Non-fungible tokens: A guide to overcoming CX challenges for the NFT marketplace
The last few years have seen digitally savvy internet denizens go all in on non-fungible tokens, or NFTs for short. As a topic of conversation, NFTs entered the public consciousness emphatically, filling airtime on popular talk shows and podcasts, and even garnering endorsements by some of the celebrities you'd least expect. The frenzy brought a wider audience, and in turn, the value of these digital assets soared.
According to CNBC, in 2020, collectors and traders spent $82 million on NFTs; in 2021, that number skyrocketed to $17 billion. That's a 21,000% difference.
Despite that monumental growth, this burgeoning technology is still finding its place in the world. Trust, safety and security form the basis of some of the biggest challenges facing the NFT community. There are, however, ways for brands to counter these problems with enhanced security and robust education.
What are NFTs?
Like other Web3 technologies, non-fungible tokens are redefining the concept of ownership. As digital assets "minted" (made available for purchase) on the internet, NFTs promise buyers some level of exclusivity — whether that's a one-of-a-kind piece of art, a limited edition song or some other unique product or service that can be bought and sold online. The concept borrows from the cryptocurrency universe: NFTs rely on peer-to-peer transactions that codify the authenticity of ownership on a blockchain.
Though that much is clear, defining NFTs from a regulatory point of view is muddy. There's nothing in place to distinguish whether an NFT is a commodity, security, intellectual property or some other classification. The technology came on fast, and it'll take time for regulators to catch up.
Why are NFTs so popular?
In March 2021, the popularity of NFTs took hold after Christie's auction house sold a piece of record-breaking digital art. Mike Winkelmann, a graphic designer known in the online art world as "Beeple," created Everydays: The First 5,000 Days — a collage of 5,000 pieces of digital art that he'd been producing on a daily basis since 2007. It sold through Christie's for $69.3 million.
This was a game-changer for the digital art world. Soon, other artists were jumping on board. As the Creative Bloq website explains, "NFTs can be harnessed to create the projects mainstream media ignores because everyone can have access to raising funding and being in complete control of their message and art." This enables historically marginalized people — women, people of color, LGBTQ2S+ — to participate in what Creative Bloq describes as the "levelling of the playing field."
It didn't take long for brands with loyal fans to get involved, and as metaverse and blockchain usage continues to expand, more are certain to join in. From the Coachella music festival's NFT gift to all ticket holders (a seed that blooms into different types of flowers depending on the ticket tier), to Gucci's multiple NFT projects linking super-exclusive products to digital and physical assets, NFTs are proving to be an instrumental marketing tool.
While there's a lot of promise for investors in buying and selling (or even creating) NFTs, it's important to understand the common obstacles faced by customers, like threats and scams, and the ways in which they might be countered.
NFT threats and scams
The NFT market remains highly volatile, which means there are a number of security considerations brands need to take into account.
For example, scammers may use deceptive techniques to manipulate pricing. In wash trading, an individual creates a false impression of market activity by simultaneously buying and selling the same asset; and in shill bidding, an individual inflates prices by bidding on their own items. Regrettably, the list of market manipulation techniques is long.
Additionally, minting an NFT doesn't require the minter to own the copyright to that piece of art — a reality that creates an environment that's ripe for fraud. Of course, for the original, authentic creators, this is problematic to say the least.
Other common nefarious tactics take advantage of the lack of understanding about the intricacies of NFTs and cryptocurrencies in general. Be on the lookout for these scams:
Giveaway scam: Often described as a "rug pull," this is where a scammer promises a return, in this case an exclusive or otherwise valuable NFT, to those who send cryptocurrency to a provided wallet address. This return, of course, never materializes and the scammer gets away with the initial "investment."
In a similar vein, scammers may also take celebrity interview footage and present it as if the celebrity endorses a particular NFT. This "endorsement" is then used to run a giveaway scam, using the celebrity's name to reach a wider audience.
Social media hacks: When a social account is hacked and the attacker then uses it to message followers, often with a giveaway scam or similar.
Support scams: According to the CryptoLiteracy organization, 98% of people do not understand the basics of blockchain and NFTs. This means it's easy to fall prey to someone pretending to be a customer service agent who needs your crypto wallet's private key in order to provide support. These support scams can come via phishing emails, social media hacks and other social engineering methods.
Best practices to address NFT challenges
In order to conquer these challenges, it's important to look at best practices in three distinct areas when dealing with NFTs:
- Content moderation
The decentralized nature of NFTs actually makes them very secure. However, social engineering scams and platform security must remain top of mind to help NFTs overcome trust barriers. Education plays an important role in wider adoption, as does a requirement for basic cybersecurity best practices such as password hygiene and email encryption.
Wider security in the industry is a continual area of focus, too. The NFT Security Group is a collection of industry leaders looking to make NFTs more secure and put less responsibility on individual customers.
For platforms and others in the space, Know Your Customer (KYC) best practices are important for the promotion of security. KYC helps brands to comply with money laundering regulations by clearly identifying the users involved in a transaction. These practices will no doubt become more stringent as the NFT ecosystem develops.
Content moderation is also important in removing fraudulent listings. It's essential to educate those new to crypto on how to verify the authenticity of anyone that approaches them with an NFT offer that seems a little too good to be true. In this, there needs to be an element of DYOR (do your own research) placed back on the user. Brands can facilitate that by helping customers understand what they need to look out for and how to verify the authenticity of an NFT project.
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NFT customer support in the face of CX challenges
As an NFT marketplace, or a brand looking to explore the potential of NFTs, it's important that your customer care team understands the NFT landscape.
Plain-language resources on NFT risks and mechanics — for both customers and agents — are an effective way to heighten literacy and help people to recognize threats and scams.
Self-service support options such as FAQs or automated chatbots can help customers find tips on authentication or best practices for avoiding scams.
And, it's important that when they do speak to a customer care agent, they are met with patience and care. Because so few people know about the intricacies of NFTs, customers may need extra reassurance when it comes to their privacy. Equally, if someone does fall foul of a scam, an agent should handle the situation with empathy.
As is often the case with disruptive technology, NFTs offer both excitement and risk. To help customers walk that fine line, brands need to take emphatic steps towards education, security and support.