The opening of the NFT Factory: what impact on the sector?

What are NFTs? What are the links to Web3?

NFTs, or non-fungible tokens, are tokens similar to those used in cryptocurrencies and make it possible to digitize various information, partially stored in a blockchain. Their immutable character allows for a multitude of uses in different sectors such as luxury, video games, real estate, or even the world of art. NFTs were born on the Ethereum blockchain, after the implementation of a new token standard: ERC721. Thus, the vast majority of NFTs are ERC721 tokens located on the Ethereum blockchain (65% of NFT exchanges at the end of the third quarter of 2022), such as ERC20 tokens, such as LINK or stablecoin USDT. However, NFTs are now present on other blockchains such as Solana, Avalanche or Polygon. Regardless of the placement block, NFTs are traded on markets, the most well-known of which is OpenSea.

The scalable and unique nature of each NFT makes it a key element in the decentralized revolution and the transition from Web2 to Web3. Indeed, Web3 characterizes the new evolution of the web based on decentralization and blockchains. After Web2, characterized by social networks and allowing users to become “content creators”, Web3 promises them to regain control of their personal data by reducing centralization as much as possible, and therefore , after all, the massive collection of user data by tech giants like Meta. or Google. In this new decentralized web, cryptocurrencies and tokens ensure the transfer of value, while NFTs facilitate the transfer of digital objects (digital art, avatar accessories, etc.) and property (virtual land or the deed of ownership of a property in the real world). It should be noted that NFTs today have multiple applications in many sectors and are becoming an essential tool for brands to manage communities and reach new generations.

What are the challenges of this opening?

The challenges of NFTs are various and varied and depend on the sector in which they are established. In the music world, NFTs represent a new source of income for artists and allow musicians to regain control over all aspects of their music, from royalty fees to copyrights, stimulating fan engagement. In the art sector, NFTs are inherently sought after as a store of value and increasingly attract collectors and artists. NFTs are also attracting some big names in the luxury watch sector, especially to ensure authenticity and facilitate the resale of luxury watches on the secondary market. In this case, the intangible and intangible nature of NFTs makes it possible to guarantee traceability and authenticity. The world of culture is also opening up to this technology and some cities do not hesitate to use it to promote their heritage. This is especially the case of the city of Cannes, which recently auctioned off ten of Cannes’ heritage sites in the form of NFTs.

As we’ve seen from the various uses of non-fungible tokens, they can represent a real-world object or place, a complete digital artwork, or a portion of a traditional artwork. NFTs can also represent an intangible Web2 element, such as the NFT representing the front page of Wikipedia, auctioned for more than 660,000 euros, or even a Web3 item in the form of an avatar accessory that evolves into a metaverse. However, an NFT can not only represent objects or places, but also act as an entry ticket to an event or a discount coupon in a store.

Why are more and more brands getting into NFT?

Clearly, many brands quickly realized that NFTs could be used as a great marketing tool with multiple advantages. Some sports brands such as Nike or Adidas quickly distinguished themselves by offering accessories for metaverse avatars, at a time when virtual worlds were in the spotlight after the announcement of the strategic change of Meta, formerly Facebook, eager to occupy a dominant position in decentralization. worlds in order to bring her touch of centralization and keep control of the personal data she holds so dear. Luxury brands have also been able to exploit the business opportunities hidden behind the connection between the metaverse, NFTs and real-world products, as evidenced by the fashion week taking place in the Decentraland metaverse. During this event, we could find in particular DKNY, Tommy Hilfiger, Paco Rabanne, Dolce & Gabbana, or even Etro. Major luxury brands are using NFT to bring an atypical touch to their collections. This is especially the case with Prada, which is launching Timecapsule collections in limited quantities for 24 hours, where each item comes with an NFT, bringing an extra touch of exclusivity to the brand’s customers. The luxury brand is not new to Web3, having already collaborated with Adidas on an NFT community project.

Indeed, if luxury brands are getting into NFT, it is also with the aim of developing a certain community around these non-fungible tokens, bringing a breath of fresh air by attracting the more sensitive generations X and Y. to digital assets than the previous ones. generations. The Lacoste brand perfectly combines the marketing aspect with the community aspect by actively involving its community in the development of its Web3-based projects. Crocodile Brand recently allowed its Genesis NFT holders to determine some features of its upcoming NFT collection.

This participatory approach implemented by luxury brands is unprecedented in a sector that is more conservative than other brands such as those focused on sports. But another practice aimed at building community loyalty complements this participatory aspect by rewarding community engagement through NFTs. This is the case of Yves Saint Laurent Beauté, which offered the first NFT to subscribers on its Twitter and Instagram accounts. NFTs which will act as a loyalty card and give access to many exclusive events.

Therefore, the opportunities offered by NFTs are numerous for brands, and few are still hesitant to take the plunge. Luxury brands seem to be the most advanced in this area, creating new companies that specialize in supporting brands towards Web3. Indeed, in the face of the economic slowdown in China and the expansion of online commerce, driven mainly by repeated shutdowns, luxury brands are ready to do everything to win over the younger generations, refreshing their brand image by adopting new methods of management of their community.

Why did France decide to support this market with public money?

Jean-Noël Barrot, Ministerial Delegate in charge of the digital transition, recently announced the government’s intention to support the NFT ecosystem with public money. The latter underlined France’s desire “to take the turn of Web3, which will profoundly modify the Internet and its uses.” This announcement came a few days after Bruno Lemaire, Minister of the Economy, declared his desire for France to become a European center for crypto-assets. This desire to position France as a major player in the NFT industry is not unjustified and is explained by France’s dominant position in certain areas such as culture, video games or the luxury industry. Jean-Noël Barrot also noted the need to “build a regulatory framework for NFTs, objects that have not yet been identified, especially in terms of legal certainty”. At a time when 2% of the French have already invested in NFTs (according to a study carried out by KPMG for the Association for the Development of Digital Assets), the government’s priorities are to attract global players and mobilize private funds, to create a digital euro sovereign , while exploring the potential of NFTs and decentralized finance (DeFi). These objectives should facilitate the creation of a European metaverse, as mentioned by Emmanuel Macron, by accelerating the creation of a regulatory framework for NFTs.

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