Using NFTs to Disrupt the Exclusive Merchandising Space
Read time: 9 mins
Adoption of new technologies has accelerated over the last few decades. This is best reflected in the evolution of the Internet from Web 1.0 to 2.0 and now to Web 3.0, driven by the proliferation of smart devices across geographies. Technologies such as blockchain and non-fungible tokens (NFTs) are next in line, with much hype around the possibilities they offer for business transformation.
Industry leaders are, however, grappling with NFT, the latest disruptor, keen to understand the concept, risks, and implications of this technology and how best to exploit its potential. If you are a tech-savvy business leader, a solution architect, or even a technology enthusiast, read on. This blog documents Zensar’s experience with NFT and the success of our partnership with a high-end luxury store in Europe and shares how we can bring trust at scale and adopt digital technologies in the world of art and exclusive merchandise.
What is NFT?
A Non-Fungible-Token or NFT is a digital artifact. Every such digital artifact and its corresponding NFT is unique: for example, the digital artwork named Everydays: the First 5000 Days was created in February 2021 by digital artist Mike J. Winkelmann. He then minted (created) an NFT for this artwork. There is one, and only one, digital artifact with the name “Everydays: the First 5000 Days” and therefore only one corresponding NFT. An NFT comprises the metadata of the digital artifact and a smart contract (computer program) which is executed when there is any modification in the metadata, referred to as a “transaction” on the NFT. The NFT’s metadata and smart contract reside on a blockchain network that can support non-cryptocurrency transactions as well (e.g., Ethereum).
Minting an NFT: An NFT comprises two elements:
a) Metadata about the digital artifact, e.g., name, description, URL, owner, etc.
b) Smart contract, a computer program that gets executed in the event of a transaction on the NFT.
The artifact is normally stored on a cloud server such as Amazon S3. The URL in the metadata points to the location where the digital artifact corresponding to the NFT is stored. The “owner” field in the metadata contains the details of the current owner of the digital artifact, e.g., “Vignesh Sundaresan (a.k.a MetaKoven),” who is the current owner of Everydays: the First 5000 Days. The act of creating the metadata and the smart contract for a digital artifact is called “minting of an NFT. Any change in the metadata of the NFT needs to be recorded on the blockchain network as a transaction.
Trading in NFTs: NFTs can be traded in different online marketplaces such as Opensea, Rarible, and SuperRare. The trade happens in a secure manner on a public blockchain network such as Ethereum. It is important to note that if the NFT was minted on Ethereum, the trade can happen only on marketplaces that run on the Ethereum public blockchain network.
NFT for physical assets: NFT can also be minted for a physical asset such as a sculpture or a painting. For this, we first create a digital artifact corresponding to the physical asset, e.g., a photograph of the physical asset, and then mint its NFT. The physical asset may remain in the custody of the original seller, or the new owner may redeem it. Information about the physical possession of the asset is also recorded in the metadata of the NFT recorded in the blockchain transaction.
What to expect in future from NFTs: The standards of NFT implementation are evolving, and changes in the near term are expected to bring more trust. The scalability of the underlying blockchain technology itself is undergoing change.
On a cautionary note, there is not enough awareness about NFTs in the world at large, and use cases for NFTs are still evolving. Therefore, organizations are advising people to exercise caution when exploring the NFT space due to a general lack of understanding and technology maturity[1].
Enhancing value through NFT
NFT technology solves various challenges with respect to digital artifacts in the evolving world of the Internet while also solving some challenges for physical assets. Here is a list of benefits NFT offers for physical and digital assets:
Secure ownership: The ownership of an NFT is recorded on a blockchain network, which is decentralized and tamper-proof. This provides a secure way to establish ownership of digital artifacts and physical assets, preventing fraud and disputes.
Authenticity: NFTs can be used to verify the authenticity of digital artifacts and physical assets. This is particularly important in the art world, where forgeries can be difficult to detect. NFTs can provide a transparent and immutable record of ownership and provenance, helping establish the authenticity of the artwork. Prior to the arrival of NFT technology, the only way to ensure authenticity was the opinion of connoisseurs or industry leaders, which is not a scalable approach.
Monetization: NFTs provide a new way for artists and creators to monetize their work. By creating an NFT, they can sell their work directly to collectors and fans without the need for intermediaries such as galleries or auction houses. This can potentially result in higher profits for the creators.
Access to global marketplaces: NFTs allow creators to sell their work globally, reaching a wider audience than would be possible through traditional channels. This can help to democratize the art world and provide greater opportunities for emerging artists.
Traceability and authenticity for physical assets: NFTs can be used to establish the authenticity and provenance of physical assets, such as artwork, jewelry, or luxury goods. By creating a digital artifact corresponding to the physical asset and minting an NFT, it becomes possible to track the ownership and history of the asset on the blockchain. This can help to prevent fraud and ensure that buyers are getting authentic and verified assets. Additionally, any damage to the asset can be recorded in the blockchain, providing a transparent record of its condition.
Zensar’s high-velocity approach to leveraging NFT for clients
Zensar has been leveraging NFT and blockchain technology in multiple engagements with clients, helping them achieve their business objectives through the unique benefits offered by the technology.
Case study: British luxury goods company drives monetization through an NFT implementation.
Our client, renowned for exceptional craftsmanship and timeless designs, is reputed for its fine jewelry, watches, leather goods, silverware, and other luxury items.
We helped our client to drive new monetization opportunities across seven exclusive premium segments by becoming its blockchain technology partner and helped implement an NFT solution critical for achieving the monetization goals.
Challenges
Factors that were inhibiting the client from capturing further value:
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Loss in value: The client operates in the luxury items market, where value drops drastically if authenticity cannot be established.
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Counterfeits: Counterfeit objects could negatively impact the business by diluting the brand's reputation for quality and craftsmanship, potentially reducing sales revenue.
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Inability to trace ownership: Inability to trace the ownership of luxury items impacts the company's business by increasing the risk of theft, fraud, and counterfeiting.
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Friction in trade: Even though the client is highly reputed, which enables it to sell premium items, after-market sales are still filled with challenges that indirectly affect the sales.
Solution
We Implemented an end-to-end NFT minting solution that:
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Brought in blockchain to establish authenticity and track ownership with ease. The solution was built on Azure with Agile DevOps for faster deployment of state-of-the-art tech.
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Is NFT marketplace (OpenSea)-compatible to enable faster aftermarket sales, in turn increasing the sales for the client.
The solution was implemented with Zensar’s High Velocity Enterprise™ (HiVE) model, a multi-speed execution model that delivers disruptive business value with multi-disciplinary teams. To make this solution a reality, multiple virtual PODs were created that covered following engineering disciplines:
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ReactJS-based front-end
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Blockchain backend
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NFT auction business analysis and requirements
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Cloud developers, to implement on AWS using S3-based Lambda functions
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Mongo Database developers
Impact
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$5M+ in NFT sales since launch
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Participation of 3000+ bidders
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1300+ total trades (drives royalty proceeds)
Zensar’s High Velocity Enterprise™ (HiVE) model delivered the first phase to UAT in five weeks and could move to production in the seventh week after incorporating UAT feedback.
Zensar teams continue to work with the client to lay down the foundation for the client’s enterprise architecture and form a solid bedrock for a high-velocity business.
Conclusion
NFTs have emerged as a promising technology with unique benefits for both physical and digital assets. NFTs provide secure ownership, authenticity, monetization, access to global marketplaces, and traceability for physical assets. Zensar has been at the forefront of leveraging NFTs and blockchain technology to help our clients achieve their business objectives. While there is still a lack of general understanding and technology maturity around NFTs, the standards of NFT implementation are evolving, and the changes in the near term are expected to bring more trust. As with any new technology, caution is advised when delving into the NFT space, but the potential benefits make it worth exploring for tech-savvy business leaders, solution architects, and technology enthusiasts.
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