Earlier this year the sale of NFTs fell to a daily average of around 19,000, down from 225,000 back in September of last year – a 92% decline. The daily trading volume on NFT marketplace OpenSea fell by 80% between February and March 2022. (source: WSJ)
Are people finally coming to realize that previous months in NFTs were mostly a lot of hot air? Or is the decline in line with and even expected given everything else going on in the world (rising inflation, higher gas prices, the war in Ukraine? etc.)
While impossible to pinpoint a single case, what’s most clear now is that the initial hype has died down and average folks have had a chance to catch up on what NFTs are and most, still just don’t get it.
The most common question I’ve been asked is, “Ok so once I own an NFT, anyone on the internet can user it anywhere so what do I do with it?” And unsurprisingly, this is the question that many in the NFT space still struggle to answer. What’s the point of owning something you own and paid for can be used by everyone else just the same?
Separating hype from reality
My personal experience with the inaugural Metaverse Fashion Week (you can read about that here) was similar to that of others who attended; hardly the break out success that everyone had hoped for. Probably because for any event, virtual or otherwise, to walk away feeling like you gained something from the experience is key – hype can only go so far. The primitive feel of still early web3 technologies clearly left everyone wanting for more. But whether we like it or not, the next frontier for leading brands will to figure out how to translate unproven technologies into sustainable revenue streams, and separating hype from reality, even if it is virtual reality.
In 2021 global spending on virtual goods reached around $110 billion, more than double the total in 2015. That spend is expected to be worth at least $135 billion by 2024. While many experiments in the Metaverse are still proof of concept exercises, no one can deny that the Metaverse thing might one day happen if and only, there is some globally recongizable and experiential value.
Defining value, early stages
The early days of NFTs positioned them similar to real-world art pieces. But this argument for paying money for something that anyone can use just the same quickly fell apart. What is ownership if there’s no landscape where everyone understands how to determine and claim ownership?
I think the best, albeit simple demonstration of how NFTs are beginning to show value en masse is via how they can be used on social media, something that almost everyone gets these days.
Earlier this year Twitter launched ‘NFT profile pictures’, where you can connect your digital wallet (where NFTs one owns are kept) to your Twitter account and use you NFTs you own as your profile pic.
If you connect your digital wallet to your Twitter account, this means that,
…people can associate your Twitter account with your connected wallet’s public crypto wallet address. This means your Twitter account will be associated with your current and historical crypto wallet transactions and holdings, including all other NFTs in that wallet, because this information is all available on the public blockchain.Via “About NFT Profile Pictures on Twitter”
The TL;DR here is that by connecting your digital wallet, Twitter is able to know that you are the actual owner of a specific NFT and display this as part of your public profile.
Another example of NFT utility within a context that most people are now familiar with is with domain names, what the majority of businesses and orgs that use as their web address. They’re controlled by the Internet Corporation for Assigned Names and Numbers (ICANN) and purchased through a domain registrar like GoDaddy or Namecheap and are thus centralized. The content is then hosted by a service like Amazon Web Services.
There are now NFT domain names that instead of living on a domain registrar are created as ‘smart contracts’ on a blockchain. So rather than paying an annual hosting charge just to own a domain, once you buy an NFT Domain, it’s stored in your digital wallet just like other NFTs and cryptocurrency – you buy it once and own it for life (or sell it). This ‘self-custody’ aspect is one of the most important features of an NFT Domain because it means it’s decentralized. Some NFT domain extensions offered now are .crypto, .blockchain, .wallet, .nft and you can buy them on Unstoppable Domain.
Especially for payments, if you send and receive payments in crypto it can be annoying to have to share a hugely long wallet address (32-34 characters of just….0xc6b05d35ee7101onandon….) so having something like yourname.nft for example can be an easy way to tell people where to send your money with less risk it’ll go to the wrong place.
Beyond true ownership and helping to simplify crypto transactions, the decentralized nature of blockchain domains are valuable because they remove the need to trust a centralized authority like ICANN. Says Will Martino,
“Given current global trends in both business and government, it’s quite rational to want an alternative to relying on the benevolence of a large organization of significant power.”Will Martino, CEO Kadena.io (via Builtin.com)
In a decentralized internet, where websites can be easily taken down by governments, the ability to have a domain, controlled by the owners can help to counter censorship, authoritarian government takedowns etc.
Because NFTs are ‘minted’ on a blockchain, their authenticity is verifiable. Modern day consumers are very accustomed to memberships and the perks they provide in their everyday life. Whether it’s Costco giving you deals on bulk purchases to 2-day free shipping with Amazon Prime—memberships programs are intended to create.
This is the same concept is now being applied to NFTs. Rather than signing up with your name, email address etc., your membership is initiated or granted via purchase an NFT. This verifiable ownership then grants you access to benefits, perks and exclusive options that can be real world or virtual depending on who they’re being offered by. Your NFT is like a VIP card, just in digital format.
But the biggest win-win aspect of any membership program is it’s ability to foster a sense of community. For companies and brands especially, engaged communities provide a great place test new products, get feedback on new initiatives, and ways to reach new customers via passionate existing ones.
IRL dining – early next year, Gary Vaynerchuk is expected to open the FlyFish Club, a IRL restaurant heralded as the world’s first member’s only private dining club where membership is purchased on the blockchain as a Non-Fungible-Token (NFT) and owned by the token-holder to gain access to our restaurant and various culinary, cultural and social experiences.
Why NFT? According to the site…
As an NFT, the membership becomes an asset to the token holder, which can later be sold, transferred or leased to others on the secondary market. By utilizing NFT’s, FFC is able to create a loyal, member-community that we can provide special experiences for. NFT’s create new modernistic financial models, which will allow FFC to deliver an exceptional and sustainable product for years to come.Why NFT? via flyfishclub.com/how-it-works
As the name clearly implies, the cuisine will be a seafood-focused restaurant “with a robust raw bar, drawing from international influences, created by award-winning chefs and hospitality experts”.
As of now there appears to be 2-tiers of membership, a ‘Flyfish Club’ membership and a higher tier ‘Flyfish Omakase Club’ option. Both are offered for sale in Ethereum and give you access to various levels events, dining experiences, and I could expect, to even Gary himself as I’d assume he really likes fish and will be dining there often. The original NFT membership sale was sold out long ago but they’re trading on OpenSea.io so like anything in this world, if you got the money, cash or crypto, everything is for sale for a price.
Not to be outdone, in late 2021 celebrity chef Tom Colicchio announced that he was entering the NFT space with CHFTY Pizzas, a release of 2,777 pizza-themed NFTs valued at around $200 each aimed at building the largest chef and foodie community.
The CHFTY brand is creating a new definition for utility. Initial offerings include exclusive digital CHFTY Cooking Demos with world famous chefs, IRL events, sophisticated kitchenware giveaways and more.via https://www.chftypizzas.com/about
Some other examples of NFTs as providing some kind of membership utility.
Bored Ape Yacht Club
Probably one of the most successful NFT sales to date. A 10,000-strong NFT collection of ape avatars, each unique and programmatically generated from over 170 possible traits from headwear and clothing to facial expressions. Outside of using these as digital avatars, the NFTs also serve another purpose. Each BAYC NFT holder gains lifetime membership to a secret apes-only club.
And my favorite, where you can “become an executive member of the good life”, Poolsuite was as a membership offering perks to users. The Poolsuite NFT also looks a lot like an AMEX and is the first NFT to integrate with Apple Wallet. While I’m still unclear what exactly the perks to members are, they do stream the best beachy-vibes music on Poolsuite FM, and the branding and merch is well, enough to get me living for the hype. Marty Bell is the genius.
Purhcase of an NFT gives you access to watch a TV show. According to the creators (a la Mila Kunis and Ashton Kutcher), the NFTs are a way for fans to “engage directly with the content they want to watch and be a part of the content creation process.” (read more on decrypt.io)
We’ve been hearing about them for what now feels like forever now but the NFT and blockchains more generally are still in their infancy. What’s clear already, however, is like almost any type of product, hype will only get you so far and the NFT’s as a pure art play is not an enduring value proposition for most people. To become something that people will pay for there needs to be some inherent value to a purchase whether it’s a way for you to ‘flex’ in the Metaverse (via displaying ownership of a ‘cool’ NFT’ in your social media profile) or getting exclusive access to the latest supper club. Perhaps it just becomes future’s digital vessel like the QR code, just tied to the blockchain.
What’s for sure is that the NFT market has evolved rapidly over even just the course of one year. Everyone has not yet moved into the Metaverse and everyone who bought an NFT did not become the overnight millionaire they hoped to become.
There’s no doubt though that the NFT market has attracted more people to the crypto space which no doubt makes me excited for things to come.
If you have thoughts I’d love to hear them as always.