NFTs or Non Fungible Tokens are a boom now and it seriously has become the talk of the town which is pacing at a breathtaking rate. It has now helped digital artists be it in form of images, music, art shows their skills and monetize them long term. While we all understand what NFTs are but have you ever asked a simple question on what makes it awesome? Or, how is a simple piece of art going to be implemented in real-world application? Or most importantly, how are NFT holders actually making money out of these digital pieces?
We at Kyte.One have researched thoroughly and have come up with a very clean but simple architecture that clearly defines the workflow of NFTs. By the end of this blog, you will have a clear picture instilled in your brain which you can relate to in million other fields. Let’s dive deep into it without any further delays.
The Buying Phase
Now, the first thing to note here is that the businesses who want to launch their NFTs would first create their NFT and then either launch on their own NFT marketplace or can launch their NFTs on some of the most famous NFT marketplaces such as Moonsama or OpenSea and so on. Post NFT launching in either of the marketplaces, it is now users who come in to buy these NFTs from the marketplace and claim the ownership of these digital artifacts in exchange for tokens. An important thing to note here is that the businesses launching their NFTs associates multiple benefits with these little pieces of artifacts which give users enough reasons as to why they should hold their NFTs. Based on the benefits one gets, users, can decide if they want to further their transactions or not.
For ease of understanding, say a food business launches its own NFT and each of their NFT holders gets a label “Premium Customers” that has much more benefits on their platform while ordering food than any other customers. So, the user after buying NFT now becomes a premium member and this little action here increases the loyalty towards their business. Please refer to the image below on the workflow explained until now.
The Redemptions Phase
Until now we are clear on what basis does a buyer buys a business NFTs. Moving forward towards the next part of our NFT workflow that explains the redemptions of benefits associated with these NFT holders. We would explain this with the same food business where you have bought the NFT and now going to one of the business stores. After reaching the store, you show your digital asset which is NFT in this case, and then the business checks for the validity and ownership of NFT ownership using the business Membership Verification App. If the NFT owner as listed in the app is the same as the one showing the NFT for redemption, the business then verifies the details and provides them with the benefits associated. As this is a food business, you may be entitled to say a free burger or a free drink or a particular amount of discount on the total bill amount. It is totally based on the benefits that are associated with the type of NFTs you hold.
Now, it is possible for businesses to say have three different types of NFTs namely, SILVER, GOLD, and DIAMOND and then each of these categories of NFT will have a different set of benefits associated with them. Based on the categories of NFT you hold, the benefits will be then provided to you. Pretty simple, isn’t it??
The NFT Selling Phase
Time for FUN FACT!!!
Did you know that based on the rarity or uniqueness of the NFT you hold, you can sell your NFT at a much higher price than you bought???
Exciting isn’t it? Glad that we were born in the era where NFT has just started making a benchmark in a real-world application. Personal feelings aside, based on the offers and discounts — also termed as a benefit — associated with the NFTs, the prices of these NFTs increase over time. Apart from benefits, based on the amount of particular NFT sold, the uniqueness of these digital assets increases, and then it becomes the user's choice on what particular amount do they want to sell their NFTs. Note that the NFTs will now be sold in the marketplace we discussed earlier.
But then a simple question arises!!! Hey, the user has sold the NFT at a higher price but then what is the profit for the business? Any layman would have these concerns and a single answer to this doubt is COMMISSIONS. In reality, what will happen is that users post selling their NFTs on the marketplace at say 10X the price at which they bought the NFTs, the business would then get a certain amount of commission defined in the smart contract. Hence, in a way, it’s a WIN-WIN for buyers, sellers, and businesses.
The Long Term NFT Holders
Based on the future the NFTs hold, in most of the cases, users will want not to sell their NFTs so quickly and for businesses, these customers fall into the super loyal customer category. It can simply be achieved by putting a check on which customer is holding their NFT for say more than 24 months and that would do the trick. In these cases, businesses can add more benefits to existing NFTs that would increase the rarity level of that particular NFT and in turn, that particular NFT becomes rare as there are more benefits associated. Now, the next buyer buying that particular NFT will have more benefits with them as compared to the others. And, ultimately, the price of NFT increases during selling.
Let’s take a simple example of what other benefits can be associated. Again taking the example of a food business, the owner decides to introduce a new item to their menu, say burgers. The business can associate a benefit that apart from a discount that one gets for holding these NFTs, you being a super loyal customer, we would invite you for a trial and vote to see if the particular burger is qualified enough to be on our menu or not. Hope you get the gist of additional benefits that a super loyal customer can get.
NFTs are now taking a run and they will continue to do so with every growing day. There are endless possibilities to what a business can do with NFTs and how can they earn more loyal customers by totally eliminating the middle man. We would love to hear your take on this and understand more about your view towards this approach. Do drop us a comment here and share your views.
