Will NFTs replace the gold watch?
Will NFTs replace the gold watch?
Part of future comp or only hype?
Hello all 1378 FullStack HR readers!
If you have not signed up yet, join the curious and like-minded leaders and HR by signing up here:
Listen to the episode on Spotify or Apple Podcast
Hello friends ✌️,
January has flown by faster than a jet plane.
This may also be true for the topic we will talk about today. Maybe not quite as fast as January, but there's a slight chance that NFTs will be just like fidget spinners, something to remember ten years from now. Or it could be, and it certainly was last year, the next big thing. It was as hard to ignore NFTs previous year as it was to avoid getting Omicron.
But there were very few posts about what role NFTs might play for us as employers, even though there are some great use case examples. Let’s break those down today and look at what NFTs could become.
And the usual disclaimer: the point here is not to create hype around NFTs and scare you. You will be fine without NFTs in your comp mix. Do not panic.
NFTs?
Although you may have heard the term before, let’s back up a bit and break down what an NFT even is.
NFT is short for non-fungible token. Klart som korvspad, as we say in Sweden. Or for you English speakers: It's plain as a pig on a sofa.
Not really, is it?
Fungible is something that is interchangeable but has the same value either way.
Money is fungible. If you give me a dollar and I give you back another dollar, we have exchanged physical dollars, but we still have the same amount in our pockets. A dollar is worth a dollar; they look the same, and their value is the same.
The opposite is non-fungible. Take a painting, for example. If I gave you one of my unique paintings, there is nothing you could give me in return that would have the exact same value as my painting. And rest assured, that's not because my painting skills are strong. What you give me maybe similar in value, but they will not be the same and they are not permanent. Their value may change over time.
So that's the non-fungible part. But what about the token? Think of the token as a certificate of authenticity, like the paper that was sent with expensive watches, only this time it's digital. Stored and verified in the blockchain, these tokens are essentially proof of your ownership of a particular non-fungible item.
That's probably the shortest and simplest explanation I can give of what an NFT is. If you want to learn more, here is a great video that teaches you about NFTs and blockchain.
There are many different views on NFTs. Some claim that the whole thing is a big scam and that digital art can be easily copied, for example. This is true for most art. I can easily order printed versions of famous art. But I can never buy the history and feeling of owning the original. The same is true for NFTs.
It's been like the Wild West since it was announced a year ago, and the hype will probably continue for quite a while. When the dust settles, I think NFTs will be a staple for many of us.
Now let’s take a look at what the future may hold for NFTs and HR.
It perhaps goes without saying that this is more or less pure speculation. So far, there are only a few concrete use cases in which NFTs are being deployed by HR.
Celebrations
On May 19, Bitwala transformed into Nuri. To celebrate this event, Nuri gave all employees an NFT. As co-founder and chairman Ben Jones writes in his post:
For us, NFTs should be a digital medal or badge. Employees may give them to others or auction them off, but we assume (and hope!) that our team sees them as a memento.
You should really read Ben's full article, it's great!
Another example of this comes from car manufacturer NIO.
As reported by Cnevpost:
The NFT digital brooches issued by NIO include 15,500 pieces, including seven regular designs and one mystery design, according to Ma.
According to some Weibo bloggers, NIO will distribute both the physical and digital versions of this souvenir to its employees through a lottery this year.
The regular design of the NFT includes 3 tiers, with the lowest tier including three versions of 3,999 pieces each, of which each employee has a 25.8 percent chance of receiving one. Ma shared that he received one copy of this tier.
So even if we are super early, there are some companies that have already tried this technology. Interestingly, Chinese companies seem to be the pioneers. I say this because cryptocurrencies and NFTs are under heavy scrutiny in China.
That said, I think we will see more and more use cases here. An NFT that you can use to show that you participated in something or that you spent X number of years somewhere.
But then we will evolve.
A digital badge is good, of course, but what if that token was also tied to other incentives? What if, on the tenth anniversary, the token gave the holder a 0.5% raise every year? An annual meeting with the CEO? Extra paid time off?
Companies could also, as Nuri has done, allow trading on open platforms. You could always argue about the value of such items, but then again, people already collect all sorts of things. So why not employee badges? And if the company is very successful, collecting them could be worthwhile.
Incentives
Some of the above already involve incentives, but instead of an option program, NFTs could be created. The first 100 to join would receive a specific NFT instead of receiving options.
In the long run, these could not only have a monetary value, but also come with certain rights, such as voting rights on company decisions, invitations to board meetings, and profit-sharing. This borders on "just" a token, such as those created for DAO, but since this is uncharted territory, it's up to the organization to decide how to set it up.
Tokens as a means of incentivizing employees also provide a benefit to employees. If tokens are easily tradable, employees can earn liquidity faster than with stock options, for example. Of course, there are secondary markets for stock options, but for them to be truly valuable, the company must either go public or be bought out.
Tokens could solve this problem by providing liquidity to employees sooner and faster. This is not limited to tokens in the form of NFTs, of course, but it could be an option if the company decides to do so.
Is all of this legal? AFAIK it is not illegal, at least, but there could be implications that I do not know about, and new regulations will come. This is new territory, and as you can see above, there are not many cases yet where this has been implemented. If you decide to implement NFTs, there will likely be regulatory issues - but if there is a will, there is a way.