How NFTs have become such popular digital assets

Name of Writer
Name of Institution

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 Table Of Contents
1 Chapter 1- Introduction........................................................................................................3
1.1 BACKGROUND......................................................................................................................3
1.2 PROBLEM STATEMENT.........................................................................................................4
1.3 RESEARCH AIM AND OBJECTIVES.......................................................................................4
1.4 RESEARCH QUESTION...........................................................................................................4
1.5 RESEARCH SIGNIFICANCE....................................................................................................4
1.5.1 Justification.................................................................................................................5
1.6 STRUCTURE OF STUDY........................................................................................................5
2 Chapter 2- Literature Review...............................................................................................6
2.1 NFT.......................................................................................................................................6
2.2 NFTS HAVE BECOME SUCH POPULAR DIGITAL ASSETS......................................................6
2.2.1 Forms Of Nft................................................................................................................7
2.2.2 Economic Growth Of Nft.............................................................................................8
2.2.3 Emergence Of Digital Trading Markets......................................................................9
2.2.4 Buying And Selling Of Nft...........................................................................................9
2.3 ROLE OF NFT IN E-COMMERCE.........................................................................................10
2.3.1 Product Bundles........................................................................................................11
2.3.2 Digital Duplicates.....................................................................................................11
2.3.3 Pre-Launch Access....................................................................................................12
2.3.4 Collectibles................................................................................................................12
2.3.5 Loyalty Programs......................................................................................................12
2.4 OPPORTUNITIES NFT COULD BRING TO THE FUTURE OF E-COMMERCE..........................12
2.5 THEORETICAL FRAMEWORK...............................................................................................13
References.....................................................................................................................................15

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 1 Chapter 1- Introduction
Owing to growing role of internet networking, the demand of online social and video games has
also spurred as internet is a new electronic decentralized ecosystem of network structure. Thus,
the role of virtual coins and non-fungible tokens (NFTs) are a natural extension also grew as
digital type of assets which have their paramount implications for the development of e-
commerce commodity trading technology in the future (Wang et al., 2021). According to
Browne (2022), the growth of NFT witnessed surge during 2021 on YoY basis as trading of
NFTs tapped $ 17.6 billion. Major companies have also welcomed NFTs as digital assets as
Encila (2022) has underlined that NFTs are expected to deliver booming growth driven by
mainstream influencer involvement, gaming communities and rising demand of digital networks
with CAGR of 35% by 2027. The study tends to highlight the popularity of NFTs as digital
assets to feature growing potential of NFTs in Ecommerce.
1.1 Background
Non-fungible tokens (NFT) are becoming increasingly popular as consumers shift their spending
priorities from real items to virtual games and apps due to the proliferation of digital
entertainment (Popescu, 2021). Kevin McCoy, a digital artist, created the first NFT in 2014 with
the name Quantum to the Namecoin blockchain. After this, several NFTs were created across
various ledgers and NFT went mainstream during 2017 to 2020. Developers were able to make
their own tickets because of the widespread adoption of token standards (Dash, 2021). Nadini et
al., (2021) have explicated surge of virtual games that allowed users to adopt, breed, and sell
virtual cats called Cryptokitties was a tremendous hit. As a result, several blockchain-based,
open-world gaming platforms have been introduced to the NFT market. Muthe et al., (2020)
have appraised that NFT gained notoriety in the gaming industry before expanding into the
digital art and music industries, where it also found success. In traditional physical art, it’s
impossible to forge the artist’s work because to the subtleties of their work, but duplication
becomes a concern when it comes to digital art (Popescu, 2021). Despite the fact that digital
goods are more difficult to monetize, NFT has put an end to the practice of duplicating digital
artwork by encrypting it with Blockchain technology. NFT is using block-chain technology to be
able to indisputably verify who has the original of a digital product (assets), so the market is
buying and selling their virtual ownership (Bsteh nad Vermeylen, 2021). However, the
technology upon which NFTs are built is where much of their value is placed, rather than in the
NFTs themselves.
Today, NFT is not just restricted to art, music, and gaming, but it is trending for any potential
real-time asset. Despite various misgivings in the past about the success of NFT, it stood its
ground and became a big hit. NFTs are not going anywhere and will continue to play a major
role in shaping the artistic landscape. Therefore, the study tends to explicate how to make NFT
technology more potential and possible in the future of e-commerce and whether it can create
more business space as an e-commerce company by combining the current technology and
business environment.

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1.2 Problem Statement
As the current generation spends more and more time on social media and the internet, the NFT
market is taking over a big part of the economy, and with it comes the desire to have a "asset" of
one's own online, which presents opportunity and promise for the e-commerce sector (Wang et
al., 2022). However, NFT ownership becomes more difficult and complicated. The present
tendencies of going towards Metaverse is also expected to aid in the development of NFTs
(Kiong, 2022). But, NFT is still in its infancy and its progress mostly depends on people’s
comprehension of its impact on diverse fields and NFTs are expected to deliver growth and
potential to grow (Choi and Choi, 2022). The future of NFTs in Ecommerce is bright which
complement consumers to embrace virtual experience of online retailing in metaverse, thus the
study tends to explore the growth potential of NFTs in Ecommerce due to digital growth.
The study intends to explore the significance of NFT growth and how it can contribute to
ecommerce by underlining challenges and potential of growth. The study further unveils future
potential of NFT in digital ecommerce market growth. The study will shed light on how brands
can expand their digitally oriented customer base through NFT on ecommerce platforms of
Metaverse.
1.3 Research Aim and Objectives
The study aims to explore the role of NFTs in Ecommerce and future potential of NFTs, thus
study tends to accomplish following research objectives,
 To explore the available literature on NFT and its growth
 To assess the relationship of NFTs with E-commerce
 To understand the relationships of NFTs in future and highlighting pros and cons
 Forecast the potential opportunities of NFT and e-commerce in the future with the
available information
1.4 Research Question
The business uses of NFT today and its future development and use in an e-commerce
environment is likely to be explored where study aims to address following research questions,
1. How NFTs have become such popular digital assets?
2. How does NFT work in ecommerce?
3. What opportunities and potential NFT could bring to the future of e-commerce?
1.5 Research Significance
The study will likely to shed new light on NFT and the use of new blockchain technology for
huge e-commerce firms. As people will have a better grasp of the technology in future and the
irreplaceability of NFT as a result; this research paper will help to better explore the commercial
and technical ties between e-commerce and NFT, which is important (Popescu, 2021). Due to
growth of virtual digital retail platforms, the study will likely to complement significance of
virtual platform that trades NFT, providing buyers and sellers with equal power and formal
processes. The significance of this study's topic, then, rests in the question of whether or not an
e-commerce firm, by taking advantage of the state of the art in both technology and business, can
expand its market share in the future.

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1.5.1 Justification
There may be some gaps in the literature or practical issues along the way due to the fact that
NFT is a new electronic networking technology that has only emerged on the blockchain in the
last two years. The possible upside of NFT study is that it may open up new doors for the
development of the e-commerce ecosystem in the future. In the context of Web 3.0, it will also
provide light on the evolution of new technologies and deepen our familiarity with e-commerce
and NFT (Rehman et al., 2021). In the context of NFT, there are three parties involved in an
online transaction: the consumer, the merchant, and the platform. However, the interests of
digital products are not yet fully protected, and neither are the related rules and regulations, in
contrast to the old e-commerce system of the physical economy. However, it lacks the real
economy's convenient after-sale service, including the option to return or exchange purchased
items. This paper will develop an insight to the NFT as online trading platform, discussing its
security, its flaws in comparison to the standard e-commerce paradigm, and the empowerment it
will bring to the status quo of e-commerce.
1.6 Structure of Study
To develop an insight to NFT and their future potential in virtual Ecommerce world, the study
develops an insight to research background, its rationale and setting objectives in Chapter 1.
Furthermore, chapter 2's literature analysis delves even deeper into the topic of economic growth
of NFT, emergence of digital trading markets, ecommerce and NFT relationships, consumer
rights, real economy and virtual economy to demonstrate what has already been studied.
Therefore, the study tends to bridge the literature gap as Paul and Criado (2020) have signified
literature review for developing insights to key terms and variables. Furthermore, to signify the
future potential of NFT and its relationship with Ecommerce will be further explored by
following the research methodology of chapter 3. The methodology Chapter 3 will likely to
highlights methods of data collection and sources of data collection to accomplish research
objectives. In-depth data analysis and exploration of this topic are presented in Chapter 4 of the
study where data will be collected and analysed as per research aim, objectives and research
question. In Chapter 5, the study will draw some final conclusions and making some
recommendations for future research, while highlighting some of the study's limitations and
future research areas.

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 2 Chapter 2- Literature Review
This chapter discusses the findings of previous studies and helps to identify the research gap
which this study intends to fulfil. This chapter helps achieve the objectives of the study.
2.1 NFT
Non-fungible tokens (NFTs) are a type of digital asset that can only be traded for other NFTs,
and this asset is recorded on blockchain. The NFT can be associated with a particular digital or
physical item including but not limited to, art, songs, and sports where digital ownership
highlights permission to use the asset for a stated purpose (Forbes.com., 2022). Ante (2021) has
signified that NFTs can be built by anybody where files of various digital formats, including
images, videos, and audio recordings, are frequently referred to in NFTs. However, the legal
rights transferred by an NFT are not always clear, despite claims to the contrary by proponents of
NFTs (Wang et al., 2021). When it comes to copyright, IP rights, or any other legal claims to a
digital file. NFTs act like cryptographic tokens, but unlike cryptocurrencies such as Bitcoin or
Ethereum, NFTs are not mutually interchangeable, and hence are not fungible. NFTs are formed
when blockchains concatenate records with cryptographic hashes onto preceding records,
forming a chain of identifiable data blocks (Dowling, 2022).
2.2 NFTs have become such popular digital assets
NFTs which have grown in popularity as a result of the success of cryptocurrencies are
contentious subjects and trade for extravagant prices. NFTs are digital assets that are individually
unique, easily exchangeable, and mostly housed on the Ethereum blockchain. One of the key
differences between an NFT and a cryptocurrency is that each NFT cannot be exchanged for any
other asset in terms of identity, value, or function (Capco, 2022).
From the world of art to massive enterprises and even within the heavily regulated capital
markets sector, the technology is predicted to fundamentally change the nature of digital
ownership. NFTs have the power to fundamentally alter trade finance as well as the lending and
securities markets. Investment notes, for instance, can safely move across the blockchain, giving
transparency, enabling frictionless settlement, and boosting liquidity. Smart contracts (SC)
simultaneously do away with middlemen, lessen counterparty risk, and uphold the integrity of
deliverables (Capco, 2022)
NFTs have seen price increases across various collections and a resurgence in popularity, with
2021 sales reaching $25 billion (Capco, 2022). Initiatives like the Metaverse will soon take on a
new form, sponsored by numerous NFTs projects, as virtual reality develops and blockchain
becomes more widely used. The bond market, however, is a crucial component that the NFT
ecosystem is missing. Most NFT users exclusively use their NFTs to interact with specific
platforms or play specific games. You cannot stake all NFTs, unlike other crypto-currencies.
However, several NFT-backed loan marketplaces allow borrowers to pledge assets as collateral
for loans, and lenders can submit bids to lend money in exchange for interest. According to
Capco (2022), a normal transaction includes the following steps the owner of NFT associates
their wallets to the platform and the possessor selects the coin they tend to get against the
transfer and collateral their assets through SC and signing the transaction with the associated

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wallet. The platform also calculates the maximum loan limit of borrowers based on the selected
terms of loans. The lenders are interested particularly in NFTs to make offers against particular
collaterals until there is a settlement in the deal. Moreover, the asset of NFT is locked until the
loan is repaid completely (Chalmers, 2022).
2.2.1 Forms of NFT
Although the technical vocabulary used to describe them can make non-fungible tokens (NFTs)
sound intimidating, it's important to remember that NFTs are simply a proof-of-ownership
certificate for a single, irreplaceable piece of data that is kept on the blockchain (digital ledger)
(Kim, 2021). Most people think of NFTs as a form of non-material art, but there are actually
several varieties of NFTs.
 Artwork
The digital ledger on which the artwork is housed issues a public certificate of authenticity and
ownership (Vasan et al., 2022). The digital artwork "The First 5000 Days" by artist Beeple sold
at a Christie's auction in March 2021 for a record-breaking $69.3 million (NFT Now, 2022).
 Video-games
Players participate in these video games based on NFTs in the hopes of winning
cryptocurrencies, digital assets, or additional NFTs (Fowler and Pirker, 2021). Axie Infinity was
the first NFT video game asset, and it paved the way for the meteoric rise to fame of other NFT
video games like CryptoKitties, Gods Unchained, Sorare, etc.
 Music
Music has been recorded and circulated on records, cassettes, CDs, and digitally for many years,
making it a fungible good. In recent years, however, NFTs have become increasingly popular as
a means for musicians and DJs to monetize their creations, with some artists raking in millions in
just a few short hours (Brown, 2021).
 Collectibles
NFTs can be likened to digital trading cards in that they allow users to acquire, exchange, and
retain digital representations of tradable items. Some of them even fetch over a million dollars
since they are so close to the originals in quality. Businesses using the NFT market are not
limited to selling only trading cards, but rather any form of collectible object (Gupta, 2021).
 Virtual Fashion
For use in digital avatars and video games, virtual fashion refers to apparel and accessories
designed specifically for use in such mediums. Designer brands like Louis Vuitton and Burberry
have released NFT clothing for virtual characters, complete with items like kimonos and
sneakers. To that end, they are creating one-of-a-kind handbags, video games, haute couture, and
more for sale on NFT platforms . Using NFT fashion helps designers expand their businesses in
exciting new ways. (Khelladi et al., 2021)

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 
 Meme
Popular memes like "Nyan Cat," "Bad Luck Brian," and "Disaster Girl" are among those on the
list, which earn anywhere from $30,000 to $770,000 each year. The sale of the Doge meme NFT
set a record at the time, bringing in a staggering $4 million. As more individuals seek for novel
and interesting ways to make money in 2022, NFT memes are only going to grow in popularity
(Chaturvedi, 2022).
2.2.2 Economic Growth of NFT
It is possible that NFTs will lead to a more open and competitive market for products and
services (Elzweig and Trautman, 2022). Furthermore, by providing a safe and decentralized
means of monitoring asset ownership, they may aid in the fight against fraud. With NFTs,
investors may buy and sell digital assets with multiple applications.
 Blockchain
The term "blockchain" refers to a specific type of distributed, attached-only database that stores a
chain of entries that are both connected and secured via the use of cryptographic hashes. Data
saved in a blockchain becomes immutable after consensus has been reached among the network's
nodes, rendering any further updates null and void (Bamakan et al., 2021). Ethereum is the most
popular blockchain platform utilized in NFT schemes because it provides a safe setting in which
smart contracts may be executed (Ante, 2022). In addition, many solutions no longer use in-
house developed blockchain platforms or chain engines to power their unique software.
 The Smart Contract
Szabo first proposed the concept of a "smart contract" to facilitate rapid, verifiable, and
automated digital negotiation. In order to provide complex functionality and carry out full state
transition replication via consensus procedures, smart contracts based on the blockchain must use
Turing-complete scripting languages (Das et al., 2021). Blockchain-based smart contract
platforms are widely used by NFT solutions to guarantee the correct execution of time-sensitive
transactions.
 Location and Exchange
The two most fundamental ideas in blockchain technology and cryptocurrencies are the
blockchain address and the blockchain transaction. In order to send NFTs to another address, the
owner must verify possession of the private key and use a valid digital signature. Sending a
transaction that uses smart contracts is a straightforward activity often carried out with a
cryptocurrency wallet (Wang et al., 2021).
 Encoding of Data
Common practices involve encoding numerous files into either a space-efficient compressed
format or an uncompressed format to preserve original quality and resolution. This means that
these guidelines must be adhered to in the raw NFT data.

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2.2.3 Emergence of Digital Trading Markets
Digital platforms are expanding, releasing new products and services, and attracting new users
because of the rising number of people engaging with the financial markets. More and more
modern investors are looking for convenient, all-in-one solutions to manage their financial
affairs (Focus Economics, 2022).
2.2.4 Buying and Selling of NFT
In terms of fostering personal connections and displaying civic engagement, NFTs directly link
social and monetary capital. There is a built-in verification system for the data that is
permanently stored on the block chain. As a result, audiences may interact with their favorite
creators, acquire physical copies of their works of art, and become members of the communities
in which those works are featured. Buying NFTs, also called "Investment-as-a-Status," is seen as
a good way to increase one's social capital through making connections with other people in the
cryptocurrency industry.
 Buying
It's important to remember that collectors rarely acquire the copyright to the content they acquire.
The author of the content keeps the copyright because of the technology, and most NFT
platforms allow the creator to collect royalties when the object is resold (Mazur, 2021). The most
valuable aspect of NFTs is the tokens collectors purchase to associate their names with the works
of art on the blockchain created by their favorite content creators. Thus, buying NFTs allows
collectors to hold original things recorded on the blockchain that acts as proof of ownership.
 Selling
Selling newly minted NFTs is the preferred method for content creators, while selling previously
purchased and tradable NFTs is the preferred method for collectors. Collectors need a few things
they undoubtedly already have in order to sell NFTs: an account on the NFT marketplace of
choice, a crypto wallet linked to it, and some cryptocurrency utilized on the marketplace.
Collectors can sell their NFTs by visiting their profiles on the respective NFT marketplaces and
selecting the NFTs they wish to sell (Fowler and Pirker, 2021).
According to Chohan (2021), NFT is a digital asset that helps bans to achieve profits. Numerous
decentralised financial studies have discovered a growing demand to boost NFT liquidity,
opening up prospects for banks and, conversely, providing collectors with fresh options to raise
their NFTs. Many NFTs on the market are relatively illiquid. Pricing is difficult for NFTs since
different customers are prepared to pay various prices for the same thing. Banks might create a
market where NFT owners would mortgage their pieces or collections of NFTs in exchange for
cryptocurrencies or fiat money to assess the fair worth of NFTs.
When both parties agree to the terms, SC may be used to effectuate the loan and deposit the NFT
from the borrower's wallet into an escrow account run by the bank. Banks may assist collectors
and investors in several ways, including improving liquidity and supporting fair pricing for
NFTs, which would increase portfolio diversity and open up new NFT markets, by offering a
safe market for NFT owners and using their NFTs as collateral. By offering a new class of

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products, like the collateralization of digital assets and the usage of margin and transaction fees,
banks can benefit from decentralised ledger technology (DLT) while growing their revenues
(Wilson, 2021). The implementation of NFT use cases will aid in the development of the bank's
business strategy and help it stay ahead of fintech and other rivals.
Moreover, the artists in the business of NFT are getting the rewards of their creativity as the
records to depict that 257 digital assets creators have made at least $1mn in sales in the last thirty
days (Bouraga, 2021). According to Nadini et al. (2021), the sales of NFTs are presently
skyrocketing as financers look for novel opportunities and assets that derive value from non-
fungibility that raises their rarity. Ali and Bagui (2021) shows that digital assets are
strengthening their position in the collection market, which is anticipated to continue growing in
2022 after a strong year of sales in 2021. Due to the creation of several novel use cases,
particularly in the area of blockchain games, NFTs are also gaining ground. Blockchain gaming
surpassed the $1 billion thresholds in 2021, according to studies, and researchers believe that
NFTs will accelerate blockchain usage. The ability of collectable objects to link the real and
virtual worlds is another factor that is anticipated to be a major driver of their adoption (Rehman
et al. 2021). Additionally, the collectables industry will draw in additional merchants. As NFTs
proliferate, new retail operators will see them as catalysts for cross-brand alliances. Such
connections will go beyond tangible and intangible products.
The creativity potential of NFTs is huge. Moreover, virtually any digital asset can be developed
into one. However, the renowned NFTs are regarded as digital collectables and art. The
technology is greatly flexible and that means anything can be tokenized like tweets, in-game
assets, books, songs, and videos. The digital assets are making a splash on the scene of the
auction for a particular time and the reports are showing a rising value. The greatest grossing
artist to date is Pak, whose assortment raised around $283mn (Fintech Magazine, 2022).
Additionally, the highest-selling pieces sold for around $1.6mn (Fintech Magazine, 2022).
Beeple is another renowned creative of NFT whose artworks are sold for around $173.2mn.
However, the greatest sale to date for a sole NFT is Beeple fetched around $69.3mn (Fintech
Magazine, 2022). Tylerxhobbs ranks third and Dmitri Cherniak ranks fourth generating greater
than $100mn sales (Fintech Magazine, 2022).
2.3 Role of NFT in e-Commerce
According to Cornelius (2021), with subtle indications, the world of digital popularity has
transformed. Every organisation is interested in NFTs because of their potential and advantages.
It is asserted to significantly advance the sector of digital trade. In other words, NFT is a
platform for technology that you can use to prove your ownership. On the blockchain, non-
transferable tokens are produced and kept in the decentralised ecosystem. Its amazing versatility
has been extremely beneficial to numerous digital industries. Similar to this, proponents of
blockchain technology are developing a plan to include NFTs into the e-commerce industry.
Because there is a need for NFTs in e-commerce networks, several businesses are interested in
developing them.
E-commerce is a platform for trading that enables individuals to buy and sell goods using digital
platforms like the Internet. The use of NFTs in e-commerce platforms is a hot topic in the world

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of cryptocurrencies. Different e-commerce systems have started as a result of the development of
NFT applications. You should engage a top NFT Marketplace developer to integrate NFT into an
e-commerce platform because we have a lot of expertise in doing so. The technology itself
appears to be hindered by the incorporation of NFTs into e-commerce portals. The NFT is a
virtual currency, and the e-commerce network is focused primarily on the trade of real goods,
therefore the two are entirely at odds with one another. However, this merger process gives
businesses some new revenue opportunities (Dash, 2021).
Trading goods and services on an e-commerce platform involve many third-party organisations
because it operates in a centralised ecosystem. These intermediaries have significantly distorted
the commission distribution. Third parties are not allowed to be involved when using NFT. In
recent years, NFT use has reached astounding heights. Using a virtual currency is a prevalent
trend in the business world. There are excellent revenue opportunities for business models with
incorporation. Since real things are delivered right away after purchase, clients value this
experience more than e-commerce sites, where orders are delivered several days later. Offering
the NFT version of the purchased asset offers consumer fulfilment and enjoyment. This tactic
has been employed by numerous multinational firms to boost e-commerce earnings. For instance,
the multi-billion dollar sneaker company Nike has started utilising NFT in its online store.
CryptoKicks was the name of this. This allows customers to receive the NFT version of the shoe
they ordered. According to Zheng et al. (2022) NFT is very useful in e-commerce and there are
different ways in which NFT has played a key role in doing business through e-commerce
(Grankvist and Moustakas, 2022).
2.3.1 Product Bundles
According to Sestino et al, (2022) bundling NFTs with other products is an excellent approach to
creating NFTs and offering them to the customers. A person can add an NFT to a customer's
purchase, for instance, if they purchase a specific item or spend a certain amount of money in the
shop. There are two advantages to bundling for the company. One benefit is that it makes people
aware of NFTs and interested in the collectables the company is making. Additionally, it enables
the online store to immediately satisfy customers. Customers have to wait to receive their
purchases and it is e-commerce's drawback. The customers will, however, find something they
can interact with and share with their friends and family the moment they combine NFT with an
online purchase. Customers will be pleased, and it will spark more enthusiasm for selling the
goods.
2.3.2 Digital Duplicates
The metaverse already exists and is expanding. In the metaverse, people purchase land, wear
clothing and accessories, and do other things. In the metaverse, all digital assets are NFTs.
Companies that are forward-thinking and want to benefit from the early adopters of the
metaverse have started providing digital copies in addition to client purchases. The e-commerce
brands should give consumers a digital pair of shoes in the form of NFTs along with the pair they
purchase online, for instance, if they sell shoes. Global shoe and clothing companies like Gucci
and Nike have already started to do this (ENACHE, 2022). Digital copies offer rapid online
client satisfaction, much like bundled products. However, by providing digital replication, the

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company can also access the metaverse's market for digital assets. Last but not least, the e-
commerce brands can offer NFT products to metaverse subscribers and increase their sales
revenue once the brand recognition is sufficiently high.
2.3.3 Pre-launch access
NFTs are a great way for e-commerce businesses to promote their new products and provide
customers unique access before the official launch. Pique consumers' interest in the goods and
services before they go on sale is a tactic that all businesses are interested in. Companies can
utilise NFTs to provide customers with a preview of future products, provide promotional
materials, and generate excitement for upcoming product launches. It is now simpler than ever
for enterprises to use NFTs ingeniously to introduce new products because they are no longer
completely dependent on NFT markets to plan and sell these digital assets. Successful businesses
have created NFTs around product launches and promotions using Shopify's new NFT features
(De Haro, 2022).
2.3.4 Collectibles
To benefit from the collectables, the company needs a well-known brand and a solid
consumer base. To celebrate special occasions and honour the customers and devoted followers,
collectable NFTs can be made if the company already has strong brand recognition.
Unfortunately, the majority of tiny e-commerce companies lack the brand recognition necessary
to attract clients with souvenir collectables, but it does not imply the e-commerce brands should
not try (Goforth, 2021).
2.3.5 Loyalty programs
Ingenious ways to power loyalty programs can be achieved with NFT technology. The most
obvious solution is to reward devoted clients with free NFTs in exchange for their ongoing
business. Smart businesses, however, are utilising NFT technology as the foundation of their
loyalty rewards program. Many businesses offer loyalty cards that are charged each time a
consumer makes a purchase, similar to coffee shops and cafés. NFT technology can also be used
by e-commerce businesses to design digital loyalty cards for their clients. Digital loyalty reward
cards improve customer satisfaction, reduce costs for the company, let customers store all of
their rewards in one location, and they can even be used interchangeably for other products and
services (Sestino et al. 2022).
2.4 Opportunities NFT could bring to the future of e-commerce
According to Vijayakumaran (2021), there are several opportunities NFT can bring to the future
of e-commerce and in this way, e-commerce sales will be boosted. The first opportunity which
will contribute to the e-commerce industry is a reduction in customer lifetime value. Customer
loyalty is what every eCommerce brand focuses on. eCommerce brands can bound NFTs with
their offerings to attract more customers. These NFTs could unlock rewards and special benefits.
They can also allow buyers to get early and exclusive access to new merchandise, offers,
discounts, features, and new products. Getting a buyer for NFT can be a bit more expensive than
getting a buyer for a T-shirt they can find that anywhere. But the risk pays the reward, there is a
good chance that the NFT buyer will move up the value ladder of the business.

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The other opportunity is product authenticity verification. NFTs are distinctive, non-
inflammatory, and most importantly traceable because they are built on Blockchain. A crucial
necessity for multi-tier, multi-site production nowadays is traceability. It enables visibility and
satisfies consumer demands for a guarantee of transparency and quality. A system for
establishing technology-based trust between supply chain participants is proposed in a case study
from the textile and clothing industry, but it may be adapted to any other and the blockchain can
be disseminated.
In future, the NFT will help e-commerce businesses to work on inventory management.
According to Wang et al. (2022) as NFTs are assets that can be uniquely identified, data storage
and inventory management are made simpler. Every moment a new transaction occurs,
inventories are instantly updated. The network's affiliates can instantly track total stocks and
missing assets.
Zhao and O’Mahony (2020) argued that it displays that the brand is at the forefront of
contemporary trends and speaks the same language as current and new followers, the launch of
NFT can enhance the company's reputation within the existing consumer base while also
drawing in a completely new generation of viewers. Accepting these active communities can
give brand projects credibility and acknowledge them as a force to be reckoned with in the
modern era, increasing the effectiveness of reaching target audiences (Sestino et al. 2022).
Another way NFT has transformed future e-commerce is through the concept of exclusivity used
by NFTs is another important benefit (Allen et al. 2022). Instead of displaying certificates of
authenticity from the makers to highlight how unique or unusual the asset may be, buyers of rare
NFTs specific to a certain item might point their viewers to a digital signature. This feeling of
exclusivity can be especially useful when customers wish to add to or grow their collection and
communicate their intentions to one another (Chohan and Paschen, 2021). Jewellery and other
pricey things might benefit greatly from this since the exclusive gives them the chance to
comprehend the transaction more thoroughly than they otherwise might. This is especially true
when it comes to commissions for original artwork or presents, where the buyer would desire
written documentation of the specific transaction they made.
2.5 Theoretical Framework
The theory that is used in this study is the transaction cost economic (TCE) theory. TCE has
shown to be a valuable tool for gaining a deeper knowledge of the structure of transactions and
how economic activity is organised more generally across a variety of industries and institutional
contexts. Digital transactions were not even a thought when ICT was initially created, some 50
years ago (Joy et al. 2022).
TCE contends that market mechanisms, provided production incentives are reasonable,
are best suited for non-specific and easily characterised transactions between trading partners.
The hierarchy is improved by vertical integration, which complements the mandate and power of
the renegotiation to resolve problems rather than the markets, but as assets become more
specialised and redistributed to assets more easily and as transaction complexity rises (Bodó et
al. 2022). This is due to the possibility that the participants to a market-based transaction will

13
behave opportunistically and re-allocate the rents from the intricate and specialised transaction
using their trading partners. This is particularly true if it costs a lot to keep an eye on the other
party's behaviour or the attributes of the product or service being traded. However, market-based
factors like rivalry and reputation can aid in reducing the dangers of free riding. The supplier and
the buyer may band together within the organisation under predetermined ownership to reduce
these risks. Benefits of trade high-power incentives for coordinated adaptation are involved when
the transaction is transferred from the market to the firm. The most important prediction is that
vertical integration will most likely be flat as asset specificity and transaction complexity rise.
Additionally, the deal is more likely to be planned within the organisation when asset specificity
is coupled with a high level of uncertainty (Sayem, 2022). This theory is used in NFT because it
is based on e-commerce and the digital economy, which is relevant to the study.

14
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