Time for an NFT Reset?

This is the scene a couple of blocks from where I live. I hope everyone reading this is familiar with at least one of these guys – I don’t know if Bored Apes are as recognizable as Mickey Mouse or Homer Simpson yet, but I venture they are getting close.  I love seeing this wall every day, because it reminds me of the burgeoning tech and crypto community that is being encouraged to thrive here (Thank you Mayor Suarez!) I appreciate the visionary work that the creators of these NFT communities have done. They’ve contributed to a growing awareness around a ground-breaking new technology (i.e., blockchain) that has given us new ways to think about not only how we do community, but also how we buy and own things, and the nature of money itself.

So why am I suggesting that it might be time for an NFT reset?

Certainly the gaming / cartoon / fantasy industry, which could be defined in different ways, has a massive global valuation. It makes total sense, given the demographic trends involved in this area (i.e., tending younger and generally more tech savvy than older generations) that NFTs would gain their first stronghold among these masses. However, I’m considering the other people groups who are not necessarily part of this population segment, and the extent to which NFTs may have become exclusively associated in their minds with furry creatures and other cartoon-beings (some not so cuddly and in fact more the stuff of nightmares than bedtime pals, but that can be discussed elsewhere). 

Late last year I was at NFT BZL, a conference here in Miami during December Art Week, and was talking to a Bored Aper who had just been to their IRL (in real life) event during NFT NYC. He said it was great, but that there were only 5 women there (there are 10,000 Bored Apes). Even if he was exaggerating, I think this raises an important point. If certain people are receiving only a cursory flow of information about all things blockchain, they would likely associate NFTs exclusively with fantasy creatures, and would have decided that they aren’t relevant to them and could not be useful or important in their lives. This kind of thinking is just typical human nature, to simplify and perhaps stereotype things that we haven’t taken the time to dig into deeply. 

The conundrum I see is this. The potential for NFTs to revolutionize the ways we think about and participate in communities is tremendous. Not only can they be an impetus to form new groups, but can also lead to more effective and profitable ways to manage and maintain existing entities (more on that below). However, if the NFT concept is automatically associated with pigs that are different colors and smoke cigars and drive Lambos (I hope that doesn’t exist. I just made it up not to offend anyone. So I probably offended everyone), those to whom that image is not appealing will likely not see these possibilities. An important thing to point out here is that there are some incredible NFTs that are coming out of the art world that are simply gorgeous and naturally have the broader appeal that I’m talking about. However, many of these don’t come with the same type of community structure and participation that the animation-based avatar-type series often do. 

Why can’t we have it all? NFT images that appeal to a variety of people along with strong community benefits. I think if we expand the NFT concept along this dimension that a large increase in adoption would be possible (think Facebook transitioning from a cool college communicator to world domination). I’d like to run through a series of questions to take a fresh look at NFTs, so that we’ll all start on the same page and be in a position to realize the full array of opportunities and number of applications and situations where NFTs can make an impact. 

So if an NFT isn’t a cartoon character, what is it?

I’m thinking that now most people know that NFT stands for ‘Non-Fungible Token,’ and that it differs from many crypto currencies, for example, which are fungible. Two things being fungible means that if we each have one and we exchange them, we’re exactly back where we started. This is not the case for NFTs, where each one is unique. If we each have an NFT and exchange them, we will both have something new.

Do NFTs represent a completely new idea?

While NFTs are certainly innovative and groundbreaking, they do share some features with ownership items we are already familiar with. It’s worthwhile to point out that, while many people (including me) use the term NFT to refer to, say, a piece of digital art, the NFT is actually not the art itself, but the record of ownership. The idea is similar to the deed you might have for a piece of real estate, or the title for a car. The NFT is like the deed or the title, linking the item to the owner. Just as cars can be uniquely identified using their VIN number and real estate through its property survey description or track number, the NFT is identified through its ‘hash,’ or a unique code. As a property deed or a vehicle’s title links the relevant identifiers to the owner’s name, the NFT record links the hash to a digital wallet address. So while the idea of recording unique ownership is not a new concept, the NFT innovation of storing this information on the blockchain paves the way for all sorts of interesting applications.  

What are the advantages of storing information on the blockchain?

Blockchain technology is the underlying force behind cryto currencies, decentralized finance platforms and NFTs, with the potential for so much more. The basic idea is that, instead of storing information about what’s happening (i.e. transactions) in a central place, it is stored on a vast network of computers that all have an identical record of the information that is publicly available. Essentially then it would be extremely challenging for rogue actors to counterfeit or manipulate this data, because it would be refuted by the vast array of copies that contain accurate information. Regarding the NFT as an ownership record, usually what’s stored on the blockchain is not the NFT digital file but only its hash number and the wallet address of the owner. This is for efficiency; you can imagine that storing too much on the blockchain with so many copies gets expensive computationally. The digital file is stored in a secure place such as IPFS (Inter Planetary File System).

Aren’t digital assets different from physical ones? Can’t they be copied more easily?

This is a great question, and one that people are thinking about a lot. The answer naturally is yes; you can copy a .jpeg file more easily than you can copy your neighbor’s sports car. Most people know that you can just right click on an image on a webpage to download it. With the current state of technology it is really impossible to avoid a file being copied by others, at least in some form. Which is why I’d like to challenge you to think about the NFT experience and its possibilities in a different way. While files may be copied, only legitimate members who hold the NFT will be able to enjoy the community benefits, which can include both personal and financial rewards, depending on how the group is structured.

Which begs the next question.

 Why join an NFT community?

Being part of an NFT community gives you a chance to do more than pay dues to an organization to participate in its activities. Instead, it’s possible to have an ownership stake that shares characteristics with owning stock in a public company. You can benefit if the visibility, reach and desirability of membership in the community grows. This can take place not only through the increase in value of any individual NFTs that you own, but also, if the community is structured this way, through profit sharing or other incentives. The functionality of smart contracts can be leveraged to set up how this would work on an individual community basis. Even more than with a stock investment, you can have a say in voting on the future direction of the community. While it may be possible to structure such an entity legally without using NFTs, one significant advantage to creating it in the blockchain space is the ability to operate seamlessly throughout the world, regardless of national borders. This is a reason why NFTs are good model not only to start new groups, but also as a structure for existing entities to consider.

What are other benefits of NFT ownership?

Besides the benefits of direct ownership for the NFT holder, this model of community participation also allows content creators, artists, musicians and others to sell a direct stake in their work to their supporters and fans, generally eliminating layers from the middle and increasing (often greatly) their share of profits. In our economy, making a purchase is a vote of support for content and its developers. Buying an NFT directly from the producer is a great way to show support for individuals whose work we want to see continue to grow and thrive.  

Final Thoughts

So what am I advocating today? In light of the features of NFTs that we’ve discussed, I’d love to see more of the following:

1. Already existing groups exploring the NFT model for joint ownership and sponsorship of their communities, and

2. The advent of more community-first and -focused groups that use the NFT model. 

I was at happy hour with a friend discussing all this business. At about the same time we both said, ‘You don’t really need the images!’ He pulled out a blank white key card, the one he uses to buzz into the marina where he lives on his sailboat. ‘Nothing exciting here! Just a blank piece of white plastic.’ Yet it’s his access to a world of delights. Like an NFT with a great community.

I don’t think we’re ready for imageless NFTs just yet, nor am I suggesting it. They make it interesting and fun! The nature of the digital images (or videos, or something else! Let’s think outside the box) can be something that is appealing and appropriate for the people taking part. But if the needs and interests of the group come first, starting with the images might be like the tail wagging the (cyber) dog.

Are you interested in building a community-focused NFT group with great benefits and jammin’ NFTs? Send me a message 😉