Dynamic NFTs

NFTs exist on a spectrum from speculation through art to utility.

In the NFT universe there’s an emerging conversation around Dynamic NFTs (dNFTs). Dynamic NFTs are NFTs that can have their metadata updated based on triggers to its smart contract.

Michael Robinson has a nice Twitter thread that explains dynamic NFTs and shares a couple of use cases.

Dynamic NFTs are interesting because they add the ability for developers to evolve their NFT products over time, get to know their customers better, and offer increased utility in ways that perhaps couldn’t be imagined when the NFT launched.

Real-world Examples

In the thread, Michael uses both car and home examples. How a dNFT representing the physical item can track important things about the item. There are as many examples as the mind can imagine.

Imagine health records that get updated. Or school transcripts. Or work histories.

I’ve always like the idea of NFT-based credentials of sorts. Over the course of my career I’ve worked on some interesting projects. In 1998 I worked on one that was trumped as one of the top-ten most strategic IT projects of the year: Nasdaq Taps TIBCO for Revamp of Messaging Infrastructure.

Do you trust me? What was my role? I was the lead architect. Still trust me? That’s a big claim.

If, however, my employee record at TIBCO were an NFT, the CRM could have updated my record and I could prove it to you. Sure… you could call TIBCO and maybe they’d still have a record that I worked there. But a record of every project? You could ask my boss but would he remember? Every project for everyone on his team over decades?

Instead, that NFT (perhaps shared on LinkedIn) is proof with provenance directly from my employer without any necessary thrashing to call and verify references.

And that leads us to the main objections, which by now you’d realize aren’t real objections.

Objections

It’s useful to think about the home or car examples to counter the objections in the thread. There were really two:

  1. What about a database?
  2. Doesn’t Carfax or Zillow already do this?

These really are the same question in some ways.

What about a database? Well, whose database? My medical records are stored at the doctor’s, but I go to a lot of doctors. If my project example above was in a TIBCO database, would they still have it? Who’d have access to that data? Not me, that’s for sure.

Have you ever bought a home? The bank asks for information they already have, and a lot of what happens is the buyer or seller runs around collecting information from different organizations’ databases! Information about title, liens, property boundaries, taxes… So I ask again, whose database?

It’s all in a database… but it really should be associated with the physical property, not the organizations that own or collect the information.

Middlemen have evolved like Carfax or Zillow. Do we trust them? Have you read their terms… how much of that trust puts the responsibility on them for mistakes, or is it buyer-beware? And, a middleman means overhead.

Further NFT Innovation

Dynamic NFTs are one piece of the puzzle when it comes to how NFTs will help us innovate for more privacy, more efficiency, and more trust.

Why you buy alcohol, you have to prove your age.

But you show your ID.

To a complete stranger.

Your ID contains:

  1. Your birthdate
  2. Your address
  3. You ID number
  4. And more…

The cashier only needs to know if you’re over a certain age… yet they get tons of information about you. Why do they need your date of birth? Your home address?

The information on your ID is needed to derive an answer, and today the human is the only way to trust that answer. If your ID were validated in a wallet, you could have a smart contract that gives just the answer you need, without exposing unnecessary information about your identity. This is what it means to have trust embedded in the network.

Which is why I like the response to “why not just carfax?” deep in the thread comments:

There’s nothing “wrong” with carfax. But this approach as the potential to remove layers of trust from the data and make the data more securely accessible in more contexts.

That’s what this is about.

It’s about trust built into the network and not about decentralized databases.

And, it’s about unlocking data kept by middleman to enable more innovations with data. If you’re curious about a specific example, read about how merchants can create their own cross-platform “verified purchase” owners to unlock the power of community rather than having their champions locked into retail silos like Amazon or Walmart.

Tokengated Commerce and Crypto Wallets

Crypto wallets are the digital spaces that contain the different elements of a composable identity.

In plain English:

Your wallet might contain a variety of “things” that serve to identify who you are:

  • your Starbucks’ loyalty card,
  • a collectible you’re proud of,
  • an achievement you share, and
  • your work ID.

We’re going to compose the things in our Web3 wallets to reflect our personalities. And, brands that recognize this, will help their customers identify with them through innovative Web3 loyalty expressions that manifest in these wallets.

Many of the things in the list above can be stored in the wallets that exist today (like Apple Wallet).

But these wallets are “dumb” containers. They’re functional and not expressive.

What gets interesting about crypto wallets is two bits:

  1. What’s in Web3 wallets doesn’t need an intermediary to the technology that stores the “thing” you’re putting in the wallet. It’s not just about money, but if I complete a class on Swift UI Programming, and that course certificate is minted on-chain, my wallet can display it. What’s gained over an Apple Wallet like solution? Provenance. Proof that what’s in your wallet is yours. This may not matter for a collectible (one that you’re not trying to sell) but may matter for a credential.
  2. The other interesting thing is that Crypto Wallets are ‘smart-contract’ enabled, which is like having little apps in the wallet that enables capabilities on top of the composable item.

Connecting on-chain innovations to off-chain infrastructure

I’m going to share two articles on what’s driving the current interest in wallets, but before I do, I want you to consider one thing.

Let’s say Starbucks allows me to mint an NFT that represents my loyalty card, to store in a crypto wallet.

Do you think that even Starbucks will be able to tell customers what wallet and chain they need to download to access the NFT?

Or, will Starbucks need to find their community of users on the chains that these users have chosen for themselves with the wallets that their members are familiar with?

Do you think Starbucks wants to put every loyalty transaction on-chain, starting from scratch to build a new loyalty system based on a Web3 technology stack… or, do you think Starbucks will need to connect their existing loyalty Web2 systems into this new Web3 stack, to combine the best of on-chain and off-chain capabilities in order to deliver innovative solutions?

(Hint, it’s the second choice.)

Just to be clear, I’m using Starbucks as an example that we can all relate to, not because I have any inside information into what they’re doing. I only know that they’re exploring a “digital third place” based on public information they’ve shared.

Learn More

If you’re curious, and want to start from the User Experience to understand the benefits of Web3, Identity in Web3, and how wallets play a part, please read these two articles:

  1. Simon Taylor’s “Why is everyone doing a Web3 wallet?
  2. The Crypto Wallet, Unlocking Digital Identity

In last week’s Tokengated Commerce announcement, Shopify talked about C2C as an expansion of B2C. B2C is “business to consumer”, while C2C is “connect to consumer”.

The wallet is the container in which businesses will connect to their consumers, and that’s why, as Simon asks, “everyone is building a Web3 wallet”.

5 Things to Consider When Creating a Tokengated Commerce Strategy

There’s a ton of interesting experimentation going on in the tokengated commerce space. If you’re new to Web3, or skeptical of NFTs, it’s useful to consider Tokengated Commerce as simply an extension of e-commerce into Web3 technologies.

Even the language around this is developing. For the sake of this post, I’ll use NFT and token somewhat interchangeably.

What kinds of extensions?

Strategy extensions. Token (NFT) holders can be considered superfans, not just customers. If the token has utility, it encourages superfans to be participants in your community, rather than just buyers. This may change go-to-market strategies, product launches, and more.

Technology extensions. E-commerce sites will need to integrate with crypto wallets, blockchains, and have to deal with the complexities of gas fees and ESG.

Product extensions. Digital and physical products will need to be combined and brought to market in innovative ways, involving both new technologies and new community practices driven by new values. Agami is a great example.

Why?

On one hand I’d like to say, “it’s unclear why”… and yet, I don’t believe that. Though I do believe Tokengated Commerce has yet to have it’s “Uber moment” (I think of Uber as one of the first mobile-first apps — meaning apps that didn’t make sense on a fixed computer without geolocation information tied to an individual).

That said, there are a few trends that are important that make Tokengated Commerce important for retail to begin experimenting:

  1. Whatever happens with “the metaverse” is happening, and digital products (or digital-physical pairs) are part of any digital world that manifests.
  2. Company values are shifting from purely financial metric oriented to something else. Again we see this with Agami, but it’s more like a company can be successful “enough” financially AND have an impact beyond that success on their community and be considered very successful (or at least, I hope this is the trend).
  3. Community is becoming more important than customers. This is both a long term trend (my opinion) and the flip side of #2 above. An example is the shift from buying things to subscriptions. It’s easy to understand why companies shift from revenue per transaction to lifetime value of the customer when that happens. Companies are going to look more at the lifetime value of their NFT holders, and that’s not a technology shift but a cultural one.

5 Considerations for Creating Your Tokengated Commerce Strategy

1. Think multichain, not individual chain

This is a complicated topic, but not really. Take a note of many of the largest tokengated commerce launches and you’ll realize that almost all are caveated — announcing an NFT launch on a particular chain.

On Shopify, only BCware has launched on all supported Shopify chains (Ethereum, Polygon, Solana, and Flow). If you’re trying to reach your community, you need to reach them in the wallets, and with the tokens and technologies that they’re already using.

Also, in a rapidly evolving space like blockchain, sentiments shift quickly.

What if you built on Ethereum and gas prices spike making your solution unviable commercially?

What if you build your solution on a proof-of-work chain and ESG concerns put a hold on the project?

These are real concerns that can cause months of delays to projects that don’t have a multichain perspective from the start.

2. Consider NFT utility

Consider how to add NFT utility to community members. Community is such an important part of Tokengated Commerce that you must consider token utility right from the beginning of your experimentation even though token utility is more about your business process than the technology implementation.

Will you airdrop NFTs to existing customers?

Will you provide advanced releases to NFT holders? What about exclusive offerings?

How will digital-physical products get bundled and launched? What will they look like in your inventory system?

How will NFT minting get associated with the real-world product in your inventory, or shipping and logistics systems?

Making two parallel products and manually connecting them via a “spreadsheet” isn’t a viable solution.

These questions lead us to the following strategy point…

3. Take your business process out of your app

Developing all of this complex integration in your app simply isn’t something that should be done. It becomes difficult to manage and change over time (and by difficult we mean expensive and bad for your user experience).

For decades the team at BCware has been advising companies on how to best integrate the value-chain of systems that support an application, into individual customer experiences. While one-off integration, say for example, tying your app directly into Salesforce for customer information, or into Polygon for low-cost NFT minting, can be faster up-front, it makes your business process brittle and inflexible.

We’re working with one customer, and their initial launch is expected to work one way. However, they fully expect that as they expand their offering the underlying process will change. Whether it changes because of their target customer demands, or it changes because they learn something and evolve their process doesn’t matter. We all know things change, and the best way to adapt to change is to decouple the underlying process from the experience you’re delivering to your customers.

4. Create an abstraction layer between your developers and tokengated technology

Let’s say you write your NFT solution and connect to OpenSea. Then there’s a new NFT market integration required. What do you do? Write directly to the new marketplace APIs? And when there’s a third… do you rewrite the same functionality in your app a third time and connect to yet another marketplace?

It’s better to create an abstraction layer that lets your developers do something once, and allows you to plugin to any marketplace as the space evolves.

Same goes with blockchains. And custody services. And CRMs. And messaging platforms. (You probably get the point by now so I’ll stop.)

An abstraction layer also allows a central IT organization to manage what underlying capabilities get exposed to developers so that developers adhere to corporate standards (say around security or compliance). When developers code directly to external services APIs (or even internal ones, but the point is more obvious for external APIs), what the do is often “invisible” to IT teams responsible for protecting the organization and insuring that costs can be managed over time.

This isn’t a new idea, in my career this is exactly what large financial institutions did when they adopted to middleware. They created their own abstractions on top to help their developers do the best job possible, while protecting their orgs from vendor lock-in, technology obsolescence, while providing developer guardrails for compliance with organizational policies. It’s important to do this.

It also allows your developers to experiment and migrate experiments to real-world applications more seamlessly.

5. Remember that integration is what makes this real

Your Tokengated Commerce project is not an island. It’s part of your e-commerce strategy. This means that the integration you’ve done for your e-commerce platform is also going to be needed for Tokengated Commerce. You need to ask yourself:

How are you going to connect all these chains and web3 services to your existing infrastcture like your CRM or logistics systems?

How will you connect into your messaging infrastructure to allow your tokengated platform to leverage existing internal tools such as custom dashboards or logging systems?

Too many companies have had marketing-led Tokengated Commerce projects that can’t scale to the enterprise because they didn’t have an integration strategy built into their program. This is an easily avoidable trap with a technology like the BCware Platform.

About BCware

It should be obvious that the considerations above are among the critical capabilities that BCware are bringing to the Tokengated Commerce space.

As part of our NFT App partnership with Shopify we are working with companies with which this advice has been resonating. Analysts agree, and all-in, it’s a pretty exciting time.

Definitely reach out if you’re curious about how BCware can help accelerate your Tokengated Commerce project and future-proof your investments in early experiments.

To learn more:

The Business Case For Blockchain

In today’s digital economy, superior operating models can only be achieved by optimally aligning innovative technology infrastructures with overarching business goals. Organizations are therefore in a perpetual search to simplify complex business processes with innovative technology and gain competitive advantage and flexibility. Blockchain and Distributed Ledger Technologies (DLT) represent a tectonic shift for global businesses, almost identical to the transformation driven by the Internet in the 90s.

The digital economy era’s business-to-business (B2B) relationships depend on sharing data and securing transactions in a complex world of global supply chains with numerous participants, services and integration points. However, despite the continuously evolving technology landscape since the Internet revolution, the B2B infrastructures have more or less been confined to the same first-generation core principles. Secure collaboration of business processes still requires complex application integration in an environment of multiple private siloes of data and manual interventions for reconciliation of information. Transparency, security and compliance remain key challenges while organizations are facing a data explosion and transaction volumes among a large number of untrusted parties during their digital transformation journey.

While enterprise business and IT executives recognize the enormous potential of Blockchain technology, they also need to rationalize and justify the benefits with minimum risk and business distraction. The most commonly cited hurdles for enterprise adoption according to recent surveys are:

  • Integration challenges with the existing IT infrastructure
  • Lack of internal Blockchain expertise and the associated cost of acquiring it
  • Concerns about current mainstream Blockchain platform dependencies and future interoperability issues
  • Uncertainty about scalability, governance of change and standards

But organizations cannot afford to miss out on the business opportunities that Blockchain technology opens up. Blockchain’s transformational nature sets the scene for new business models and relationships. As early movers capture the opportunity and the competitive advantage, followers will be seriously disadvantaged while they try to play catch-up.

According to a recent World Economic Forum/Accenture report, 51% of survey respondents identified “missing out on developing new products/services” as the number-one concern if they do not invest in blockchain technology in the near future. The other two most common answers were “missing out on speed/efficiency gains” (23%) and “missing out on cost savings” (15%).

We at BCware perceive Blockchain/DLT as a foundational enabling technology that needs to be completely transparent to the end-user. Enterprise IT staff do not need to know the internal working details of a traditional SQL database in order to put it into use. The same should apply to Blockchain as a distributed ledger. BCware’s Blockchain-agnostic approach allows us to use best-of-breed platforms while keeping an open door for future platform innovations without risking customer deployments for interoperability. With BCware team’s strong background as pioneers of enterprise integration, we provide a platform that integrates seamlessly with the existing enterprise IT infrastructure with near-zero effort on behalf of the customer.

The Blockchain-powered BCware Multi-Party Integration Platform is an enterprise-grade and industry-vertical agnostic Blockchain PaaS (Platform as a Service) to deliver on the emerging needs of the digital enterprise. Two key design principles govern the BCware high level architecture:

  • Plug-and-play integration with the existing enterprise IT infrastructure through loosely-coupled APIs
  • Blockchain platform-agnostic architecture through a fully decoupled and abstracted access layer

BCware’s approach therefore empowers enterprises overcome the major barriers in DLT adoption through the BCware platform architectural principles as depicted below:

Secure collaboration of business processes is at the heart of today’s very complex global supply chains. The management of these supply chains is a formidable challenge as the technology foundations of these systems have been stagnant around the same principles since the early Internet days. Blockchain offers an opportunity to solve the perennial issues that compromise supply chain effectiveness. A recent Capgemini survey identified the highest priority traditional supply chain pain points as:

  • Lack of traceability
  • Risks involved with multiple stakeholders
  • Lack of responsiveness
  • Abundance of manual processing
  • Regulatory compliance
  • Reconciliation burden

According to the same Capgemini survey, the following industry verticals are aggressively pursuing adoption Blockchain technologies:

Manufacturing

  • Supplier contract management
  • Holistic view of assets
  • Production tracking
  • Recalled goods tracking

Consumer Products

  • Tracking provenance
  • Monitoring asset conditions
  • Regulatory compliance
  • Warranty management

Retail

  • Blockchain-enabled market places
  • Preventing counterfeit products
  • Tracking returned goods
  • Blockchain-enabled loyalty programs

The BCware platform has been designed and implemented with a vertical agnostic approach. We have also paid close attention to market business challenges that are likely to be early beneficiaries of Blockchain along with the early adopter industry verticals.