Should your company launch an NFT? Here are 4 things you need to know.

In 2021, non-fungible tokens (NFTs) came out of what seemed like nowhere to rack up nearly $41 billion in sales. This explosive growth combined with the busy reputation can understandably make startup leaders wonder if NFT is a smart growth opportunity for a young business, or just a flash in the pan that will just burn you?

After the initial explosion of buzz around NFTs, the market experienced a sales volume decline as Ethereum, the cryptocurrency on which many NFTs are based, fell in value. With the NFT market now starting to stabilize as the prospect of Ethereum becoming cheaper to mine seems positive, it is easier to get a real answer to the question of whether to delve into NFTs.

Related: The Beginnings of Digital Assets and the Growth of NFTs

Meanwhile, one of the market’s biggest weaknesses – its severe energy inefficiency – will also be fixed in the near future, removing yet another obstacle to growth. In other words, strong indications point to NFTs continuing to flourish for the foreseeable future. But do they make sense for your new brand?

The possibilities for the NFT market are expanding

In many ways, NFTs are just getting started. New marketplaces will continue to emerge, making it easier to pay for NFTs with fiat currency. Metaverses and video games will begin to take full advantage of NFTs, selling transferable avatars and in-game items to players that they can truly call their own.

With the right approach, you have an opportunity to tap into an ever-growing, tech-savvy global audience willing to purchase digital products that come with residual royalties built into the blockchain contract. However, that does not mean that entering the NFT market is an automatic slam dunk for any business.

Despite its trendy reputation, an NFT is not a magical money maker. Like any product, it requires proper marketing, a thorough business plan that includes the costs and risks, and a reliable team behind it all. Launching an NFT also requires a thorough understanding of where it fits into your overall corporate vision. Here are some considerations when considering your decision regarding NFTs:

1. Educate yourself about the behind-the-scenes aspects

For you get involved in this area, you need to start with a solid understanding of blockchain technology and NFTs. Many resources are available to help you learn the ins and outs of the technology. NFTNow is a solid place to start.

Related: How blockchain technology is changing the world from metaverse to NFTs

After you understand the process behind an NFT, you should also give yourself a practical education. Create a simple “test NFT” that you can sell to a friend or colleague for $1. Go through the entire process and see if it’s something you can see yourself and your customers repeating enough to generate a viable business line. Having a basic understanding of the process, along with knowledge of how and why NFTs increase and decrease in value, will help you decide if getting involved in the NFT space is right for you.

2. Determine if a potential NFT has actual value for your customers

In some ways, the popularity of NFTs is not so different from the mobile app craze of the past decade. As a software engineer, I was approached by many people who were under the impression that if they just had a mobile app, they could become the next Mark Zuckerberg overnight.

In most cases, the mobile apps they wanted to build would work just as well – or even better – on a mobile browser. For these entrepreneurs, building an app would just mean wasting money on something their business didn’t need and their users didn’t want. Today, many entrepreneurs make the same mistake with NFTs.

Don’t create NFTs in the hope that you will generate buzz for your business; launch an NFT collection only if you are serious about staying in the market for the long term and if you believe that your collection has a unique value that NFT buyers will emotionally resonate with. Ask yourself if you see a third party wanting to buy your NFT from a buyer as a resale. If the answer is no, then it does not belong on the market.

Related: Make your brand a household name using the power of NFTs

3. Consider all the costs of launching an NFT

While it is true that you may be able to create and list an NFT at a cost of $100-$700, that does not necessarily represent the true cost of launching a successful NFT.

If your current consumer base consists of people who love vintage art and collectibles, for example, you may need to enlist the help of experts to reach a new, younger demographic of NFT enthusiasts. This can easily turn into a marketing budget of up to $30,000 (or even more) just to get started with the right branding, storytelling and creative direction. Make sure you factor in all of these costs when deciding whether the launch will really be worth it.

4. Build a following and then start an NFT – not the other way around

NFTs should not be seen as an “if you build it, they will come” technology. You need to make sure you have a robust audience that will buy what you’re selling. NFTs are still in their relative infancy, and that means entering this new market means taking some risk. But that means there’s still so much more room to grow.

While art has been the main focus of the NFT market so far, many other applications are just being explored. Platforms like Decentraland, for example, use blockchain technology and NFTs to build an entire virtual world – all owned by the people who use it.

NFTs offer a world of potential, and it will be forward-thinking entrepreneurs who help realize this potential. However, it is not enough to want to be one of these founders. You must have a plan and a vision that makes sense in the market. Otherwise, you’ll end up getting burned after all.