In terms of business impact, the closest that the emergence of Non-Fungibe Tokens (NFTs) can be compared to is the emergence of the internet. However, the pace of change will be much higher this time. While the shift towards digital business models was disruptive for many industries, the digital transformation since the 1990s is already being dwarfed by the rate of development and adoption of NFTs.
There were several substantial factors that significantly slowed the progress of the internet:
1 - Lack of infrastructure
2 - Technical complexity
3 - Underdeveloped commercial models
4 - Consumer adoption cycles
NFTs benefit from the foundations that have been built in these four areas during the internet revolution. The NFT world has been thriving from these foundations.
Building the infrastructure that allowed the internet to reach actual scale took decades, and the physical infrastructure is, in some parts, still being built out today. For NFTs, the underlying, scalable components have already been built during the rally of cryptocurrencies such as Bitcoin and Ethereum over the last decade. NFTs leverage the existing crypto infrastructure, mainly the Ethereum blockchain, and require no other systems to be developed.
For the internet to reach scale, countless standards needed to be defined: entire technology stacks and even programming languages needed to be developed. Multiple layers of abstraction were introduced to make the technology mass-market ready. In the cryptocurrency world, not only has the technological complexity already been pushed to the lower levels of abstraction over the past decade, and end consumers and businesses can access the technology with manageably specialized skillsets. But additionally, many of the principles and methodologies developed over the past 30 years for the internet are being leveraged by NFTs, and there are even zero-coding construction kits for launching NFT projects available today.
Even though internet shops were disrupting the retail industry, the transition from brick-and-mortar to online shopping was, in hindsight, relatively slow. The first online sales were mimicking offline sales by moving the checkout to a computer screen. Since then, the diversity in business models has grown tremendously. Subscriptions, memberships, pay-per-use, and in-app purchases are just a few selected examples. While the market acceptance for these new commercial models required prolonged trust-building at the consumer and the B2B level, the prevalence of non-traditional business models is commonplace today.
NFTs build on this and leverage the familiarity with online transactions and non-traditional commercial models of both end consumers and businesses. Purchasing an NFT on platforms like Opensea requires some steps, such as, for example, setting up a so-called "crypto wallet." But the process comes much more naturally to anyone used to online shopping than the first online purchases that came to people who were used to shopping in physical stores.
NFTs are simply a commercial layer on top of the infrastructures of both the internet and the blockchain. On a consumer level, shifting from brick-and-mortar stores to online shops was a significant change and required long adoption cycles. The shift from purchasing a physical good or service in an online store to buying an NFT that comes with a physical good or service attached to it is a minor adaption. The initial distrust in the unknown realm of the seemingly complex blockchain technology is quickly being dispelled by renowned institutions such as, for example, Christie's by auctioning crypto assets. As a side effect, the amount of funding of the NFT community through the large sums that are flowing towards crypto projects acts as a catalyst both for the funding of the projects themselves as well as driving significant mainstream attention and engagement.
Understanding the pace of the NFT world
To give a sense of the fundamental difference of speed of the NFT space vs. the internet: After its founding in 1995, it took eBay over three years to close the year of 1998 with a revenue of just short of $50 million.
In comparison, one of the more recent independent NFT projects, called "The Bored Ape Yacht Club," launched in May 2021, generated over $150 million in sales within the first twelve weeks after its launch. The NFT market has evolved at a pace that is untold even in the era of scalable business models. With the emergence of platforms that offer easy accessibility for end consumers with little technical knowledge, NFTs have arrived in the mainstream.
This accessibility, coupled with the possibility for creators to capture value in the after-sales market through commissions, provides an unprecedented setup for the speed of disruption. This speed will arguably be an order of magnitudes faster than the one of the internet.
In the NFT world, the next billion-dollar project is just weeks away. Everyone is prying for practical business applications of Non-Fungible Tokens to challenge the established players across industries. The following 12 to 36 months will be decisive regarding which players manage to get ahead of the disruption curve and who will be able to capture the early markets with the most significant business opportunities. NFTs are on the verge of introducing severe paradigm shifts of how business transactions are performed and how value is created along the entire value chain. For almost every industry, if not all. CEOs need to get started today to understand the implications that NFTs have for their respective industry and business.
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