The year 2021 witnessed international and Indian brands catching onto the non-fungible token (NFT) fervour wherein celebrities either launched their digital collectibles, or aligning with the NFT bandwagon.
An NFT is a unique digital code stored on a blockchain, a form of distributed or digital ledger. In simpler terms, the NFTs are digital representation of ownership that is recorded on a blockchain. An NFT could be representing a digital or physical asset which has value. As the name suggests, these are non-fungible, and this characteristic forms its very foundation.
As per market data tracker DappRadar data analytics, the sales of NFTs reached $25 billion in 2021 backed by the crypto asset surge and rising interest of celebrities and tech evangelists across the world.
Considering India’s digital growth story, the country is well positioned to become the front runner in the NFT space. At present, there are about 11 NFT companies headquartered in India, after the United States, and Singapore.
India is a powerhouse of creativity, rising talent, and young population. The NFTs provide immense opportunity to utilise this potential, and simultaneously the much-needed reach for artists/ originators to digitally showcase their work to a much larger audience.
Given their unique characteristics, the NFTs can be used as a digital ownership record for authenticating ownership of both digital as well as physical assets. The NFTs may be awarded without any monetary considerations, or may be bought and sold using either cryptocurrencies or even fiat currencies. Both the NFTs and cryptocurrencies are built on blockchain technology, and while cryptocurrency is fungible wherein one bitcoin is the same as any other bitcoin (like the cash in a wallet), the NFTs are ‘non-fungible’ and one piece cannot be exchanged for another.
The NFTs have broader applications across industries, and provide economic opportunities. They can be used as a fan engagement tool, through sports, e-sports, and institutions with a popular fan base can create new economic opportunities in digital environments and virtual environments like Metaverse. It can also be used as a marketing and CSR tool.
This provides opportunity for brands to involve consumers in social impact initiatives, and bring transparency in CSR initiatives of brands. Further, software companies have started offering enterprises a way to create and issue NFTs, thereby making them a potential marketing tool.
The NFTs are also serving as academic certificates in South Korea where the Hoseo University is said to issue NFT token (NFT) degrees and certificates to all 2,830 graduates of this year’s batch. The university hopes that this will improve access to administrative services, might reduce academic fraud, and increase in confidence of hiring international students.
The NFTs as digital tickets and digital loyalty cards where sports, movies and music have the opportunity to create new digital economies across physical, digital and VR (virtual-reality) environments and airlines, hotels, and hospitality industries which have traditionally built loyalty programmes and coalition loyalty programmes have the opportunity to increase the scale of these programmes. Due to reduced cost of operations, the benefits of NFT-based loyalty programmes will expand to masses.
Many artists across the world are converting their art to NFTs, such as musicians, photographers, digital artists, and painters are now converting their art pieces into NFTs, and are taking control over their audience. India has many artisans and artists who can explore true value of their work, by converting their art into NFTs.
The NFTs also boost virtual fashion where NFT owners can customise their digital orders thus giving customers to personalise their products as one-of-a-kind items. Such innovations in the space will also be a major source of employment generation.
The ownership of an NFT gives the owner control over their work, and copyright rests primarily with the creator unless such rights have been transferred. Therefore, there is a significant element of copyright, and intellectual property also involved.
Web3 is expected to be the biggest technology transformation of the Internet over the next decade. This will be a major employment generation opportunity for the Indian software, digital and allied sectors. The NFTs will be the commerce backbone of Web3, and it is imperative to have supporting policies around this.
The NFTs are more like IPs and copyrighted products, and this distinction needs to be drawn. Hence the need for the NFTs to be looked at and treated differently in taxation similar to how an IP or a copyright would be treated. This will generate employment, bring into India business, and also harness digital creativity which in turn will boost government’s Digital India mission.
Rameesh Kailasam is CEO, and Madhabi Sarkar is Senior Manager-Public Policy, Indiatech.org. Views are personal, and do not represent the stand of this publication.