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A TOKEN OF OUR ESTEEM: THE NFT FAN CLUB

If you’re like many people in the biz, you’re hearing a lot about NFTs and have no clue what they are. These digital doodads can seem downright mystical, swathed as they are in cryptographic terminology. And the inflated prices associated with some high-profile NFT sales can make them sound like the ultimate snake oil.

Yet artists like The Weeknd, Halsey, Grimes, Lil Pump and Pentatonix and storied music brands like eOne-owned Death Row have all ventured into this space, and the NBA is making bank from NFTs associated with its star players. Many in the biz are bullish on the platform as a means of extending and protecting the value of artists’ creations.

So let’s make this as simple as possible, given that we’re pretty simple ourselves.

Non-Fungible Tokens—so-called because they can’t be broken down into smaller units—are digital assets that come with a certificate of authenticity. That certificate is maintained and updated via blockchain, a linked series of computations that are ostensibly unhackable and thus secure. (Many forms of blockchain have a huge carbon footprint, though some “greener” alternatives are emerging.)

In this way, anything digital—a song, a video, a digitized photo or painting, etc.—can become a one-of-a-kind collectible artifact. Sites like Nifty Gateway (where Grimes notoriously sold digital art for a tidy $6m) and apps such as Sweet provide the marketplace and infrastructure for these transactions.

The singular nature of the collectible artifacts is important; it’s what distinguishes NFTs from cryptocurrency such as Bitcoin, which as a currency must be divisible (fungible), with any unit interchangeable with any other of the same denomination. 

Here’s the upshot for artists and their teams: Sell a song as a limited-edition NFT and it becomes a collectible, rather than just another digital copy (think of a signed and/or numbered print compared to a mass-produced poster). As one of a limited series it can be traded by fans and, over time, can grow in value. Thanks to “smart contracts” built into the blockchain, the artist’s ownership of the rights to that creation “travel” with it; if I sell you that NFT song I bought, the creator participates in that sale—and every subsequent sale. Those rights are encoded in the chain.

Just as the forms an NFT can take are virtually limitless, so too are the ways they can be offered and bestowed. Perhaps you want to give away a token for free but require the user to stream your music in order to obtain it. Or you could have them scan a code at an event to unlock a promotion or furnish data in exchange for the item. Tokens can be sold for crypto (kept in a digital “wallet”) or paid for with old-fashioned plastic via portals like the App Store. The trading of NFTs among fans makes brand extension organic while creating new revenue pathways. It’s this scenario, rather than the bubble-like pursuit of instant riches, that most believe will shape the future of the platform.

To those of us who traded baseball cards, Pokémon cards or other analog treasures as kids, the fun (and growing value) of these collectible tokens is alluringly familiar. That they occupy a multifaceted digital universe makes them wondrously new. Where’s it all heading? Stay tuned.

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