Enterprise and the Brave New NFT World

[Note: This article was originally published on CI&T on August 24th, 2022.]

How to leverage the power of Web3 for your business

The birth of the Internet in the late 1990s delivered a then-new World Wide Web that, in computing terms, functioned in an essentially “read-only” way. Content was presented to users, but rarely dynamically — not adapting in real-time to the user context or input. In terms of brands and consumers, online relationships were essentially a one-way proposition. Brands offered value to their users and targets by providing content directed at them.

When the development of websites reached its first great evolution, it was called “Web 2.0,” and you could say it took the Web to a “read/write” level. Not only could users consume content, but they could also contribute their own without technical expertise. The resulting explosion of user-generated content, particularly via social media, enabled a two-way creation of value between brands and customers. Not only is brand content delivering value for consumers, but those consumers are creating content and providing inputs valuable to the brand. There was (and in many cases, still is) a two-way exchange.

As the Internet became more sophisticated, so did its users. Of particular interest was how the value created by users and customers was being captured - mostly by brands and organizations. The possibilities of sharing and carrying over this collectively-created value has led to a place where Internet users want more control over their data, content, and any value they have created.

Enter Web 3.0 – or “Web3”: the “read/write/own” era of the Internet.

The overriding concept driving Web3, driven by that desire for personal control, is that there should be no central authority users must rely on to ensure the portability of the value between participants of the Web3. Open and permissionless Blockchains are what accomplish this decentralization, establishing ownership within the data and communications streams themselves so there is no need for an authoritative entity.

Digital assets in blockchain are often referred to as tokens. These tokens can either be fungible, meaning every token is interchangeable and not unique, or non-fungible, meaning that each token has a unique representation and is not interchangeable. In the Web3 world, cryptocurrency is an example of a fungible token. One bitcoin, for example, can be traded for another bitcoin, and each has the exact same value.

Non-fungible tokens, or NFTs, however, are non-replicable and non-divisible. This makes NFTs a type of digital asset that can be individually tracked, traded and linked to specific characteristics. As Web3 begins serious development, established organizations are starting to explore its possibilities for their operations, with NFTs, in particular, an immediate entry point. The Harvard Business Review says that “NFTs could be the killer app of Web3 and its gateway into traditional commerce.” The market is ripe for innovation in developing ways to successfully integrate NFTs to create brand-new business models based on unique, unreplicable (and therefore valuable) and portable digital assets.

As with any nascent technology, however, organizations face challenges in establishing themselves in this brave new space.

Barriers to Leveraging NFTs and Web3

Some of obstacles facing organizations trying to successfully transition to Web3 include:

Fuzzy understanding. Like any new iteration of technology, there are a host of potentially intimidating concepts and buzzwords being thrown around. What is a fungible token, and how is it different from a non-fungible token? What are the implications of decentralization, and how does blockchain accomplish it? Without a clear understanding of Web3 and the related concepts, it’s impossible to think about how to incorporate it successfully into your business strategy.

Inability to visualize. The initial forays of many organizations into NFTs have largely been limited to marketing efforts that have so far offered very modest returns. For example, Chevrolet recently attempted to auction off an NFT of car artwork — in which the winner would also receive the actual car. The effort resulted in not a single bid. While laudable in the attempt to push boundaries, this event reveals the trickiness involved in finding the right approach to utilizing NFTs. It takes an experienced eye to monitor this rapidly evolving landscape and find the legitimate — and more lucrative — opportunities that are emerging.

Shortage of skills. It takes a specialized skill set to manage the more complicated aspects of Web3. Working with cryptocurrencies and digital wallets, as well as tasks like creating and managing NFTs, is often outside the expertise of the typical in-house technical team. As CoinDesk aptly puts it, “Creating blockchain seems to be arcane magic reserved only for the most highly specialized engineers.” So where can companies find the appropriate skills and expertise? In an ideal environment, business and technology operations work together to uncover deep insights and solve complex use cases, with all the internal teams aligned toward the same goal: data that’s reliable and intelligible and that enables you to prove hypotheses and act upon them rapidly.

With barriers like these, it’s no surprise that enterprises have been fairly limited up until now in their adoption of Web3. For companies who can find their way past these obstacles, however, the promise is great.

Tapping Into the Business Benefits of Web3 with NFTs

Businesses have two distinct ways of tapping into the value of NFTs. The first lies in enhancing the value of their brand with customers by creating unique opportunities to own digital assets. Much like the old trading cards, brands can create unique digital collectibles such as artwork, or offer up virtual property in a brand’s metaverse.

NFTs also open up the ability to infuse consumers’ real-world experiences into their digital lives. Savvy use of NFTs can go well beyond digital art collections or owning a piece of virtual property in the metaverse. As NYU Business Professor Arun Sundarajan explains, “the underlying technology (of NFTs) could just as well identify a unique experience” such as attending an event, or “a unique physical world object.” Portable across communities, this application of NFTs goes far beyond any social media “check-ins” or badges when it comes to customers interacting with brands.

There are also strong opportunities to leverage the long-term value creation of consumers’ loyalty as NFTs in a way that benefits both the consumers and an ecosystem of businesses operating in adjacent fields. Allowing consumers to leverage their long-term relationship to one brand or business in their business dealings with other brands creates a powerful feedback mechanism of reinforced loyalty.

The CI&T NFT Canvas: A Roadmap for Web3 Business Success

CI&T has created an NFT Canvas for leveraging NFTs end to end. When looking to develop and incorporate NFTs into your business, it’s important to talk to each area outlined in the Canvas with groups across your organization. By breaking down each aspect of the process using the Canvas, it’s possible to create a common vocabulary, raise flags early on, as well as understand the full scope of a successful NFT effort. The CI&T NFT Canvas is organized into five distinct parts.

Vision: This stage is where the digital strategy for an NFT initiative is developed. CI&T hosts strategic co-creation workshops to help uncover the direction an organization should be looking in based on their business offerings and goals. Key areas of examination include new business models, expanding business borders, brand awareness through media exposure and community engagement, and business optimization.
Strategy: Also developed through co-creation, this roadmap for how things can be implemented includes a technology assessment to ensure the proper technical capabilities — such as APIs — are in place or will need to be created in time for launch. Specifics covered in this stage include the business hypothesis, flywheel strategy, education and literacy concerns, and the NFT rollout.
Governance: It’s important that an organization’s legal, finance, and security and compliance teams be included in the process. While CI&T cannot provide legal guidance, we do raise some key points for customers to cover with the appropriate in-house teams, such as risk mapping, assets management, transaction tracking, disclosure requirements, keys and secrets management, and incident response.
Technology: This stage covers the development and security of the technology that will support the NFT initiative. For example, an NFT may need to have a unique “smart” contract controlling its issuance and behavior; CI&T can do the development of the smart contract. If the crypto wallets handling the NFTs need to be monitored, CI&T can either develop monitoring or suggest the appropriate tools to do that monitoring. If any bridging between Web 2.0 and Web3 is required, CI&T can help with that software development as well.
Business: In a typical CI&T engagement, the internal client team maintains control of the project. However, CI&T can provide expert guidance in several areas. For business development, the best ways to monetize and go-to-market are carefully considered. Marketing is also considered, in terms of activation, retargeting and creating ambassadors and peer-to-peer network effects. Finally, it’s important to look at potential partnerships, both in terms of which companies offer the right opportunities and how shared value can be created.

Seize the Advantages of NFTs and Web3 Today

According to Forbes, Web3 is expected to become mainstream much faster than Web 2.0, which took nearly two decades to mature and become the standard. Companies who embrace the opportunities enthusiastically can gain a competitive edge over those that hold back out of fear, lack of knowledge, or insufficient technical resources. CI&T is already partnering with packaged goods companies, beauty product creators, and innovators in the crypto space to help them establish their Web3 presence with NFTs and other blockchain solutions. The time to build is now, and the partner to help you do it is CI&T.