NFTs, the Metaverse, and How They Fit Corporate Strategy

From NFTs (nonfungible tokens) to virtual real estate, blockchain-based assets have exploded in the past year. The phenomenon is driven partly by tech and international brands that anticipate people living a part of their lives in the future in the virtual world. This naturally draws corporations to take a closer look at ways to get involved, find their niche within the blockchain, and capitalize on it.

What Are NFTs?

An NFT represents ownership of a unique item, such as digital artwork, that exists on a blockchain. Think of it as a certificate of ownership that cannot be modified. Or compare it to a concert ticket, where you have a ticket on a specific date in a specific seat, that’s nonfungible, because no one else can sit in that seat on that particular date. Today, sales volume of NFTs is currently in billions of dollars.

Collectibles and artwork are a popular niche for NFTs. There have been a couple of oft-reported examples of NFTs commanding huge payouts in the past year, catapulting NFTs into the limelight. Perhaps you’ve heard about how Christie’s auction house sold an NFT last year for $69.3 million, created by Beeple, a digital artist. Recently [December 2021], digital artist Pak broke Beeple’s record, selling “The Merge” for $91.8 million to 28,983 collectors.

Digital content is another NFT application, such as a piece of music or a movie. For example, a musician might have a sample pack, and other musicians can use elements to integrate with their music.

Many companies are dabbling in NFTs. Ethereum, the most established blockchain platform, offers domain names through Ethereum Name Service. It uses NFTs to provide customers access to Ethereum addresses with easy-to-remember names. Coachella just announced Coachella NFT lifetime tickets that are also tradable. That use case fits very well with how the tech can be used.

There are projects where companies are collateralizing invoices, debt, and insurance in NFT form. Using NFTs occurs in the context of securities and derivatives too, especially when you look at using them as potential custody for tokens, assets, or insurance. There are many ways you can use this technology in the context of ownership.

The best thing corporates can do is to get creative. Identify the problem for your company, and then apply an NFT solution that makes sense. It should be something that solves a real problem.

What Is the Metaverse?

The concept of the metaverse is also trending at the moment. The metaverse is a virtual world that merges social media with the real world to deliver an interactive experience. The vision is to enter the platform and encounter a wide variety of things to do. You could play an interactive game, or you could go to a cryptocurrency stock market and trade cryptos. It’s loosely defined, and it won’t have value until we see one metaverse, or until there’s agnostic interoperability among existing platforms. However, these platforms have advanced in the past year. Wilder World is one that is still developing, but the resolution and quality is a big leap from earlier metaverses.

One of the biggest challenges of metaverses is interoperability. If you’re building on an esoteric chain, you can’t get any liquidity on that chain, and any sort of financial movements you’re making on that blockchain might be all for naught, even if you have the best technical world. Can assets be moved? Is there a function to at least exchange them for cash and move that on and off? These are things to look at when considering a metaverse.

NFT and Metaverse Trends

Nike’s acquisition of RTFKT was clever because they’re investing in infrastructure. If you own the “processing house” for NFTs, then you become the point of gravity. Out of the big players, like Adidas and Bose, Nike stands out. They took a committed approach by acquiring RTFKT. Adidas created a collaboration, which may earn short-term gains, but may not be sustainable because it leans on a third party. If you’re a major brand with deep resources, it might make more sense to do it in-house.

Currently the Ethereum chain is congested. Many people are seeking alternatives, like Solana, Cardano, and Polkadot, places that are developing NFTs and Layer 2 technology solutions like IMX. Ethereum’s somewhat bulletproof with tried-and-true code. Solana is gaining significant institutional investment. Choosing a platform is about figuring out what’s important and finding the chain that provides it, risk- and investment-wise.

What’s Coming Next?

What we may see next are projects in which people work on ETH and BSC from day one, or Solana and ETH from day one. Agnostic platforms or ones with multichain capability are going to be more common, if not necessary.

When you look at the metaverse, Decentraland was one of the first iterations, but graphics were lacking. I think Wilder World has a lot of potential. As far as leaders, I can see Sandbox or Animoca taking the lead. I don’t think Facebook, renamed Meta, can do it. They have capital to buy the right companies or buy the right talent to become the leader. It makes business sense, but I think because of who they’ve become, people may not want to support them.

Exploring the metaverse will be about finding meaningful ways to engage. It needs to make sense for your business and not be cumbersome for users. If you integrate all this great blockchain, cryptocurrency, NFT into your business and you don’t educate the consumer and it’s not easy, it’s all for naught.

If you want to do it yourself, you need to find the right talent. It may make sense to tap talent in-house who are passionate about crypto. Do a census, find the people who are passionate, and put together a team that already understands your business. Even so, mistakes are inevitable. Perhaps most important is to make sure you know what the problem is that you’re trying to solve.

Ask yourself why this needs to be tokenized. Why do you need to do an NFT? How does this help your business? If you can’t answer, go back to the drawing board. If you can answer those questions and find the right people, proceed, but be flexible. Technology can change rapidly to a point where your thesis is no longer valid. Flexibility helps you pivot the thesis to match the market. As always, of course, do your own due diligence and research.

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About John Keh

John Keh specializes in marketing blockchain, cryptos, and decentralized finance (DeFi). He was the chief marketing officer at Genesis Block and GBV Capital between 2020 and 2021. He is also the founder of Run the Chain, a crypto marketing agency that specializes in launching and marketing early-stage blockchain startups. Alongside his role at the above, John is also the co-founder of Ministry of Solana, a Solana-focused accelerator, and an advisor at Radian, a blockchain-based dating ecosystem. Last October, he founded Trinity Capital Ventures, a crypto-native investment firm focusing on early-stage assets.

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This financial industry article was adapted from the GLG Webinar “Beyond Bored Apes: How to Integrate NFTs and the Metaverse into Corporate Strategy.” If you would like access to events like this or would like to speak with financial industry experts like John Keh or any of our approximately 1 million industry experts, please contact us.