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Non-Fungible Tokens, or NFTs as they are popularly known, produce different results when implemented in different areas of human endeavours. For big brands such as Taco Bells, MacDonalds, Pizza Hut, Lamborghini, KFC and many others, NFTs are a way in which to market themselves and stay ahead of the competition.
For the many other start-ups, scientists and entrepreneurs who are trying to raise capital for their projects, NFTs have presented themselves as an alternative way to raise capital. Knowing how crucial it is for businesses to raise capital for whatsoever reasons and projects, in this article we shall endeavour to understand capitals and the place of NFTs.
Conventionally, capital has been given through equity, i.e. this is a situation wherein business owners relinquish parts of their ownership of the business for capital. NFTs now bypasses this, leaving both sides satisfied. To better understand people’s motivation, collection system and the building of a vibrant community, an example, such as the one following, would suffice: Let’s say an existing streaming service wishes to launch a new business line - a new documentary section, but at a higher price than the basic plans. It probably needs $5,000,000 to start this new division i.e., investing in equipment and staff, etc. The streaming service could create 2,500 diverse kinds of NFTs, at $2,000 each or even at different prices, whilst increasing the benefits attached to those costly NFTs. Of course, all the NFTs give special benefits to their owners, investors, but they wouldn’t be equal. The NFTs could give access to investors at a discounted price, either to a new section or to the whole streaming platform. This could then motivate the streaming platform’s audience to invest capital in the business because they want the benefits that come with it.
This new model of raising capital using NFTs is beneficial to both the business and the investors. For the business, it gives them the opportunity to raise capital without relinquishing any ownership over the business. This model establishes alternatives for incomes which encourages investors and their audience to front the business while counteracting the risks and losses that come with the funding. Once the business is launched, investors can also sell or rent their NFTs with profits. The same applies to someone who bought an NFT from an investor. In the end, this model presents a scenario where everyone involved is happy. Interestingly, a new Hollywood film which has turned to NFTs to help raise the finance to produce it is called Zero Contact and stars Anthony Hopkins.
Meanwhile, the success of an NFT project depends on the audience and community built around it and is a key attribute as to whether an NFT project is a success or not. A vibrant community is vital for success when issuing NFTs. Building a vibrant community usually starts with defining who the target audience is, since this is tantamount to building value for your project. A vision can then be shared with the community explaining what the project is and how the community stands to benefit from it. The aim of the vision is to get the audience to believe in it. Once communicated, a social media platform easily accessible to your audience is then chosen for easy reaching. Discord is the most used, alongside Telegram, Twitter and Reddit. The remaining efforts needed to build a vibrant community are getting the audience excited for the project and being transparent with the community. Pitching to your audience about your project can be hard, but an influencer can easily sort this out. If done right, all these will make sure the project is successful.
Once the capital has been raised, efforts should be channelled into creating a vibrant community for your project. Here, the investors are kept updated about the project. This is also the time where the hype is built around the project for its success. Businesses have to do all they can to convince their audience to join their projects because they will definitely have heard of scams and rug pulls. Another important factor is the time and effort that needs to be spent making the project enticing to your target audience. One also needs to be mindful of the transaction fees to use a blockchain as this can be problematic, especially using Ethereum.
The usage of NFTs as a financial instrument has only just begun, as more innovative ways will be unveiled in the nearest future. Although NFT price volatility is a constant, NFTs offer a way to help build businesses and create memorable customer experiences. Another factor that is also overlooked is, if designed correctly, NFTs can be designed to create ongoing recurring income for the issuer similar to a royalty income that is seen in the music and media industries.