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In 2021, non-fungible tokens (NFTs) came out of that position reaching almost $41 billion in sales. This explosive growth combined with its stellar reputation may leave startup leaders wondering, are NFTs a smart growth opportunity for a young business, or just a flash in the pan that will only burn you out?
After the initial explosion of buzz around NFTs, the market saw a decrease in selling volume as Ethereum, the cryptocurrency many NFTs are based on, declined in value. With the NFT market now starting to stabilize as the outlook for Ethereum being cheap to mine appears positive, it’s easier to get a real answer to the question of whether or not to delve into NFTs.
Related: The Launch of Digital Assets and the Growth of NFTs
Meanwhile, one of the market’s major weak points – its severe energy inefficiency – will also be fixed in the near future, removing another barrier to growth. In other words, strong signals point to a continued boom of NFTs in the near future. But do they matter to your budding brand?
NFT market opportunities are expanding
In many ways, NFTs are just getting started. New marketplaces will continue to pop up, making it easy to pay for NFTs with fiat currency. The metaverse and video games will begin to take full advantage of NFTs, selling players transferable avatars and in-game items they can truly call their own.
With the right approach, you have the opportunity to tap into an ever-growing, tech-savvy global audience willing to purchase digital products that come with residual royalties built into blockchain contracts. However, this does not mean that entering the NFT market is an automatic slam dunk for every business.
Despite its trendy reputation, an NFT is not a magical money maker. Like any product, it requires proper marketing, a thorough business plan covering costs and risks, and a reliable team behind it all. Launching an NFT also requires a thorough understanding of where it fits into your overall company vision. Here are some considerations as you consider your decision regarding NFTs:
1. Educate Yourself on the Behind-the-Scenes Aspects
Before you get involved in this field, you need to start with a solid understanding of blockchain technology and NFTs. There are many resources available to help you learn the ins and outs of technology. NFTNow is a solid place to start.
RELATED: How Blockchain Technology Is Transforming the World from the Metaverse to NFTs
After understanding the process behind NFT, you should also give yourself a practical education. Create a simple “test NFT” that you can sell to a friend or colleague for $1. Go through the entire process and see if it’s something you can see yourself and your clients repeating enough to generate a viable business line. Having a basic understanding of the process along with knowledge of how and why NFTs increase and decrease in value will help you determine whether getting involved in the NFT sector is right for you.
2. Decide whether a potential NFT has real value for your customers
In some ways, the popularity of NFTs isn’t all that different from the mobile app craze of the past decade. As a software engineer, I’ve been approached by a lot of people who were under the impression that if they just had one mobile app, they could become the next Mark Zuckerberg overnight.
In most cases, the mobile apps they wanted to build would work – or even better – on mobile browsers. For these entrepreneurs, building an app would simply mean wasting money on something their business didn’t need and their users didn’t want. Many entrepreneurs today are making the same mistake with NFTs.
Don’t create an NFT in the hopes that it will generate buzz for your business; Launch an NFT collection only if you are serious about being in the market for the long term and if you believe your collection has a unique value that will resonate emotionally with NFT buyers. Ask yourself whether you want to buy your NFTs from a buyer for resale to a third party. If the answer is no, then it is not market related.
RELATED: Make Your Brand a Household Name Using the Power of NFTs
3. Assess All the Costs for Launching an NFT
While it is true that you may be able to create and list an NFT at a cost of $100–$700, this does not necessarily represent the true cost of launching a successful NFT.
If your current consumer base consists of people who love old-fashioned art and collectibles, for example, you may need to enlist the help of experts to reach a new, younger demographic of NFT enthusiasts. This can easily turn into a marketing budget of $30,000 (or more) to get started with proper brand building, storytelling, and creative direction. Make sure you take all these costs into account when deciding whether your launch will really be worth it.
4. Build a following and then launch an NFT – not the other way around
NFTs should not be viewed as a “if you build it, they will come” technology. You need to be sure that you have a strong audience that wants to buy what you are selling. NFTs are still in their infancy, and that means entering this new market means taking on a certain amount of risk. But that means there’s still a lot more room to grow.
While art has been a major focus of the NFT market thus far, many other applications are just being explored. Platforms like Decentraland, for example, are using blockchain technology and NFTs to create entire virtual worlds – all owned by the people who use it.
NFTs offer a world of potential, and it will be forward-thinking entrepreneurs who help that potential come to fruition. However, being one of these entrepreneurs is not enough. You must have a plan and a vision that makes sense within the market. Otherwise, you’ll burn out eventually.