What Are NFTs and What Do They Mean for Your Small Business?
Get extra money flow with NFTs.
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NFTs—an acronym that means "non-fungible token"—are very popular right now and refer to items that are unique or one-of-a-kind. Original art, for example, is non-fungible. There may be copies, of course, but there is only one original. "An NFT can be thought of as a certificate that only exists once, is unique, immutable and cannot be interchanged," explains Michael Bouhanna, Sotheby's Co-Head of Digital Art and Contemporary Art Specialist, who led Sotheby's Natively Digital NFT auction in June 2021. "At Sotheby's, we view the potential of NFTs as a once-in-a-generation opportunity to create a bridge from this innovative new form of digital art to the institutional art world."
The value of an NFT is tied to cryptocurrencies, another mysterious term. Cryptocurrencies refer to a type of digital currency based on the blockchain, or a decentralized network, in which each coin is unique and difficult, if not impossible, to counterfeit. The process is supposed to be secure, and the rewards are supposed to be great. An NFT could net an individual several thousand (even millions) of American dollars. "We aim to lead our industry in adopting this new technology and collaborating with digital artists who are at the forefront of exploring the value this area can generate for every player in the art world," Bouhanna says.
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The ABCs of NFTs
Selling NFTs are a great way for a small business to earn passive income. Set up a digital good as an NFT and earn money every time a new person buys it from the last person who had it. The path of ownership for the NFT is easily traceable on the blockchain (albeit you may need a tech savvy on your team), so you can always find out where it ended up and who currently owns it. In a sense, these unique digital assets on the market have the value that trading cards used to have in the past. People will buy them to have the privilege and status of being the one to own them. And that's good for your small business because it helps to spread the word about you and may attract more customers for your other services or goods.
What's. more, NFTs are easy to create. First, you need to already have the digital asset that you created. Next, you can use a site like Rarible to convert your asset into an NFT and place into the marketplace. Rarible will walk you through the process of making an NFT. You will need to connect your cryptocurrency wallet, so if you don't already have a wallet, then you will need to set that up first. NFTs only deal in cryptocurrency. The FAQs section of the NFT creator site and the seller/buyer sites can tell you which cryptocurrency you need to buy and add to your waller, and which wallets you would need to connect to receive money.
What it means for your business.
NFTs can have a huge payoff for your business. "In some ways, entering the NFT market is no different to when we entered the market for Contemporary art, which we did in 1973," says Bouhanna. "For the last 277 years, we've made it our business to keep our finger on the pulse of what's exciting in the cultural and artistic world around us—and that's just what we're doing here."
If an NFT of yours increases in value and becomes highly sought after, your business could earn a large profit on the digital asset, but this is never guaranteed. Getting started does have a learning curve, though, and some of the fees for the different NFT selling sites can be expensive. Small businesses should thoroughly research the market and talk to their financial advisor before taking the plunge. Like anything in the business, NFTs should be planned for and vetted. You will need to understand the risks as well as the potential rewards, and understand how to pay taxes on your sales. In the end, NFTs can be a great business move for you and open the door to more opportunities to make money and grow your business.