Ryan Faist is the Content Marketing Manager for Channel Key, a full-service Amazon and Walmart Marketplace consulting agency. A nationally published and award-winning journalist, Mr. Faist writes about the latest developments in ecommerce, marketplace strategies, changes in consumer shopping trends, retail industry disruptions, and the overall shift toward online shopping. For daily Amazon news and e-commerce updates, follow Channel Key on LinkedIn.
Non-fungible token, or NFT, has become one of the biggest buzzwords in the crypto industry. If you’re a little fuzzy about what exactly NFTs are, don’t fret. You’re not alone. NFTs are still a new trend in the world of digital commerce, yet they are exploding in popularity. In the past twelve months, NFTs have disrupted entire industries, including real estate, live events, music, art, and – you guessed it – toys.
What are Non-Fungible Tokens (NFTs)?
An NFT is a digital file attached to a blockchain. That might not make a lot of sense at first, but it will after we break it down. Let’s start with the concept of fungibility. A fungible item is something that can be easily exchanged for another one of its kind. Think of a dollar bill. It doesn’t matter which dollar bill you have; they are all the same. Baseball cards, on the other hand, are non-fungible. Each one differs in value based on its content, condition, rarity, etc.
NFTs enable the transfer of ownership among nonfungible digital goods, which has always been a challenge. Anyone can download the same JPEG from a website, but who owns the original? NFTs solve this problem through the blockchain. Without getting too deep into the weeds, a blockchain is a public, decentralized ledger that tracks transactions with code. When you purchase an NFT, it is documented in the blockchain, providing proof of ownership.
NFTs can be just about any type of digital file. They can be music, videos, artwork, memes, even event tickets and domain names. One of the most famous NFTs is a pixelated image of an ape called CryptoPunk #5217. It sold for $5.59 million.
The most important thing to know about NFTs is that they are designed to provide verifiable ownership over digital files, which enable them to be bought and sold. At its core, the concept of NFTs depends on three essential properties:
- Authenticity: Every NFT is attached to the blockchain via a smart contract. This is a self-executing contact written into lines of code. Smart contracts can’t be copied or duplicated, which enables them to function as a certificate of authenticity.
- Ownership: Smart contracts identify and track ownership of NFTs via the blockchain. It’s important to note that most NFTs don’t transfer the rights of the content; rather, they verify ownership of the original file.
- Transferability: Smart contracts enable NFTs to be bought and sold on marketplaces with cryptocurrency. Since blockchains are decentralized and verified via code, transactions are quick and immutable.
How are Toy Brands Using NFTs?
NFTs provide a way to monetize digital content. For toy brands, this opens up a virtual gold mine – literally. NFTs offer new ways for customers to engage with products.
Dr. Seuss was one of the first major toy brands to realize the potential of NFTs. In July of 2020, the company announced a partnership with Dapper Labs to create a series of licensed digital collectibles called Seussibles. These are digital trading cards that feature Dr. Seuss characters. More important than the actual NFT is how the company created a fun way to use them. A newly launched mobile app offers customers a unique brand experience, including the ability to:
- Initiate trades with friends to build out their NFT collection
- Create NFT trade posts to show what they’re looking for, and what they’re happy to trade away
- Search through community posts for real-time trading floor action
- Transfer items on the blockchain quickly and seamlessly
- Showcase their favorite NFTs on a virtual wall
- Organize NFTs into custom stacks
- Export NFTs as profile pics for social media channel
Barbie is another popular toy brand that recently entered the blockchain. In January, the company partnered with mintNFT (a studio and marketplace for NFTs) to launch three one-of-a-kind Barbie and Ken avatars at an online auction. The event promised buyers “a unique place in fashion history” as Barbie moves into the virtual realm.
The Barbie NFTs are built on Flow, a decentralized and developer-friendly blockchain designed specifically for games, collectibles, and the apps that interact with them. Flow was developed by Dapper Labs, the same company that partnered with Dr. Seuss to create Seussibles.
Are NFTs Here to Stay?
Much debate surrounds the future of NFTs and the broader topic of cryptocurrency. Supporters argue that NFTs make markets more efficient by streamlining transactions, eliminating intermediaries, and enhancing security. Others argue that, despite blockchain technology, the lack of governance over cryptocurrency creates a risky environment with the potential for fraud and scams.
One thing is certain: NFTs are becoming big business. According to investment bank Jefferies, the NFT market will reach $35 billion in 2022 and climb to $80 billion by 2025. With this financial trajectory, digital tokens could very well become a permanent trend for retail industries. Only time will tell. As for now, toy brands like Mattel, Star Wars, and Disney have found a new (and profitable) way to create new customer experiences.