Months ago, while watching a Saturday Night Live skit about non-fungible tokens (NFT) featuring a parody of Janet Yellen speaking to a high school economics class, I realized what an NFT is and how they work. What they represent, how they are minted, and how their value is exchanged became clear while watching Pete Davidson in a boy wonder unitard rap about the latest crypto-phenomena.
It was only later that I realized that NFTs have plenty of practical applications. In that video and elsewhere, I’d only seen NFTs used to chronicle the value of digital assets like the seven- and eight-figure high-profile works of art we’ve all read about. NFTs have other practical uses for brands, their customers and partners, and as a result, will be an evolving vector for brand abuse that will have a tangible impact on brand protection.
Practical Uses of NFTs
Let’s begin by examining the practical -- and far-ranging -- uses of NFTs in commerce. NFTs can express the identity, uniqueness, and scarcity of physical and digital objects throughout the digital and the physical world. Whether an NFT represents a copyrighted image, financial instrument, or digital asset, an NFT can be secured, and its custody chronicled within a blockchain.
For example, LoanSnap is opening mortgage underwriting to the masses by assigning NFTs to property loans. They are using a new protocol (BACON) and NFTs to encapsulate the data about a loan, its underlying asset, and its mortgagee, all to facilitate individuals’ ability to invest in loans.
In the gaming world and metaverses NFTs are being used to exchange assets within and outside the game or world. Gamers can trade on their winnings and accomplishments by trading in NFTs. Specifically, an NFT may be assigned to an asset like a weapon or in-game currency and exchanged between players without transferring an entire account.
Though only recently finding the spotlight with the rebranding of Facebook as Meta, metaverses have long been virtual worlds with shops, theaters, attractions, residences, and other “real (virtual) property.” NFTs are now used to represent their uniqueness, ownership, and value. Unsurprisingly, real estate agencies are in the business of buying, selling, and speculating in metaverse real estate exchanges.
And there are plenty of other more practical and fanciful uses of NFTs, which are putting a focus on how NFTs are minted, managed, and exchanged. Speaking of exchanging, there are dozens of emerging exchanges where NFTs are being traded. With the diversity of NFT applications, you can bet that specialty, regional, and language variants of exchanges will be created and evolve.
The Impact of NFTs on Brand Protection Professionals
As NFTs become more commonly used beyond early adopters and speculators, there will be an impact on brands and customers and, ultimately, upon those responsible for defending brands. So, what precisely should those charged with consumer and brand protection be concerned about related to the popular usage of NFTs?
Along with abuse and scams specific to NFTs, there will be issues common with existing physical and digital venues and platforms. Inauthentic use of the protected intellectual property to confuse consumers will find a new home in digital exchanges, marketplaces, games, and metaverses.
Fake and stolen digital goods based on branded NFTs will be rampant, especially as NFTs gain widespread appeal. Scams whose goals are to steal platform credentials to commit downstream digital and physical crimes like phishing, pharming, malware, and ransomware will undoubtedly target unsuspecting holders of NFTs. Everything old will be new again, just as with any newly minted and evolving technology or platform.
There are some yet unanswered questions. For example, along with trademarks, patents, and copyrights, will brands begin to create NFTs to protect their brand, goods, and other works? And how will the use of protected branded NFTs be tracked and managed? What tools will emerge to patrol the dozens of NFT exchanges for fakes and abuses that exist today and can be expected to grow? Will organizations need to form new security and brand protection capabilities to protect themselves, or will the responsibility fold into existing organizations?
What should brands do to prepare for the onslaught of NFTs?
- Learn about them - becoming familiar with NFTs and how they are used is as simple as getting a digital wallet, going to an NFT exchange, and purchasing a nominally priced NFT. Try transferring an NFT to a work colleague or friend to understand that experience.
- Bring an intellectual property protection lens to this emerging technology by monitoring and managing NFT use and misuse in applicable fora.
- Create a cross-functional team of legal, business, and technology leaders to understand the use, associated risk, and a process for managing and controlling the use of NFTs in your organization.
- Find vendors and outside counsel who are prepared to help you if NFT abuse becomes a material threat to your business.
If you want help with understanding NFTs, how they are intertwined with your business, and their abuse online, please contact us, and we’ll be glad to help.