1. How are NFTs being used currently and is the growth of this space as lucrative and smooth sailing as it looks?
Across businesses and among artists and creators alike, non-fungible tokens (NFTs) are currently being used in a myriad of ways. From digital art and collectables to driving digital experiences, the growth of this space has been incredibly explosive, with some NFTs selling for millions of dollars and digital art collections garnering massive attention. In fact, according to research from Finder, NFT adoption in Southeast Asia is rising, with the region reported to have the highest adoption rates worldwide.
NFTs open up new potential revenue streams for digital creators and businesses, allowing them to connect directly with fans of their work, cutting out the middlemen. Today, businesses leverage NFTs to drive unique customer experiences as well. From tokenizing physical assets such as real estate and collectables to enabling customers to purchase exclusive access to an event or experience, NFTs present endless opportunities for businesses.
While NFTs have enabled a robust digital economy, as with all new technology, there are still challenges that need to be addressed before they can reach their full potential. For businesses and investors, many exciting opportunities in the NFT space have yet to emerge.
With NFTs creating an entirely new economy of digital creativity, this moment is a paradigm shift with a lasting impact. New technology and participants will emerge, and prices of NFTs will ebb and flow, but we think that the NFT market is here to stay.
2. What kind of opportunities do NFTs provide businesses, and how is it expected to shape the future of business operations?
The rise of NFTs presents an exciting and important opportunity for creators and businesses alike. In today’s digital-first world, NFTs create new business opportunities by enabling organizations to create new business models, ameliorate the value of existing products and services, and enter new markets. Since NFTs can be any kind of digital content, the possibilities for businesses are endless, resulting in the rising popularity of NFTs. Recent research shows that NFT adoption rates in Singapore are higher than that global rates, pointing towards the growing popularity of the space.
As a digital asset and tool for content creation, NFTs can serve as an effective marketing tool to increase brand awareness and enhance overall customer experience. For businesses looking to diversify their revenue stream and better engage with customers, projects involving digital collectables and personalized NFT collections are increasingly being adopted among brands. Renowned brands such as Lamborghini, Samsung, and McDonald’s, have already leveraged NFTs in their customer engagement efforts. Furthermore, businesses can use NFTs to create digital certificates of authentication for products, loyalty programs that reward customers with digital tokens and more, reducing the need for physical resources and subsequent waste.
With emerging technological innovations to ensure the accurate authenticity and provenance of an NFT, businesses can also tap into the investment opportunity that the tokenized asset provides and reap the monetary benefits and returns of owning an unreproducible digital asset in the time to come.
Adobe believes that NFTs will shape the future of business operations as more organizations adopt and sustain a digital-first mindset in this post-pandemic era. With the notable and unique creative opportunities that NFTs offer for all in the digital economy, global industries across consumer goods, retail, gaming, and more, can reimagine the way they engage with customers.
3. What are the immediate challenges and concerns when it comes to transacting NFTs as a business?
As with any new technology, there are challenges surrounding the way NFTs are structured.
As an asset that is hosted and transacted entirely online, NFTs could face cybersecurity and fraud-related risks. With NFTs currently being structured as a way to provide an origin trail only for the token and not for the digital artwork, this presents a potential disconnect in information such as who created a piece and how it was created. By combining the attribution standards built through Adobe’s Content Authenticity Initiative (CAI) with the token provenance inherent in NFTs, the CAI attribution tool aims to provide secure information about who created a digital piece of content, including tamper-evident information like a name, location, and edit history. Having this data, combined with the information connected to an NFT, is a step forward in giving businesses and collectors confidence in the source and authenticity of the NFT they own, and the artwork connected to it.
NFTs also depend on blockchain transactions which can potentially use large amounts of electricity, but there is a way forward that reduces energy consumption. New blockchain platforms like Flow and Ethereum 2 are on the rise and collaborating to find solutions to this problem. Ethereum 2, for example, aims to reduce climate impact significantly by lowering energy consumption by up to 99.95 per cent.
4. What are leading technology companies, such as Adobe, doing to support businesses in the face of these challenges, especially when it comes to authentication?
Adobe is taking a proactive approach to supporting businesses in the face of blockchain technology challenges, by providing a suite of services and products that enable frictionless authentication, security, and trust within the NFT space. Coupled with partnerships with, and support for organizations that are helping the NFT market grow, we remain committed to ensuring that the NFT space continues to empower businesses and creators in a digital-first economy while supporting their sustainability goals.
Adobe’s “Content Credentials” (beta) function is ensuring the authenticity and provenance of digital artwork by using a combination of digital signatures, cryptographic hashes, and timestamps to create an immutable record of ownership. This record is stored in the blockchain, making it impossible to modify or delete without leaving a trace.
For instance, if a business decides to create digital art via Photoshop, it can choose to preserve attribution throughout the entire creation process. Metadata is used to track the creative process such that potential buyers will have greater visibility regarding the origin of a digital asset and its entire creation process. Alongside the CAI attribution tool, this ensures that digital assets remain unique and verifiable, while also providing greater transparency and trust in the digital asset market, thereby ensuring sustainable growth of the NFT space.
To play our part in addressing environmental concerns, Adobe’s participation in the Behance x Polygon integration offers a low-fee alternative to other NFT platforms and supports energy-efficient blockchains to reduce the industry’s carbon footprint. This is a step forward in enabling NFTs to remain accessible and environmentally friendly for all.
Aside from environmental concerns and issues related to provenance, NFTs can also be expensive due to the need to pay the gas price for minting an NFT, thereby deterring certain artists and businesses. However, we’re seeing some exciting experimentation, such as OpenSea for instance, with systems that charge collectors for minting the NFT instead of the artist.
In response to these challenges, there have been encouraging efforts from the industry to lower the barriers of entry for businesses looking to enter the NFT space.
Metaverses and other immersive experiences are the next waves of digital interaction. With NFTs being one of the fastest-growing areas of the metaverse today, Adobe strives to fuel immersive experiences and content through its products and services.
