Business leaders see benefits in the adoption of non-fungible tokens or NFTs, according to a joint study by Bain & Company and the World Economic Forum.
The Evolution of Non-Fungible Tokens report found that the global adoption of NFTs has been relatively constant since June 2022, emphasising that mass adoption is not over and will take time to unfold. This is despite the rise and fall of hype surrounding the blockchain-based tokens.
While NFT adoption speeds vary across industries, the study reveals that sectors currently spearheading the launch of NFT projects include sports, ticketing, luxury, retail, gaming and art. As NFT technology continues to evolve, and as new use cases are identified, adoption is expected to spread and grow across a wider range of industries, the report concludes.
According to the report, NFT technology can offer several advantages: a higher level of protection against fraud and more efficient and streamlined digital record keeping. NFT users also see a variety of benefits including increased accessibility, transparency, and ease of use.
The widespread adoption of NFTs among businesses depend on eight factors:
- Regulatory and legal clarity. Different countries are beginning to create regulatory frameworks for digital assets in the emerging web3 environment. However, efforts are still at a very early stage, and the industry still lacks a common taxonomy surrounding NFT use cases. To ensure mass adoption, an NFT taxonomy tailored to the nature of each use case and a regulated legal framework for basic security and protection needs to be established.
- Development of web3 ecosystem. Web3 products and services development is uneven across industries. NFT mass adoption will be supported by customer education and the adoption of general web3 elements and functionalities. Through a better understanding of underlying NFT technology, users and companies could better recognize the benefits of NFT use cases.
- Macroeconomic and business environment. Current adverse macroeconomic environment is making companies re-prioritize their efforts and investments into more core businesses to the detriment of exploring new ways of growth through NFTs. Stabilizing crypto and other digital assets markets can create a more secure environment, a clearer legal framework, and enhance the attention of interested customers.
- Interoperability. While interoperability is critical for many use cases of NFTs, currently it is quite limited. Interoperability standards and protocols should be developed to enable NFTs to operate across different blockchain networks and platforms.
- User experience. NFT user experience is complex, causing high friction in the customer journey and preventing user adoption beyond initial enthusiasts and crypto-savvy communities. Smooth customer experience is paramount to allow mass adoption, led by wallet improvements (eg simple login with email/phone, payments with fiat, integration with web2 platforms, etc.) and the evolution of digital IDs.
- Technology development. Main chains struggle to combine affordable costs, high transaction capacity, security and decentralization simultaneously since underlying blockchain technology needs to mature overall in terms of throughput, latency and security. Achieving the technological milestone of high-capacity networks at an affordable price with strong security and reliability is necessary.
- Track record of success. Most noticeable cases across industries have developed digital collectables, while other use cases for NFTs are still small proof of concepts or tests and learn examples. The emergence of large-scale success stories will undoubtedly boost companies’ confidence, encouraging them to move beyond small proof-of-concept experiments with NFTs. These success stories need to be backed up by performance metrics that indicate the potential returns, reducing the perceived risk of investing in NFTs.
- IP and brand holders adopting the technology. Companies with a strong brand and popular IP have started developing pilots and small-scale NFT projects but have yet to commit to meaningful and valuable developments. It’s crucial for companies with strong IP, a recognized brand and extensive fan communities to launch NFTs, as this will propel widespread adoption.
