One of the most important developments in the events industry took place in 2021 when marketing company Night After Night collaborated with Kings of Leon to release the first-ever new album in NFT format. They showed off the ability to offer unique fan rewards and a proof-positive ownership record of limited-edition digital goods.
Since then, the industry has been abuzz with excitement. But before diving into the possible applications of this new technology, and talk about its impact in the events industry, this article will cover the technical questions that most new adopters of NFT ask.
What is Ethereum Blockchain?
“Scalability is this idea of coming up with a Blockchain that can scale much larger than existing chains essentially by processing transactions in parallel. And moving away from this paradigm where every single node on the network has to process every single transaction.” - Vitalik Buterin
The technology that makes NFT possible is called Blockchain. Blockchain is a database that tracks the digital ownership of something. This database collects information together in groups, also known as blocks. Each block has a certain storage capacity and after it gets filled, it is chained onto the previously filled block.
This inextricably links every offer, every transaction, every transfer of digital rights in a long chain stored in this database. Thus, ‘Blockchain’.
No one person owns a Blockchain database. Instead, it is used in a decentralized way, with many mirrored nodes being available in the cloud. That way if one of the copies of the Blockchain has been manipulated or has an error, thousands of other nodes can be used as a reference and validation point, and the record corrects itself.
No one node within the mirrored network of databases can tamper with the information held within them. Therefore, the history of transactions in each block within Blockchain is irreversible.
How does Ethereum get involved? Ethereum is one of the most popular, lightweight Blockchain protocols. Its embedded cryptocurrency, Ether, is used in conjunction with these Blockchain databases. It is far faster and more efficient than the likes of Bitcoin, which is essential when every single transaction needs to be logged and become part of the chain. As a basis of comparison, Ethereum blocks are validated around once every 12 seconds. Bitcoin validates around once every 10 minutes.
More importantly, the open-source cryptocurrency has built-in Smart Contracts on Blockchain functionality. Because Ethereum contracts can do everything that typical computer programs do, they can be tied into complex concepts such as digital ownership, limited time and limited quantity sales, rights purchases or rentals, and even reversion of rights upon some kind of exclusive redemption process.
Every Ether transaction has an associated fee to prevent spamming the Blockchain in a denial of service. This fee, called ‘gas’ in Ethereum terminology, rises as the value of Ether itself rises.
In a nutshell, Ether is used to value a digital transaction at the point of exchange, while the Ethereum Blockchain can set the rules and parameters of the ownership of digital rights and objects.
What is an NFT?
“NFT tokens have gained such popularity because they’re easy for users to understand. They understand what they’re buying and what its value is. That’s what’s usually missing when one thinks about whether or not to invest in cryptocurrency. The popularity of NFT tokens shows that people are ready and willing to work with cryptocurrency.” - Alexander Althausen
NFT stands for ‘Non-Fungible Token. That means that whatever piece of digital property the token is attached to is unique. It can’t be automatically exchanged for an ‘equivalent’, like trading one Bitcoin for another and coming out even.
NFTs establish and protect the intangible concepts of digital ownership. This means an artist can do a limited digital run of an image, an album, or a book, and anyone who purchases it receives rock-solid proof that they are the new owner. That proof is enshrined in their digital wallet.
Because Ethereum Blockchain allows for complex contractual agreements, the artist can also attach a long-term royalty to the resale of the NFT. So every time the unique piece changes hands, a percentage of the new transaction price would be paid to the original artist.
How Are Ethereum Blockchain NFTs Being Used Right Now?
Mark Cuban, the Dallas Mavericks owner, is interested in making use of the commission aspects of NFTs. When a season ticket holder resells one or two of the most popular games in the season to deeply discount their attendance for the rest of the year, he would like a cut of the action:
“We’re trying to find a good option for turning our tickets into NFTs. We want to be able to find ways so that, not only can our consumers, our fans, buy tickets and resell them, but we continue to make royalty money on them.”
The Kings of Leon release was incredibly nuanced, and six lucky fans will benefit from their purchase… forever. The drop featured six ‘Golden Tickets’ randomly scattered throughout the NFT set. The band gave Golden Ticket holders four front row seats on each of their future tours, good for the venue of their choosing anywhere in the world, for life. It was an amazing ‘thank you to fans for embracing the Ethereum Blockchain-based sales medium.
Smart Contracts on Blockchain allow for guaranteed charity contributions, with no delay and no uncertainty. A portion of each Kings of Leon NFT sale was donated to the Global Relief Fund for Live Music Crews. The Blockchain aspects provide immutable proof of the donation for tax purposes.
How Can NFTs be Used at Events?
An NFT can be the unique representation of someone’s right to attend a real-life show… a virtual ticket, for example.
Because ownership is tied to a specific digital wallet once the transaction is recorded on the Ethereum Blockchain, that ticket is 100% safe. Nobody can copy it. There’s nothing physical to steal. Nobody can print out a barcode on a cleverly faked physical ticket and get that seat at the stadium on the event day. The owner is set in stone, and the only person who can redeem the NFT that represents their ticket is the person with the password to the correct digital wallet.
Image Source: NFT.Kred
But the application of Blockchain secured NFT tickets goes beyond mere security. They’re also anti-scalping measures. Transferring an Ethereum Blockchain-based ticket is more like an involved online transaction than a simple exchange of cash for a piece of cardboard in a parking lot. The original vendor can make the NFT non-transferrable. Or assign a 100% artist commission to the exchange. Or limit the resale price to the ticket’s original price. Or any number of validation measures could be automatically imposed upon redemption.
Speaking of assigning a percentage of commission to the artist, imagine an instant and perfectly accurate commission split when each ticket is sold. Every financial aspect of a venue contract can be encoded into the NFT, including who gets what money when a ticket is sold. There is no net versus gross issues, no skimming, no uncertainty about payment methods.
When used as a digital ticket for an event, an NFT can include any number of fixed rewards, or prizes randomly assigned to a certain number of seats for the event. Examples might include shirts, posters, limited vinyl prints, digital copies of the latest album, a complete digital collection of the artist’s works, or even additional event perks such as backstage access or an invitation to the afterparty.
Because NFTs are attached to a digital currency via Ethereum Blockchain, they can essentially be used as a method of crowdfunding. Imagine a local band moving up to a larger venue. They can ask fans to purchase NFT tickets in advance, allowing their Ether balance to grow in a form of secure escrow with the venue. As soon as the venue rental fee is reached, the dates of the shows could be established and sent out to local fans. Any additional NFTs sold would be pure profit for the band, up to the venue’s capacity.
Even larger acts can benefit from the crowdfunding aspects. For example, once a big act sells out, they could consider an additional night if the venue has availability. By selling NFT tickets that are fully refundable right up until the additional date is confirmed, they are essentially crowdfunding an extra performance. As soon as the artists and the venue are happy that the additional date is profitable, they can tell fans that the extra show is on, and that purchased tickets are valid and no longer refundable.
Finally, the venue itself can become involved in the NFT package. They can offer discount upgrades to NFT ticket holders if their skyboxes and private rooms are underutilized for an event. They can incentivize snacks or drinks, buy one get one free offer, and other venue-connected perks that might lead to upselling.
NFTs are the biggest thing to hit the Ethereum news stream in quite some time. Smart Contracts on Blockchain are a game-changer. The market impact is broad, impacting the events industry's financial, organizational, and artistic aspects. In addition to creating unique works of art that can be offered to fans and collectors alike, the digital ticketing options that Ethereum Blockchain NFTs offer artists, management companies, and venues are amazing.
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