NFTs are all the rage in some small circles right now. Enough so that it gets in national news and into your social media feeds. For some it is an exciting marker for a new medium plus distribution of art, utility, and experimentation. For others… well lets just say many people are skeptical. For me it is well beyond art or jpegs. But we will get to that last part later.
Yesterday Coinbase announced that it will be launching an NFT marketplace by year’s end. You can sign up for early access now. It is tough to predict the future, but Coinbase getting into the NFT world will likely add a mega boom to an already booming emerging market.
For context the biggest NFT marketplace is OpeanSea. There are a few others who are doing quite well also. OpenSea has exploded in activity in 2021. In 2019 they were doing a few hundred thousand in sales volume a month. Pretty good. The sales are now so astronomical that the bar chart doesn’t even measure 2019 compared to current activity. Imagine that! Daily sales volume this month alone has ranged from 50 to 190 million. That is with literally only a few hundred thousand active monthly users. In contrast incoming market participant Coinbase has millions of users. Coinbase had Q2 net income of $1.61 billion.They are a juggernaut.
With all the success for OpenSea one may wonder what Coinbase has to add. Well coinbase has native wallets, vast amounts of capital, seasoned employees, and a huge amount of eyeballs who haven’t even considered NFTs as of yet. Additionally there are a considerable number of problems in the NFT space. Perhaps they will offer solutions for some. After all, space is remarkably early. Tools are still being developed.
The Pain & Opportunity
In my experience of buying an NFT at launch (called minting) just about every project has had trouble. Delays, bad communication, full 10,000 item projects sold out in a few minutes. Massive gas fees. Huge $ scalpers grabbing everything to resell higher. Art upload problems, bot problems. The list goes on and on. Yet still people are flocking. There is much room to improve assisting those huge launches. Fix the friction.
On the plus side, with so many launches and so much experimentation we are learning in real time what the best practices are for future projects. What worked well, but only once? What has seemed most fair to buyers for projects that will clearly be sold out instantly? Why are so many artists selling cheap knowing prices will skyrocket, leaving that money to others? Pricing is wild. Especially as it is all done with eth as the denomination, and it’s value can fluctuate.
Communication is largely done on Discord. Each project has its own Discord server. I have joined too many. Still in over 30. I have to leave at least half. I can’t keep up even just all the announcements. Communication remains an issue and doesn’t scale with the growth of projects. Scams abound. People are tricked out of real money.
Once you have bought a few NFT’s from various projects you might find yourself having trouble tracking their value (if you are into it for that reason). I finally found one I happen to like called WGMI (we are going to make it). Simple and very effective. I imagine much more work is being done here to analyse opportunities on marketplaces. Bots are already rampant.
If crypto/NFTs are so open, why are so much of our transactions on closed platforms?
After @punk9529 99 tweet missive on the open metaverse I have been pondering this. It inspired a possible NFT project for me, which I am still noodling on. I am sure there are dozens or more open source projects to solve problems similar to what I have mentioned above, and many more solutions to problems I have not yet considered. Rarible has launched and ‘Open Source, Cross-Chain Community Governed NFT Protocol’ as an example. So much here is is on my list to dig into.
NFTs to Infinity
Beyond open source we will see many smaller tools, libraries, plugins, etc. Wrappers exist now for api’s. How much longer until there are wordpress plugins to package up the basic frontend? Soon, if not already, launching an NFT project like those random generated loot box style art reveals will be as successful as launching a new app to the iPhone app store. Just one drop in the already full bathtub. The flood of ‘generated art’ from this copy/paste mania will be epic.
It will be interesting how the rush of consumers to participate meshes into a glut on the market of new products. Existing and older projects with strong communities such as CryptoPunks, BAYC, VeeFriends, and World of Women will retain value. Newer projects that add real novelty or utility beyond some pyramid scheme will catch on. Original art launches will continue, with some artists being more successful than others. Existing art will continue to come online. I have had 2 conversations this week with artists/owners about bringing existing fine art online. I’m certainly not the only one.
Every influencer and celeb will at least consider launching their own NFT token. It’s that old 1,000 true fans concept in perfect commercial form. I can see this replacing at least some Kickstarter projects. Stoner Cats raised big money in 30 min via NFT mint to fund their animation series – with big celebrity help of course. I can’t even imagine the conversations at OnlyFans right now.
Crypto gaming will probably be how most people interact with NFTs. Likely without really knowing. We have Axie pulling in hundreds of millions a month as a crypto native play to earn game. Many others are right behind them. The current overall video game market is 150+ billion. Nearly 3 BILLION players worldwide. Many games have already normalized buying and selling items, even trading them. Billions of people are already used to buying, selling and trading digital goods. The basic mechanics and notion isn’t new. Expect a lot of experimentation over the next few years here.
I expect a lot of regulatory scrutiny as well. Some projects I have seen launch are already feeling like securities. Can’t stop that, but don’t expect that any marketplace that wants to be active in the US will list them. No doubt a small army of lawyers are already all over this. It is out of my zone of understanding.
At some future point it may be fun to do a stream or podcast where we pick an existing business model and discuss how any of this or other upcoming tech will impact it. NFTs are primary keys, we have a globally accessible and open / trusted database that holds them, and we all can have multiple unique & portable identities that exist across apps. The ability to use all of it and build upon it all is more of a game changer than people realize. Once you start thinking about what those 3 things enable, you can’t stop.