The NFT Staircase: How digital ownership benefits brands and consumers

One of our goals with our new book, The Everything Token: How NFTs and Web3 Will Transform the Way We Buy, Sell, and Create, is to unlock the power of nonfungible tokens, or NFTs, for business. National and international brands are already using NFTs in some of their consumer-facing campaigns, but we think far more of them could benefit from the technology. And we don’t want local businesses to be left behind; NFTs present them, too, with opportunities to engage their fans and communities. 

To that end, we’ve created a blueprint for builders — everyone from startup team members to small business managers to big brand executives. We describe a five-step framework for success: the NFT Staircase.

• Ownership – This is table stakes in web3, but it’s fundamental. NFTs leverage blockchains to create digital assets whose ownership can be defined and verified independently of any platform or intermediary. This helps create markets in goods for which ownership would be difficult or impossible to define, including the now-ubiquitous case of digital imagery, but also game items, event tickets, and even health data.
  
  This means NFTs can outlast their creators and give people a degree of individual control that they’re used to with physical assets: The wallet that owns an NFT can determine which platforms access it and how it is used. If you want to move your NFT art collection from one platform to another, for example, all you have to do is disconnect your digital wallet from the first one and connect it to the new one. This gives people a greater degree of psychological ownership over their digital assets. And it kicks off a powerful incentive loop: when you’re an owner of a digital asset, you’re incentivized to help build the associated brand.
• Utility – Adding functionality beyond ownership to NFTs can drive further value. Many tokens have a default functionality, such as displaying an image, providing access to an event, or enhancing play in an online game. But that’s only the beginning: Because NFTs are embedded in software, new functions can be added over time. An online game NFT might also grant access to a Discord server that hosts discussions of the game, or unlock a subscription to a fan publication. Utility reinforces the value a person attaches to an NFT, and encourages repeat interaction with the asset, which in turn can inspire brand attachment.
  
  And crucially, with NFTs on public blockchains, third parties can introduce utility just as easily as the original creator can. Combined with tokens’ interoperability across platforms, this means that a wide variety of contributors can imbue NFTs with ongoing value in a broad range of online and even offline contexts. A person can use a digital avatar in multiple metaverse platforms at once, without needing those services to interface directly with the creator or with one another — just like a person can wear an item of clothing wherever they want without the brand’s approval. A restaurant can airdrop coupons to holders of “NFTickets” to a local sports game. A studio launching a new “Morlocks vs. Mages” role-playing game can target people already holding wizard NFTs. More broadly, an NFT project can launch by leveraging networks of people whose various interests are identifiable onchain. (Authors’ note: we are not aware of a Morlocks vs. Mages game actually existing, but if it did, then Scott, at least, would definitely play!)
• Identity – The combination of ownership and ongoing utility drives holders to get a sense of personal value from their NFTs and, eventually, develop a sense of identity around them. Interoperability plays a role here: it’s easy for people to showcase a given NFT (or more precisely, its associated metadata or media) as part of their public identity across disparate platforms. And conversely, as more people come to associate digital identity with a digital wallet, it’s especially important for brands to issue NFTs that anchor their relationships across people’s online experiences.
  
  Identity is a big part of the reason that PFP (“picture for proof” or ”profile picture”) NFTs, specifically, have taken off. These tokens are designed to let people express an imaginative identity for themselves, and connect with others who have similar self-images and aspirations. (More on that in the next step.) But identity can apply to any NFT category. Think of a favorite POAP (“proof of attendance protocol”) NFT commemorating an event, a digital “I voted” sticker, or even an NFT attached to a slide deck you’re particularly proud of. Over time we expect to see many NFTs establishing individual ownership and identity around personal data such as academic credentials and health records.
• Community – NFTs have a “network superpower”: Each token implicitly links holders together into a network of people with shared interests and experience. This is like the type of network effect we’re used to from web2, except here the value accrues to the asset rather than the platform. NFTs make it possible for people to find their tribes, and then provide a foundation for them to collaborate upon. The more prominent an NFT becomes across different contexts, the stronger the associated network becomes.
  
  Moreover, NFTs put holders into two-way conversation with brands. Some NFTs grant governance rights, as in the context of a DAO, or decentralized autonomous organization. But even without granting those rights, NFTs still anchor the community of a brand’s supporters, and empower them with ownership of brand assets. We describe fandom in the NFT context as having a “semi-permeable membrane”: Ideas and experiments can percolate up from NFT holders, and the brand itself can integrate the most successful ones.
• Evolution – All of this comes together to comprise a powerful package for digital brand building. Through NFTs, a creator, company, or cause can build a community  whose members personally identify with the brand and are both incentivized and empowered to contribute to it. Connecting those people to each other and the brand can lead them to develop in unexpected and exciting ways.

The summary here only scratches the surface.  The upshot is that as projects ascend the NFT Staircase, they have the potential to level-up ordinary consumer interactions into multifaceted community experiences. As a consequence, we expect NFTs to become ubiquitous in both online and offline applications. 

As we explain at the end of the first chapter:

NFTs can turn images into event tickets, and event tickets into brand anchors. They will usher in the next generation of customer loyalty programs, creating structures that benefit both businesses and consumers in new ways. They’ll change the way we manage our work histories and health data. And they can transform simply owning a product into a close-knit community experience. 

NFTs are the everything token.

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If you want to read more about using NFTs to grow businesses (and the business of NFTs), you can read a preview of the book, and get a copy wherever books are sold.  

If you have picked up a copy — or do so in the future — we’d love to hear from you! Please share your thoughts with us on X/Twitter, LinkedIn, Farcaster, or elsewhere, or reach out directly here. (And if you or your community might be interested in a special NFT edition of the book, let us know.)

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Acknowledgements: We are deeply grateful to all of the builders, creators, and consumers in NFT-world — especially our friends, colleagues, and collaborators — for inspiring and informing this project; extended acknowledgments are presented at the end of The Everything Token. On this piece specifically, special thanks to our editors, Tim Sullivan and Robert Hackett!

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Steve Kaczynski has more than fifteen years of experience as a communications and marketing professional, including stints in leadership at Progressive Insurance and Nestlé. Now a tech entrepreneur, consultant, and commentator, he cohosts the popular web3 morning show Coffee with Captain, and serves as the community lead for Starbucks Odyssey, the coffee company’s NFT-based loyalty program.

Scott Duke Kominers is the Sarofim-Rock Professor of Business Administration at Harvard Business School, a faculty affiliate of the Harvard Department of Economics, and a research partner a16z crypto. He also advises a number of companies on marketplace and incentive design; for further disclosures, see his website.

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The authors hold digital assets, including fungible and non-fungible tokens from some of the companies mentioned. They also advise companies and serve as experts on marketplace and incentive design, web3 strategy, NFT brand-building, and other topics. 

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