Can NFTs Support Organizing in the Future of Work?

Emerging technologies are constantly evolving and shape how we organize work within organizations. Building upon design principles of decentralized autonomous organizations (DAOs), our Point of View article explores how one application of blockchain technology offers novel avenues for organizing in the future of work. We argue that some degree of decentralization can enhance equality and fairness in traditional organizations.

Non-fungible tokens (NFTs) are digital assets based on blockchain technology that are increasingly being used for various applications in organizations. In our article, we explore how NFTs can be deployed in traditional, centralized organizations to introduce novel solutions to their fundamental problems of organizing. We examine the prospects, promises and hurdles of deploying NFTs in organizations to support their division of labor and integration of efforts and suggest how organizations can navigate its potential hurdles.

NFTs are rapidly becoming a forceful technological and economic phenomenon (Nadini et al. 2021). These tokens grant certifiable ownership of digital (e.g., image, video, audio) and real-world (e.g., land, artwork) assets, relying on an immutable digital passport recorded on a blockchain—a distributed ledger in which users can record their virtual transactions (Swan 2015; Wang et al. 2021). Unlike conventional cryptographic assets based on blockchain technology (such as Bitcoin and Ethereum), NFTs are not interchangeable, hence the term non-fungible.

Despite the tremendous enthusiasm around NFTs, their application within organizations has so far been limited to marketing and supply chain management. For instance, some firms are disrupting the current marketing landscape using NFTs to increase customer engagement (Mueller et al. 2022). Coca-Cola issued an International Friendship Day NFT to engage customers in shared celebratory moments through NFTs. Furthermore, given their digital footprint and data tracking capabilities, NFTs are disrupting the supply chain industry by reducing costs, eliminating bottlenecks, and fostering transparency in the supply networks.

We observe that NFTs have three unique properties that remain unexplored in organization design scholarship:

(i) Representativity: NFTs are a digital representation of digital or physical assets (Chandra 2022), which may comprise artwork, music, videos, event tickets, or luxury goods. NFTs can also be used as a digital certificate of ownership for intellectual property, such as patents, copyrights, work tasks, or ideas, which gives NFT holders the possibility to monetize them and control their usage.

(ii) Collectability: NFTs are unique digital assets, as they are non-fungible by design. By contrast, other blockchain supported assets, such as cryptocurrencies, are fungible and thus can be traded one for another. Since NFTs are unique, users can collect them and store them to benefit from both their economic and non-economic value. People may want to collect NFTs, as they may provide entertainment or reinforce their holders’ social status (Serada et al. 2021). NFTs’ uniqueness makes them desirable in certain communities (e.g., collectors of digital art such as Bored Apes NFTs, play-to-earn gamers) and implies that they have an idiosyncratic economic value that may potentially grow over time.

(iii) Exchangeability: NFTs enable the ownership of unique assets that are exchangeable in virtual markets. Chandra (2022) defines NFTs as “a digital representation of an asset that is written in a ‘smart contract’ […] and tradeable using digital cryptocurrencies […]” and “a system to claim, represent, store, and move value (i.e., within virtual worlds) using smart codes” (p. 1).

Relying on those properties, we propose that NFTs can contribute novel solutions to fundamental problems of the division of labor (i.e., task allocation, task self-selection, task ownership) and integration of efforts (i.e., incentive systems). Table 1 displays the dimensions of organization design that can benefit from NFTs, the design opportunities that this technology enables, the specific benefits enabled by NFTs’ unique features, and an example for each dimension. In the division of labor, NFTs can facilitate (sub)task allocation, improve efficiency in the self-selection of tasks, and enhance task ownership. For instance, organizations can use NFTs to facilitate (sub)task allocation. They can represent ownership of work tasks through an NFT. Hence, NFT holders can trade ownership of work tasks with other employees or external parties in a decentralized marketplace. It may help trust building among NFT holders and reinforce their feelings of belonging to specific work communities.

Furthermore, we propose that NFTs can benefit organizations’ integration of efforts by providing novel forms of incentives that reward original idea contributors and limit potential crowding out effects of monetary incentives. First, organizations can use NFTs to reward original idea contributors. They can represent ideas as NFTs and set up an idea generation and sharing platform. They may distribute royalties to original contributors for the successful sharing or implementation of relevant ideas (similarly to artists using NFT-enabled smart contracts to receive a royalty on their work every time it is sold). Second, organizations can deploy NFTs to complement monetary incentives. NFTs can be flexibly tuned to cover an entire range of incentives. For instance, employees can use them as status symbol within the organization or exchange them for alternative digital assets or material goods. NFTs can reduce reliance on monetary incentives for certain tasks, for instance the ones that require creativity or organizational citizenship.

 
Our framework reveals how NFTs enable some degree of “decentralization” in traditional organizational contexts, a novel research avenue that needs further exploration. Our paper contributes to scholarship on blockchain technology and decentralized autonomous organizations (DAOs) by revealing that NFTs can benefit traditional organizations without the need to fundamentally transform their structure.

Specifically, we add to recent work (e.g., Murray et al., 2021) that has examined how blockchain technology can mitigate or remove certain agency costs resulting from contracting with agents within traditional firms. Rather than reducing contracting costs between principals and agents, we posit that NFTs can mitigate horizontal coordination issues within and across teams and result in more efficient division of labor and integration of efforts. We invite management scholars to explore which design components of DAOs enabled by emerging technologies could be useful to identify novel solutions to key problems of organizing in traditional organizations. For instance, future work could explore how decentralized governance principles of DAOs could enhance democratic processes and organizational fairness in decisions about division of labor and integration of efforts (e.g., reward systems) in traditional organizations.

Would you like to dive deeper? Our recently published Point of View article at Journal of Organization Design is available open access here: https://doi.org/10.1007/s41469-023-00154-w

Table 1: NFT-Enabled Organization Design