NFTs…a tech solution in need of a customer problem?

Our Analyst Jack Elston simplifies the confusing world of NFTs and explores the benefits they could offer customers

At The Foundation, we help brands and businesses pioneer on behalf of customers. We are always thinking about how to help solve customer problems by understanding what people really value, and then trailblazing on their behalf. This often involves looking at future trends, which, in this day and age, often involves tech.

NFTs, the newest tech trend on the block, can appear a bit crazy to the rational mind. My close friend told me he bought an NFT and then proceeded to send me what can only be described as a stick drawing, before making my jaw drop when he said he spent the equivalent of £600 on it. But he isn’t the only one. People have spent a lot more on a lot less. This got me thinking. Surely, underneath the millions of pounds worth of digital monkey pictures, there is something more?

The answer is particularly interesting because NFTs have great benefits beyond just pixel art images, and they are a fantastic technological solution. But to what problem? What current issues that customers face can they help to solve? Put simply, can the lives of customers be improved by NFTs? And if so, how?

Firstly, what is an NFT? 

An NFT is a unique token linked to digital (and sometimes physical) content, such as works of art or collectibles. They are non-fungible because each token has its own unique properties. NFTs are securely recorded on a blockchain, which is a digital record of transactions that is duplicated and distributed across an entire network of computer systems. This provides a secure and decentralised record of transactions by utilising the same technology that plays a crucial role in many cryptocurrencies. This allows the assignment of ownership of digital data meaning an NFT can have an official owner at a time as secured by the blockchain, and no one can modify the record of ownership.

So, one capability of NFTs is indisputable ownership. Authenticity.

So far, this has given the world indisputable ownership of digital monkey images. But for NFTs to be more than another tech fad - they need to help solve genuine customer problems. The question is - where do customers face problems caused by an inability to prove ownership and/or uncertainty over a lack of authenticity?

Ticketing is one such area. Research shows that more than 5 million fake tickets are sold every year, with as many as 12% of people buying concert tickets getting scammed. These victims are, on average, losing £365 each.

Yes, you read that correctly, £365.

Clearly, authenticity with ticketing is a massive unsolved customer problem.

Here, NFTs can provide a solution to an otherwise unsolved problem. Smart tickets in the form of NFTs would be verifiable. They would have clear ownership. Blockchain technology allows the validation of the authenticity of the ticket with absolute certainty because each token has a verifiable data and transaction log that can help prove the history of ownership. Alternatively, the reselling of a ticket can be equally forbidden as NFTs can be made non-transferable or even price limited in computer code, preventing the transfer of extortionate scalp tickets. Therefore, by utilising NFTs, event organisers and businesses can provide customers with something they truly value, trust that the ticket they have paid for is real.

NFTs can also provide customers with fairness and trust. For example, the cynic in me is always wary when something says ‘10% of all profits go to charity’. After all, once that purchase is made, I can’t track where my hard-earned (or hardly earned) cash is going.

I am not the only one. Research has shown 33% of people don’t trust charities. Moreover, 79% of people said that the most important factor in trusting a charity is that the money donated reaches its intended targets. This is compared to only 52% of people who said that it was if the charity was operating to high ethical standards and 50% who said that it’s if they are making an impact. 

Here lies a clear customer problem. Many people don’t trust charities, and their biggest concern preventing them from trusting them is whether the money they donate will reach the right people.

NFTs have the potential to allow greater transparency and reassurance to customers supporting good causes or concerned about how their contributions will be used. This can be done through ‘smart contracts’. This is a part of the blockchain technology which allows someone or multiple people to receive a cut every time an NFT is sold. These are also known as royalties. While in practice royalties are often used to reward the original creator, they can be used to ensure a percentage is donated to a certain person or entity, such as a charity. It wouldn’t matter when or how an item is bought or sold, customers can have trust that a percentage of the sale is always given to a particularly good cause, not just towards the CEO’s new superyacht.  

In fact, it’s not just NFTs that benefit from these smart contracts. They are a feature of blockchain technology more broadly. This could open up a whole host of uses.

For example, charities could move to 'impact-based donations' where public donations, in the form of digital currency, could include clauses that mean funds are only transferred when specific conditions are met. This can increase trust among customers that their donations will and have been used for what was intended.

NFTs can also provide customers with better control, particularly over their data.

Data control is a growing concern for customers. Recent research has shown 51% of customers are worried about their data being sold. They worry about whose hands their data may end up in. Despite sensitive health data information being a highly sought commodity, in its current capacity, it is bought, sold, and exchanged with little knowledge or consent from its actual owner.

NFTs can facilitate the shift of ownership of health data back to customers. Customers could have their own NFTs which would act as a controlled copy of their anonymised, health-related information. Companies such as Aimedis are doing exactly this. Allowing this medical data to be bought and sold, as NFTs, by pharmaceutical companies or other businesses. They can be held accountable as the data is only visible to the provider of the information and whoever has purchased it. Should it then be sold to a new owner, the customer who originally provided the data can track who bought it and how it is being used.

NFTs can therefore give back control to customers by empowering them to own their personal data, whilst giving them the choice to monetise that data if they wish to. This means customers can finally make their own decisions about what happens to their data.  

These are only a few of the areas in which customer problems could be solved using NFTs. NFTs can provide customers with better authenticity, greater trust, and the opportunity to take back control of their own data. Moreover, the value of features associated more broadly with the blockchain offers further unearthed advantages.

There are also those who have concerns about NFTs. Their impact on the environment, difficulties integrating into existing tech, and even security concerns. All of which would need to be ironed out before there is an NFT revolution. And it’s worth noting that these concerns apply to a wide range of products and services associated with the blockchain, not just NFTs. 

But this shouldn’t discourage a pioneer. If NFTs can really solve problems that customers care about, then these hurdles will be well worth overcoming.

So, it would appear we may be at the start of a potential tech revolution. NFTs are a solution in need of a customer problem to solve. And there are customer problems worth solving that NFTs can help with. Areas of customers’ lives that require greater authenticity, ownership, and control are just a few examples. But what’s needed is someone to bring these together – using NFTs as a new and better way to create value for customers. The stage is set for a customer-led pioneer to bring NFTs to the mainstream.