COVER STORY: 5 NFT business models for real world problems

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NFTs are used in business today to mimic some of the benefits of shared ownership. This can be seen through dividend payments and the base infrastructure to brand loyalty programs. 

Ensuring creators are rewarded with passive income throughout their life, not just the first time their work is sold, and to help deliver sustainable business outcomes such as carbon removal.

Far away from the noise and fury of secondary markets where the only goal is to flip-fast, new business models are emerging which employ not only non-fungible tokens but also smart contracts on the blockchain.

For too many business leaders still, the concept of NFTs conjures up little more than cartoon images such as, for instance, a monkey smoking a cigar while wearing a sailor's hat. We’re not joking.

But NFTs have evolved far beyond bizarre cartoon art. Today they are creating passive income for investors in new ventures, to binding communities together through loyalty programs, saving endangered reefs and uplifting indigenous voices.

Sue Wan Wong and Yvonne Beh at The Edge Malaysia describe how NFTs are used to confirm digital ownership and confer rights to particular entities.

They write, “Given the malleable nature of NFTs, creators have sought to mint tokens with a digital representation that is wrapped with a bundle of rights — for example, a token that represents a specific area within a forest with the right to vote at token holder meetings to acquire further land around the forest as part of an afforestation initiative, and gaining a yield on the sale of carbon credits that are accredited from the afforestation initiative.

“As a result of this, the analysis of whether securities laws or other laws would apply begin to grow in complexity.”

Digital Nation Australia spoke to five companies and individuals who are using NFTs to invest new business models better the world and make a global change.

Walking Between Worlds: Creator economy

Walking Between Worlds is an organisation that focuses on the uplifting and showcasing of global indigenous artists such as Australian First Nations, Canadian Inuit, and the Hopi Native American tribe.

Currently, they have four artists whose works they are highlighting, Toby Cedar, Bibi Barba, Jimi Thaiday and Jakeob Watson.

Tim Lea, founder of Walking Between Worlds explained the NFT drop is through three collections, the first of which being the genesis collection.

“The first initial collection is for Indigenous artists looking at the theme of indigenous dance, because that's a non-threatening subject matter. The second collection, I mentioned the other indigenous communities that we're talking to, we're looking towards doing fusion pieces, between international indigenous communities, and here in Australia.

“There are unified issues that indigenous communities have faced a lot of the legacy of colonialism and they're all facing as communities this issue of the digital divide,” he said.

The smart contract behind the NFTs ensure the artists are properly paid out. Lea explained that the smart contract on OpenSea automatically generates a 5 percent royalty payment to Walking Between Worlds (as the publisher) for future re-sales.

"From here we will send 70 percent of the royalty payments to the artists directly linked to their re-sales. Re-sales royalties will initially be manually shared with the artists and once we have some direct experience of the flow of funds we will write code to automate the process.

"At all times the artists have complete access to the smart contract to audit the flow of funds so they can check their entitlements at any stage," he added. 

Lea said the feedback from the indigenous artists have been positive.

“We’ve had quite a number of Indigenous artists actually come through to us and say, ‘we love what you're doing, how do we get involved?’ We're trying to create a safe set of hands for Indigenous artists, because we're focused on having indigenous protocols, making sure that we're protecting [the art],” he said.

He also wants to continue encouraging indigenous artists in getting involved with Web3 and the metaverse.

“It's about how do we deploy ideas and concepts that we can educate at an efficient level to get the artists to embrace NFTs but to also understand the processes of digital art.

“We've been in discussions with a number of third-party education providers to look at. They are as a community very disenfranchised, so anything that we can do to help is very powerful,” he added.

Hi-Rez the rapper: ownership and loyalty

Hi-Rez the rapper is a US-based musician who recently staged a single drop in the metaverse to reward his fans has an impressive digital pedigree. In particular, his decision to utilise YouTube in its early days has seen him net more than two million YouTube subscribers. 

His latest innovation — the “Hog homies” NFT project — combines the characteristics of share ownership for his tier one “OGs” aka Original Gangsters with a loyalty program for tier to NFT holders that would be familiar to any corporate CMO.

Hi-Rez said the OGs invested with the knowledge they were going to get passive income.

“Typically, the OGs will get roughly 20 percent, split that up amongst 75 people and it comes to a third or fourth of a percentage point,” he explained.

It’s an ever-evolving cycle, Hi-Rez said where the 50 to 60 OG investors could get a 50 percent or 100 percent cut of the profit.

“Most of those OG holders appreciate and value the fact that I'm growing a business sphere,” he said.

While the first generation of NFT holders mirror a typical investor, the second generation of NFT holders are members of a loyalty program.

As an example, Hi-Rez said the second-generation NFT owners get invited to events and entered into giveaways only made for those with those particular tokens.

“There is a duality to it. My OGs were airdropped many of the things that are sold, not only do they make money off it, they get it for free. They have the choice to flip it, sell it, keep it hold it, he said.

“I’m building this whole ecosystem and economy. All these people in here can sell it to people that are outside the bubble. It's just like an economy I'm building here and then all of them benefit when people from the outside come inward.”

Neuno: e-commerce and personalisation

Neuno is a digital fashion brand selling art, collectables and digital wearables. Natalie Johnson is the founder and she said the company is similar to that of a retailer or ecommerce brand such as The Iconic or Selfridges.

“You can come and buy a digital piece of clothing, and wear it in in games, digitally or on a social media filter. We take a commission almost like David Jones, or Farfetch from the brands that we work with, and that is how we make money,” she said.

Johnson said these digital garments give designers more creative freedom and control over what they produce and they also do not create waste.

“If we can tap into the trillion-dollar industry this space is and we can provide exciting new revenue streams for brands, while still letting them be as creative as possible. We can be creating this revenue stream ultimately, they could go and produce less garments,” she explained.  

“We still want designers to go and design, be these aspirational brands and create beautiful products. The fashion industry is notoriously one of the biggest polluters in the world, every single person wears clothes, and every single person has a wardrobe full of clothes. This is a huge burden on the planet. If we can make digital-only collections and support them that way, then it would be a big step change,” she said.

Neuno has five different revenue streams that the company can tap into with the different products they release, according to Johnson.

“It's about having a very commercial, obvious and attainable business. and that's why I think we're similar to ecommerce. We package this almost like a climate change sustainability agenda in a bit more of a sexy, modern way with NFT's and the blockchain,” she said.  

Johnson said NFTs are driving the industry towards better change as well.

“It's dangling this attractive carrot, rather than always making it this depressing conversation that it can be sometimes and overwhelming,” she added.

The five revenue streams include taking commissions from dropping a brand’s product and taking a commission from designing NFTs, Johnson explains.

“We've also got profile picture drops, which we're releasing later in the year on our roadmap. We have some other projects where we can tap into some revenue streams with the brands combined. It's not just a flat commission every time there's multiple ways,” she ended.

Katalyst.Earth: climate change and biodiversity

Katalyst.Earth drives sustainable and digital transformation through building a two-sided blockchain based marketplace to accelerate climate impact projects.

Its NFT holders are called ‘The Katalyst Collective’ which is a global grass-roots community driving climate solutions. Each NFT provides a unique PFP and directly funds carbon removal projects and biodiversity conservation.

Mitchell Board, CEO at Katalyst.Earth said there's no real way to value this natural capital that we have today.

“Think of a forest for example, it's often valued for say, its lumber, what we need to be able to provide as a new incentive mechanism to be able to provide value to that natural capital that captures both its carbon sequestration of carbon capture potential as well as its inherent biodiversity.

“We've created a collection of NFT's, to provide a way to value that ecosystem, the funds raised from the sale of these NFTs, go towards environmental projects that remove carbon, restore and protect biodiversity,” he explained.

In the future, these rewards would include actually owning the carbon credits generated, Board said.

“Those funds are directed towards environmental project developers. These are the teams that go around they do things like plant trees or work with farmers to implement regenerative agricultural practices. Those are things that would capture more carbon in the soil, for example, these carbon sinks,” he said.

One of the major issues that these developers face, particularly the smaller and medium-sized developers is access to financing [and] capital actually implement those projects, Board told Digital Nation.

“What Katalyst.Earth is doing is raising funds from the sale of NFT's providing people a stake in these projects, rewarding them for that stake through carbon credits, and helping the environmental developers get over a major bottleneck, which is financing,” he said.

Board calls NFTs a new innovative finance mechanism for these climate solutions.

“It’s also democratising access to this market for individuals. So today, individuals don't have a way to go and invest in these climate solutions, in these carbon credit generating projects,” he said.

Board also sees NFTs as a signalling mechanism, “You think about the way people signal belonging to a group, NFTs allow you to do that in a digital era. They can say, ‘I've bought this NFT, I'm part of this community. I belong to this because it aligns with the purpose of my values’.

“That's a real innovation, people can show now their involvement in climate solutions. But they also act as a key to unlocking interactions within that community. An NFT is a bit like a digital passport, it allows you to enter into the community and to interact with that community, you can learn, you can also educate other people in our community, and you can share knowledge,” he added.

The Corals: Sustainability

The Corals is an art-based NFT project dedicated to saving the Great Barrier Reef where the tokens resemble coral from the endangered reef.

Pamela Kerr, founder at The Corals said the project is designed to revolutionise how they fundraise through using Web3 technology.

We want to make fundraising trendy and popular. We want to encourage humanity to care about the planet they live on. The business model underpinning the project is peer-to-peer direct sales,” she said.  

The Corals project will be dropped in 7 waves, each wave is a particular region that is close to the Reef such as Cairns, Mackay and the Whitsundays. Each wave will be created by a different artist in their medium of choice.

Kerr said NFTs are opening up the world to new possibilities and revenue streams.

“This can assist anyone from any nonprofit, environmental project, charity cause and financial background. It doesn't matter who you are, you can access this new liquidity. Why not use it for something good? If NFTS were not here, I would not be in the space,” Kerr explained.

Some of the challenges Kerr faces are usually revolved around people rather than the technology itself.

“Challenges are always people related as in any business, time zones, lack of knowledge, wrong people in key roles, scams and rug pulls,” she said.

However, with the current instability in the market, it is a major concern for Kerr and her team.

“The fact we deal in cryptocurrency can limit your in-real-life supporters as they believe it's connected to criminal activity. Having said all of that, I wouldn't change a thing,” she added.

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