It’s impossible to not hear about Crypto and NFTs. Even with enormous dips in value, market sizes for the two were once at staggering valuations. For example, Bitcoin had a market cap of over $700 billion–– and it’s just one of hundreds of crypto coins.
When you add NFTs, or non-fungible tokens like digital art or metaverse digital assets, into the equation, it’s hard to determine their true value and more importantly what you should do with them.
However, the average small business owner doesn’t really need to worry about them. Here’s what you should know about crypto and NFTs, why there’s no rush to jump into the market, and when you should pay attention to them.
A (very) brief primer on crypto and NFTs
In over-simplified terms: Crypto aims to be a digital currency and store of wealth, while NFTs aim to be a digital record of all things, both digital and physical.
Both operate on the blockchain, which in its simplest terms is a digital ledger (like an accounting book) that tracks all transactions in perpetuity. What makes the blockchain unique is that it is functionally impossible to alter or hack due to its crowd-sourced method of operation.
Crypto and NFTs are part of a new wave of technology and play a role in the concept of a fully digital world. In this world, commerce happens in a digital online space (often called the metaverse). Digital items are created, bought, and sold in this digital world. Physical items in our real world are codified and represented digitally within this digital world as well, creating a melding of the physical and digital.
Within this digital world, crypto and NFTs have significant potential utility.
Crypto is like digital money
Crypto entered the mainstream consciousness with Bitcoin’s launch on January 3, 2009, but digital currencies and pseudo currencies have existed for decades in the form of merchant rewards and, later on, app-based rewards.
Bitcoin gained notoriety and stirred excitement because each coin can be individually tracked on the blockchain, meaning it’s nearly impossible to hack or forge. While a clever hacker could probably fake some Starbucks rewards, it’s not possible with Bitcoin and (most) other cryptocurrencies. Further, each coin is infinitely divisible and trackable, meaning it can be used for any purchase of any value.
As a result, Bitcoin and other cryptocurrencies built in a similar way have the potential to fulfill all three obligations of a currency:
- Be a store of value.
- Be a means of exchange.
- Bea unit of account.
Users and investors were also attracted to Bitcoin because of its decentralized nature, meaning it’s not controlled by any one entity or individual, but the majority of its network participants. Proponents think this makes Bitcoin more trustworthy than currencies that rely on the decisions of a third party, such as a central bank.
The challenge is Bitcoin and most other cryptocurrencies are highly volatile. Some, like Tether and the US dollar, peg their value to fiat currency. However, critics argue this isn’t in the true spirit of crypto, since these currencies still rely on central banks and governments.
NFTs and digital record keeping
NFTs, or non-fungible tokens, are a novel technology sprung from blockchain’s ability to track transactions.
Right now, NFTs are most popularly known as digital art (sales of which have reached over $400 billion). However, the real potential utility of NFTs lies in the realm of contracts and property rights.
An NFT has a unique digital signature attached to it, which verifies its authenticity much like the code in a DocuSign signature that confirms it wasn’t forged. This unique code is how you differentiate the “real” thing from a screenshot.
In the contract world, this means that contracts signed as an NFT would be unhackable and irrefutable. Same goes for property rights, as your house or your intellectual property would be undeniably yours via an NFT that validates your authentic ownership.
The aim is to create “trustless systems” where you don’t need third parties to validate things. Instead, NFT does it for you, without human intervention. For instance, your house deed wouldn’t need a lawyer to confirm its validity because your NFT contract does that for you. Same for your insurance contract or even your passport.
Why you don’t need to worry about crypto and NFTs right now
Crypto and NFTs present some intriguing possibilities. There’s a lot of money flowing into these markets, and some investors have been able to make fortunes by investing in them at the right time (although fortunes have also been lost).
However, most small business owners don’t need to worry about them if they don’t want to. Here’s why:
Current market utility is low: While crypto and NFTs have significant potential, the volatility of the markets, and the relatively low number of merchants accepting them as payment, means you won’t get very far trying to live your life with crypto rather than fiat money (like dollars).
The technology is not fully tested or easily accessible: While exchanges are making it easier than ever to buy crypto or NFTs, it’s still a new process that’s difficult for a lot of people to understand and use.
Governments haven’t made up their minds yet: Governments around the world are not yet sure what to do about crypto or NFTs. That means more risk for anyone holding a significant amount at this time since there could be new regulations or even outright bans at any time.
You have a business to run: The crypto and NFT worlds are complicated. If you have interest in them, you can absolutely spend time learning. But spending time doing this out of perceived obligation could take up valuable time you need to run your business.
When awareness makes sense
While crypto and NFTs may not impact all small businesses right now, it’s still worth paying attention to them in these circumstances:
You’re in the tech industry: The tech industry, and the people within it, tend to be early adopters of new technologies. If you’re in this industry, you may find more utility or value in crypto and NFTs, and thus it’s worth paying attention.
You sell to tech-forward people: If your customers are techies, they may start asking you to accept crypto as payment or to mint your own NFTs.
Your company sells trust as a service: If you sell notary services, validation services, or similar “objective, trustworthy third party” services, you should pay attention to how crypto and NFTs could alter your work.
You’re personally invested: If you own crypto or NFTs, it’s a good idea to pay attention to the markets since you have a financial stake in them.
You’re personally curious: Staying on top of new trends is never a bad thing if you’re curious about them.
Where to learn more about crypto and NFTs
Some degree of crypto and NFTs is useful for everyone. There’s a lot of potential in both technologies and they could very well change how we do business. Or they could remain a relatively small portion of the global economy used by purists and hobbyists. It’s really too early to tell. No one can predict the future, but you can better prepare yourself for it by doing your research and being well informed.
If you want to learn more about crypto and NFTs, here are some resources:
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