NFT tickets — A Realistic Look At A Big Trend

This is a translated version of this article. The original version in German is available here.

A new buzzword is making the rounds in the event ticketing industry: NFTs! This new type of tickets based on the blockchain is supposed to solve many challenges of the ticketing world.

What is this technology really capable of? We took a close look

NFTs — what is it actually?

NFTs are a specific type of digital document. The abbreviation stands for Non-Fungible Token.

An NFT has properties that distinguish it from other digital formats: It is non-substitutable and non-copyable. Therefore, an NFT can only belong to one owner at any specific moment.

A comparison: You have some bills and coins in your wallet. If you have to pay an amount, you can use any combination of those items. It doesn’t matter which single coin or bill you choose. All of them are interchangeable. If, on the other hand, the Mona Lisa were stolen from the Louvre, it would not be possible to replace it with a copy of the same appearance without loss of value. It is a unique, non-fungible piece which cannot be replaced.

An NFT, like the Mona Lisa, can only ever have one owner. And therefore behaves differently from other digital documents. If you send a photo from your cell phone camera to a friend in the best possible quality, both of you will end up with exactly the same document. But an NFT behaves like a physical object. If you send an NFT to your friend, they will have this document. You no longer do. It now belongs to someone else.

This behavior is made possible by a blockchain. In simplified terms, a blockchain can be imagined as a notebook in which a list is kept of which object currently belongs to whom and by whom it was transferred. When a page is full, it is copied and distributed to many other people. This makes it impossible for someone to change the entries in their notebook later on. This would be revealed when comparing with the other copies, which are kept and tracked decentrally by different people in different places.

In reality, of course, blockchains are not run on paper, but on computers. There are different blockchains, which all have their own characteristics, strengths and weaknesses. It requires deep technical knowledge to recognize and understand the differences.

Integrated payment system

The accountants who update the notebook or blockchain don’t do this for free. They want to be paid. Therefore, it is part of a blockchain that a certain fee is due for each new entry — humorously called gas fee.

That’s why every blockchain comes with a payment system right out of the box. Payment is made with a cryptocurrency, with each blockchain having its own currency. You’ve probably heard of Bitcoin, but they are not technically suitable for NFTs. For NFTs, you are more likely to pay in Ethers or related currencies. Cryptocurrencies can be bought with a credit card on digital currency exchanges, like Coinbase. Cryptocurrencies are stored in a wallet, a digital purse that for example runs as an app on a phone. However, the practical use of cryptocurrencies in everyday life is (yet) very limited and the risk for investors who invest in crypto currency is high.

When an NFT is transferred from one person to an other, in addition to the gas fee, the actual purchase price can be settled with cryptocurrency at the same time. The NFT goes to your friend, and you receive the amount demanded for it in return. Both transactions happen simultaneously and cannot be separated from each other.

Built-in intelligence

Another thing that distinguishes NFTs from other digital documents is that they can contain their own logic. To do this, they are tied to a smart contract. This is a small computer program that is executed when certain actions are performed — like, when a sale is made.

The smart contract could automate the process of returning a certain percentage of the purchase price to the original creator whenever an NFT is resold. Resale could also be prevented altogether, or the price of the NFT could be capped.

All of these possibilities have brought NFTs to the attention of digital artists in particular. Their works are traded on marketplaces like OpenSea, sometimes paying millions.

Perfectly suited as event tickets?

If you consider the peculiarities of NFTs, a lot of things seem to fit with event ticketing:

Non-fungible: Seat 3 in row 5 on Saturday evening at the Municipal Theater is available only once. No other ticket grants the right to this seat at the same time.

Just one owner: Only one person can have the valid ticket for that seat on that night. If you pass the ticket to someone else, you lose the right to that seat.

With integrated payment option: A ticket is usually subject to payment. If the handing over of the ticket and the process of payment are linked, cheating becomes impossible.

With built-in intelligence: If, when a ticket is resold, a sum of money flows back to the organizer or if a transfer to another owner is made impossible altogether, various event ticketing problems such as usury on the secondary market or the presence of hooligans at the soccer match seem to vanish into thin air.

But all that glitters is not gold. The blockchain also has its weaknesses.

The disadvantages of the blockchain

The technical functioning of a blockchain is highly inefficient. Compared to data storage in a database, a transaction on the blockchain is much slower and consumes more engery. Een if new blockchain solutions have become much better in this respect than the notoriously energy-guzzling Bitcoin blockchain, a decentralized solution will never be better off in this respect than a classic storage in a database.

A blockchain is highly inflexible. Once content has been stored in the blockchain, it can never be changed or deleted. Content that should be modifiable or deletable must be stored and managed outside the blockchain. In event ticketing, this could be names of ticket holders, which must be collected for legal reasons but also deleted after a certain period of time (hello, covid contact tracing!). The event organizer or ticketing provider must therefore store this data elsewhere and thus remains as a centralized storage location.

Blockchain users are on their own. If you lose access to your wallet, you have no customer service to call and get help. The balance and any NFTs or tickets are irrevocably lost along with you rwallet. A ticketing provider could actually provide ways to regain access, but in this case, they would be the actual owner of the tickets, not the event-goer. Again, using a blockchain would become pointless.

The lack of necessity

The behavior of a blockchain brings one advantage in particular: decentralization creates trust where there is no trusted party. The best example of this is Bitcoin as a digital currency. The technical functioning of the blockchain allows money transfers and the management of account balances without a bank, which would guarantee the accuracy and acceptance of the data. This role is taken over by the technical functioning of the blockchain.

But in event ticketing, there is a fundamental difference: With the organizer, there is always a central entity that must be trusted. As an event visitor, you cannot avoid having to believe and trust that the ticket you bought will be accepted at the entrance and that the event will be held as advertised.

Therefore, since an event has a central body that sets the rules and requires trust, there is no need for an inefficient decentralized system.

Six claims put to the test

But do the advantages outweigh the disadvantages? Let’s take a closer look at six claims made by proponents of NFT ticketing.

Claim 1: NFT tickets are suitable as digital souvenirs

A used event ticket on the refrigerator door is a souvenir that brings back fond memories. Over time, such a ticket may even increase in value financially and become a sought-after collector’s item.

NFTs are indeed very well suited as digital memorabilia for event visitors.

As an event organizer, you could turn a video clip of the performance or the event poster into an NFT for your guests — perhaps even with personalized, individual content, which increases the value of the individual souvenir. Ticket buyers can access their personal collectible after the event and transfer it to their personal crypto wallet. There, they can collect their personal souvenirs or resell them as collectibles on an NFT marketplace.

Conclusion: True. NFT tickets make very good digital souvenirs, for themselves and to trade. However, it remains to be seen how many event visitor actually would want to use such a feature.

Claim 2: NFT tickets make an overpriced secondary market impossible

The secondary ticket market is a thorn in the side of event organizers and fans. It is annoying when an event is sold out yet the tickets are offered on specialized platforms at a much higher price.

The possibility of technically limiting the resale price of a ticket by means of smart contracts seems attractive. But this does not remove the possibility of alternative payment methods. For a sought-after event, a reseller would still find buyers who are willing to pay an additional amount outside the blockchain to get the ticket.

Even if it is impossible to pass on the ticket altogether, it can be lucrative to pass on the entire wallet to the buyer, maybe even including the carrier (e.g. a cheap cell phone).

The real solution to avoid an unwanted secondary market is personalized tickets. However, NFTs are also the wrong solution for this, as the next assertion shows.

Conclusion: Partly correct. NFT tickets can make overpriced resale more difficult, but not impossible. The real solution is personalized tickets with identity control.

Claim 3: NFT tickets enable personalized tickets

NFT tickets are tied to a specific wallet. However, access to a wallet can be passed on to another person without any problems. The real owner remains anonymous.

If a wallet is to be linked to the identity of the holder, the same time-consuming processes are required as are currently the case with a classic event ticket: an identity document must be registered and checked at the entrance. An NFT ticket does not simplify this process in any way. Instead, there is the additional question of which data would be stored indelibly on the blockchain and which data must be managed centrally. The same principle applies if a wallet is to be linked to a login with username and password.

The real solution for simplified issuance of personalized tickets would be a digital ID. If implemented correctly, each ticket can be digitally linked to the ID and verification at the entrance can be automated.

Conclusion: Wrong. The technical means to make personalized tickets the standard is not the blockchain, but the digital ID.

Claim 4: NFT tickets make ticket forgery impossible

It is true that an NFT ticket cannot be multiplied. But that is not even necessary to sell someone an invalid ticket.

A weak point of the NFT ticket is that it has to be checked at the entrance to the event. This requires a representation of the ticket, for example as a QR code. If it is possible to copy this representation, the same ticket can circulate several times — a classic fraud pattern with digital tickets.

Now, of course, there are ways to make this representation unforgeable. A QR code within a ticket app can be programmed so that it changes every few seconds and only the latest version is accepted at the entrance. Anyone who does not have the ticket within the app, but only as a screenshot, will not be admitted. However, this is again a solution that does not require NFT tickets. Ticketpark already presented such a solution in 2012. The same principle is already used worldwide at events with a high risk of fraud, completely without blockchain.

A dishonest seller could also create NFT tickets for events that either are made up or look very similar to an event that actually does take place. A potential buyer would have to check a ticket’s authenticity it first. They would do this with the one party they have to trust anyway: the event organizer or its ticketing provider. This brings us back to the point that there is no need for a decentralized system in event ticketing, since the central trusted party exists anyway.

Conclusion: Wrong. Effective means against ticket copying already exist today and have nothing to do with NFT technology. Moreover, those who expend criminal energy will always find ways to deceive their victims.

Claim 5: NFT tickets reduce costs for organizers

If you compare the costs of a ticketing partner with the costs incurred to create and sell an NFT ticket on the blockchain, the latter (assuming the right blockchain) is obviously much cheaper. However, this is a comparison between apples and oranges.

Today, the ticketing provider is not paid for the mere storage in the database and the payment collection. Instead, organizers receive a whole service package that includes technical development, consulting and additional services in areas such as support, customer management, data evaluation or marketing.

Just as most event organizers today do not develop and operate their own ticketing system, most would not want to implement the far more complex handling of a blockchain connection themselves. Third-party service providers and experts are also needed for NFT ticketing.

Conclusion: Wrong. The costs of ticketing do not arise from data storage and collection, but from services that organizers cannot or do not want to provide themselves.

Claim 6: NFT tickets open up new sources of funding

A frequently heard use case of NFTs works as follows: Fans buy shares in a planned music album or tickets for an event in advance, thus financing its creation. The fan now owns a small part of this work of art and can earn a share of its success. At the same time, the artist receives a percentage of the price when the fan resells his share. Thanks to smart contracts, this is all automated.

Technically, this concept works flawlessly — provided that artists and ticket holders behave fairly and process their revenues and transactions via the intended blockchain channel. It’s just that this basic concept is not new.

Crowdfunding can already be used today to finance a production directly through the fans. Even today, the artist is free to decide which benefits he grants the fans in return. The prerequisite is that there is already a fan base willing to pay. Community building still has to come first. You must reach people in order to generate revenue.

Also, the existing contracts of the artists must first allow such concepts — and they must also be involved accordingly in an implementation with NFTs.

Conclusion: Partly correct. Smart contracts enable interesting concepts with automated kickbacks. However, only those who have already built up a community willing to pay can benefit from this.

More hype than benefit

Are NFTs the future of event ticketing? Probably not — at least not in the form they are being discussed today.

For owners of a crypto wallet it can be quite nice to receive a corresponding souvenir as NFT after visiting an event. We at Ticketpark have acquired the technical knowledge and can offer this option to event organizers. It remains to be seen whether event visitors will want to take advantage of this option — and even more so whether a market will emerge where such souvenirs can actually be traded.

When it comes to actual ticketing, however, NFTs do not solve any of today’s challenges. Neither can they avoid an overpriced secondary market, nor prevent fraud, nor offer personalization. In fact, the centralized nature of an event makes some of these issues even more difficult to manage with decentralized technology. Not to mention that the vast majority of events do not even face the issues which NFT ticketing claims to solve.

The real solutions are not found in decentralization, but in complete digitization. The electronic ID will trigger the biggest leap here. If tickets can be personalized more easily, an undesirable secondary market and fraud will become virtually impossible. Provided the organizer is willing to limit the flexibility for ticket buyers. Spontaneous passing on of tickets, even among friends, would become more difficult or even impossible.

The blockchain as a distribution channel

However, there is an interesting use case for NFT tickets: the blockchain would be suitable if it were used as a central, independent distribution network. Event organizers could put their tickets on sale without having to sign an exclusive contract with a ticket marketer . Sales platforms could offer tickets for any event, but would now be in competition with each other. The beneficiaries would be the event visitors, who would now have the choice on which platform they would like to buy their tickets on.

This scenario also still raises many questions. And it would mean that a large proportion of all organizers would agree on a common blockchain protocol. Just a vision or a revolution? Time will tell.

And what do you think?

Whether classic ticketing or new visions for the future: We love to hear your ideas about events and ticketing. You can reach us at beratung@ticketpark.ch.