As the cannabis industry grows and evolves, it only makes sense that cryptocurrency and blockchain technology would make their way into the fray. Enter NFTs (Nonfungible tokens).
NFTs are being used by marijuana entrepreneurs to create buzz around new products, validate testing results, and sell consumers on exclusive discounts. While some are embracing NFTs, not everyone is a fan.
NFT proponents argue that they are the future of the next version of the internet, dubbed the metaverse, because they are characterized as digital art linked to bitcoin and blockchain technology.
However, skeptics argue that the tokens, which have swept the art market and are now being used by mainstream enterprises, are worthless. Critics also see the Bitcoin industry as a pyramid system replete with con artists.
Nonetheless, a number of marijuana and hemp businesses are interested enough to investigate the market with an open mind. Here are some of the reasons NFTs are a hot topic right now.
NFTs as a Method of Engagement
The purpose of art-based blockchain technology is to serve the devoted cannabis fan base. In a post-pandemic world, there’s a demand for new methods to celebrate a plant that was once banned, as well as new ways to interact with like-minded admirers — and NFTs suit the bill well.
Tokens are a lucrative slice of the pie, too: according to Blockchain data company Chainalysis, the market for NFTs reached a $41 billion value last year. Many mainstream companies are jumping onto the NFT bandwagon, such as:
- Gary Vaynerchuk, an entrepreneur, has revealed that he will open a restaurant where visitors must acquire NFTs in order to gain membership.
- Under Armour has developed a line of NFTs inspired by the sneakers worn by Golden State Warriors point guard Stephen Curry when he set the all-time NBA three-pointer record.
- RTFKT, a company that only makes NFTs and shoes for the metaverse, was purchased by Nike.
- Adidas teamed up with the Bored Ape Yacht Club to offer NFTs that grant consumers unique access to real-world merchandise, among other benefits.
- The debut NFT product from cannabis art company Calipari and cannabis private equity firm Merida Capital Holdings will be five one-of-a-kind “Genesis” cards, which will be released via OpenSea on 4/20. There will be more releases in the future.
Cannabis companies looking to cash in on new ways to keep their customers engaged are developing memberships around NFTs that are linked to cool or unusual digital assets, which are then linked to things like popular or exotic strains.
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How To Avoid Scams
Unfortunately, scammers and cheaters do exist in the NFT realm, just as they do in the commercial world. For this reason, cannabis entrepreneurs who want a piece of the NFT space need to be on their guard in a few key ways.
First, businesses interested in NFTs should always undertake as much research as possible before listing or “minting” NFTs to avoid operating in a risky space. They should also buy and sell tokens on OpenSea, the most well-known exchange.
Finally, avoid pump-and-dump schemes at all costs, no matter how tempting (or how heavily endorsed they are by celebrities). The unregulated cryptocurrency market is vulnerable to these types of scams, in which an individual or group buys massive quantities of “coins” to artificially inflate demand and price.
Those same operators typically use social media platforms or influencers to promote the merits of a certain cryptocurrency. When investors rush to buy the coin, the same group sells their holdings, causing the price to plummet. NFT holders are left with valueless commodities as a result.
The Attraction of NFTs
Cannabis entrepreneurs are notoriously driven and avant-garde, so the world of NFT tokens has a high-risk, high-reward nature that the marijuana trade is understandably drawn to. Marijuana entrepreneurs love to be pioneers and push boundaries to explore new frontiers, and there is unlimited, untapped potential with this new cryptocurrency space. NFTs are new, volatile–and the market is in its infancy. There is much development to come, and the cannabis trade wants a front-seat view.
While NFTs are just beginning to emerge and take up space in the cannabis market, the risk/reward factor is exciting and sure to yield some massive wins–and massive losses–for brave entrepreneurs trying to get their foot in the door.