There’s been a lot of buzz about NFTs in recent days. NFT stands for non-fungible tokens on the blockchain that represents ownership of a digital item. The initial purpose of NFTs was to authenticate digital artwork but the tokens now serve as a medium for businesses and individuals to sell their art online.
In the last couple of months, the popularity of NFTs hit new highs. Notable examples include digital art by Beeple that sold for $6.6 million and the NYT’s column about NFTs that sold for $560,000. Needless to say, there is big money to made for artists that are able to commission their digital art at a hefty price.
However, NFTs do have their fair share of critics. The value of non-fungible tokens is down 70% since February and experts warn that the NFT bubble can burst at a moment’s notice. Moreover, as more people create their own digital art, the novelty and exclusivity of NFTs will soon wear off.
But this has not stopped companies from getting into the NFT game. Luxury art houses like Christie’s and fashion powerhouse LVMH (OTCMKTS:LVMUY), are selling their own NFTs. Not only does this serve as a new revenue stream for companies but it allows them to sell collectibles. Almost anything on the internet can be converted to an NFT.
Here’s a look at three companies dabbling in NFTs this year:
NFTs: Yum Brands (YUM)
Last month, Taco Bell was serving up more than just the physical version of its tacos. The fast-food chain created taco-themed GIFs that were sold on the NFT marketplace Rarible. Unsurprisingly, the demand for digital taco art was hot. Nearly 25 tokens (pieces of the art) sold out in under 30 minutes.
As reported by Business Insider, Taco Bell listed its art for $1 each and its resale value was as high as $3,000. The “Ever-Crunching Tacos” secured the highest bid.
The sale of the NFTs was backed by a philanthropic initiative. Taco Bell stated that 100% of the proceeds from the sale will be put towards its Live Mas scholarship. The fast-food company says that it might do another run of NFTs, but this still remains a rumor at best.
However, its foray into the digital art market is a sign that NFTs are going mainstream.
Athletic apparel and footwear giant Nike is among the companies dabbling with NFTs. But unlike the digital art that NFTs are famous for, Nike is using them as a patent for its footwear.
Labeled the Cryptokick, this NFT removes barriers between the physical and digital world. Essentially, the NFT of the shoe is linked to its physical counterpart, When a customer buys a physical shoe, a digital version of the shoe will be made available in their “virtual locker.” So, if you were to sell your physical shoe, the sale will be mirrored in the digital realm as well. The virtual shoe can change characteristics or crossbreed as well.
Nike’s use of NFTs is truly novel because it serves as a digital collectible of the shoes a person owns. In addition to this, Cryptokick holders can use their tokens in video games or participate in online sneaker forums.
NFTs may have started as a token to represent traditional forms of art but Nike’s Cryptokick is proof that digital fashion could very well be the next big thing.
NFTs: Warner Music Group (WMG)
Another area of NFTs worth exploring is digital music. The music world first heard of NFTs when the cat-collecting game, CryptoKitties blew up in 2017.
Dapper Labs, the company behind the name, created cat-collectible merchandise in collaboration with WMG. The company recently announced that it will release two new characters inspired by Muse’s album Simulation Theory as part of this series.
According to Shara Senderoff, president of the firm Raise in Space, NFTs will blow up in the music industry. Senderoff says that people are always looking for alternatives to traditional financial instruments, making NFTs a viable choice.
Adding to this the digital tokens also provide a revenue stream for a middle class of artists who are not represented on the publishing side. Fans of the artists on the other hand now have the opportunity to explore their fandom through various avenues.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.