Why Major Brands Should Decentralize When Adopting NFTs

Non-fungible tokens (NFTs) and the metaverse have brought forth a new wave of economic models whose fundamentals are based on incentives. First, it was play-to-earn (P2E) games like Axie Infinity and Splinterlands, but the trend is quickly catching up with traditional industries. Last year, several established brands launched their own NFT initiatives while others set up virtual shops to build a stronger brand loyalty in the digital age. 

However, there is a bone of contention; some of the thought leaders in the Web3 space argue that the likes of Starbucks are launching gated metaverse ecosystems, which beats the whole logic of decentralized marketplaces. AAG Co-founder and CEO Jack Vinijtrongjit recently published an extensive Op-ed on this debate, 

“While it’s great that Starbucks is simplifying the experience so that it’s easier to onboard users, users are actually gated in the Starbucks ecosystem. Users don’t have a choice to use their own wallet, trade on their favorite NFT marketplace, or use their NFTs someplace else unless it’s permitted by Starbucks.”  

So, what is the way forward to integrate existing industries with the metaverse economy? As much as there may be a couple of schools of thought, the most important thing is for stakeholders to get the fundamentals right. This means sticking to the core principles of decentralization and permissionless ecosystems. 

Bridging the Gap between NFTs and Traditional Industries

Just like the internet in the early 80s, NFT development is still a foreign concept to many. Yet, major brands are beginning to explore varied decentralized approaches to make their presence known in the metaverse.

The most common one is building on existing Web3 platforms like Decentraland and The Sandbox. Some of the major brands that have gone this route include Samsung, which set up a replica of its 837 flagship store in New York inside Decentraland. Atari, the famous video game maker, has also followed a similar strategy, having launched the Atari Sunnyvale suite of gaming experiences on The Sandbox metaverse. 

Brands also have the option of collaborating with established NFT creators to launch their own collections. Adidas, for example, partnered with Bored Ape Yacht Club (BAYC), Gmoney and Punk to debut the company’s first Originals NFT collection back in 2021. This particular collection was sold out in minutes, generating over $23 million in sales. Notably, Adidas also owns a virtual piece of land on The Sandbox. 

Last but not least, Web3 service providers like AAG have emerged to offer a range of products that traditional companies can leverage to onboard into the metaverse. Some of the tools featured in this Web3 ecosystem include a multi-chain wallet, which minimizes the friction of moving funds from one blockchain to another. AAG also offers guild support, enabling play-to-earn innovations to access the much-needed resources for starting. 

Looking Into the Horizon 

In their current state, NFTs are still largely unexplored, and the possibilities for integrating this technology are endless. Goldman Sachs predicted last year that the metaverse will balloon into a trillion-dollar economy. While market conditions have been a bit unfavourable in the recent past, the NFT market has bounced back this year. The latest stats from DappRadar show a 42% increase in trading volume between December 2022 and January 2023. 

But more interestingly, there is also a growing interest by financial institutions like JP Morgan, which was the first bank to open a banking lounge on the Decentraland metaverse. Meanwhile, fashion brand Nike recently launched a collection of ‘phygital’ NFT sneakers through its blockchain subsidiary RTFKT studios. It is worth noting that this new trend of ‘phygital’ goods is becoming a quite popular form of digital branding. 

Final thoughts

In summary, NFTs are on track to disrupt the nature of today’s businesses and interactions by making the experience more personalized. However, there is a thin line between adopting the play-to-earn concept to ride the NFT wave and integrating blockchain-based solutions that actually create borderless markets. The latter will win in the long term as more people gradually appreciate the value proposition in on-chain economies.