a successful NFT business model.
We know that 35 percent of the famous Monalisa painting is meaningless. So, you cannot split the NFTs into smaller denominations. One can only hold, buy, and sell these as whole entities. However, there is a possibility that an expensive NFT can be bought in partnership and one can get a share of the same.
Though, technically one can create unlimited numbers of NFT, it is its scarcity that makes it attractive. That is what makes non-fungible tokens interesting for business. Increasing rareness enhances desirability and that is suitable for any NFT business model.
Moreover, NFTs solidify ownership rights. A non-fungible token paired with Blockchain technology helps to provide ownership rights to a digital asset. An NFT is also transferable. One can easily trade NFT ownership rights on a specialist market.
Now, we have some understanding of fungibility, non-fungibility, and non-fungible tokens (NFTs) along with the business model.
Besides this, there are many other ways to create revenue. Blockchain technology has opened up doors for more business opportunities. We will discuss these innovative ways to earn money using the business model for NFT in the coming blog post.