The Sunday Drip #14 | Point/Counterpoint - The current state of NFTs
Let's take a higher viewpoint this week and debate some hot topics!
Welcome to The Sunday Drip from the Sunday:Drip Society crew. Each Thursday, we’ll breakdown a broad web3 topic and share our thoughts on what’s really happening beneath the surface.
The past week in the world of NFTs has felt like the slowest week of the entire year. Many factors have contributed to this slow down, including an overall economic slow down due to the uncertainty surrounding Russia-Ukraine war. Two of the most telling factors indicating a slow down are, (1) gas dipped to very reasonable prices this week and (2) Tai Lopez dropped an NFT project.
There have been many questions about where we are headed from here, so let’s plug them into a Buzzfeed worthy article structure that highlights my amazing writing skills (
and hopefully leads to increased viewership) — Point and Counterpoint!
POINT: NFTs prices have peaked.
It’s hard to believe we will reach higher floor prices than we did a few weeks ago, pre-Russian invasion. Most floors of the “blue chip” projects are down from their peaks, despite ETH also being far from its peak. You could argue, as time goes on, we are finding the true value of NFT projects and the mania and speculation is beginning to wear off.
Speculation and mania are beginning to wear off because projects are running out of tricks up their sleeves. What is left to speculate? BAYC has a token coming, RTFKT has god knows what coming, and new projects are not only visual derivatives of each other, but also utility derivatives of each other.
Buyers are getting a better feel for roadmaps and are now able to apply a timeline to roadmaps. PFP projects are completely out of ways to say “we’re all going to be in a Discord and hopefully we can do something cool. Plus you get hats! Metaverse!”
NFT enthusiasts have no ability to promise their attention to a single additional project. We can’t possibly keep up with all of the announcements and asks.
(… keep in mind, this is me just presenting the bear cases. It’s how these articles work.)
COUNTERPOINT: NFT prices only cooled. We’re only getting started.
I’ll concede that maybe a few projects have hit their peaks, but I’ll die on my hill arguing that the NFT market is only getting started.
NFTs went from jpegs of monkeys to rentable restaurant reservations to multi billion dollar valued clubs in the blink of an eye. We are still so, so, so early into the development and adoption of NFTs. I mean, we’re still working out the security and legal kinks. Reducing risk and applying legal utility will drive rapid adoption.
The recent slowdown is giving the projects more time to build, and that’s exactly what they need. A break from pricing pressure and the moonboys. We really have no idea what is coming from BAYC and RTFKT still has a MNLTH that we haven’t cracked open yet. The only crossover with Nike that we have seen is their logo being placed on RTFKT images. Plus they are still tweeting this sh*t, and I’ve been wrong before.
The floor declines are driven by the wider economic uncertainties. When stock portfolios are down 20%, it’s hard to hold on to that NFT of a Doodle worth $30k.
Giving these projects time to build, with all of their mint money, is like giving them more time to prepare for their first impression to the world. They will be ready for their grand debuts, and that will help the public understand owning digital assets. Coinbase’s NFT marketplace, which may or may not launch in the next 7-10 years, will expose a wider audience to a more polished product.
Right now, NFTs feel like how people were still doubting Amazon in 2013. Eventually, we will all be owning digital assets linked to utility and people will try to argue that “NFTs were different back then.” Projects are more like poker players waiting to show their hand rather than magicians with nothing left up their sleeves.
POINT: NFTs are Ponzi schemes.
I hate this point, but I have to bring it up. I don’t want to spend that much time on the “point” part of it, because
my “counterpoint” section is much funnier to read the point is weak.
It’s true to say that the only way people are making money in NFTs right now is by other people entering the space and buying those assets from earlier investors. Ponzi is an incorrect usage, it’s more of a pyramid scheme, but it’s a fair point… right now.
NFT games like Wolf Game, Riot Racers, and Shadow quest rely on more money coming in than money coming out. Fine.
COUNTERPOINT: NFT business models are nothing new.
My favorite tweets are this: you know what else is a Ponzi scheme? Everything.
This argument drives me crazy because of the hypocrisy. “Value” is measured in so many ways, that it makes no sense to say there is no “value” in NFTs. Many people use the art industry as an example of extreme value that is hard to measure. Think art is a Ponzi scheme too? Fine. What about the value of memberships, clubs, experiences, concert tickets? Those are more driven by willingness to pay.
People are very uncomfortable with applying value to something that is not physical. A house has value, until no one want’s to buy your house from you. Maybe you live in a small town and all of the jobs just dried up. Everything has value, until no one wants to buy that thing from you.
Let’s keep going with this.
What do Facebook/Instagram, Snapchat, Google, and Tiktok all have in common? They all make most of their money from advertising. What makes their advertising cost more (and make them more money), is when it is highly targeted to consumers. Specifically consumers who have money to spend.
Many NFT projects and Discord communities are EXACTLY that. Take a look at LinksDAO. LinksDAO is a group of about ~5,000 golfers who spent upwards of $1k to buy a Golf NFT promising membership to a golf course. LinksDAO, while small, is an extremely valuable collection of golfers for companies to advertise to.
Forget the “how” when it comes to advertising in NFTs. If there is money in the idea, it will get figured out.
Free business idea to someone: create an platform that analyzes the NFTs/POAPs (which reflect a person’s interests) in a crypto wallet and advertise to the holder. We’ll call it — New Facebook. You see what I mean? No one seemed to doubt Facebook as a company before it started advertising to users. There is a POAP/NFT advertising platform on the horizon and someone will make a sh*tload of money.
NFTs are going to become vehicles for companies to target you in the future. And that’s fine. Don’t want advertising? Don’t connect your wallet. You went to Cochella? Here’s a free attendance NFT/POAP that gets you a discount next year. Oh and Live Nation will now target you with concert ads.
I’ll flesh this idea out later.
POINT: Advertising will ruin NFTs.
I’ve actually heard this before, and this is honestly a fair point to make. Advertising is annoying. We basically run from it until we pay a company to avoid it. Amazon literally sells their tablets for less money if you opt INTO advertising.
It feels like we are in a endless cycle of building businesses that are ad-free until we can’t survive without ad money coming in. Ads sort of answer the Ponzi scheme criticism from above.
(Here is where I will admit I have definitely lost the plot on this article but I am having fun and I hope you are too.)
COUNTERPOINT: Advertising will save NFTs.
For this counterpoint, let me use the NFT games I referenced above as examples for how advertising could save certain NFTs.
As I said, many of these games depend on more money coming in than money going out to survive. That concept makes even the players of the NFT games a little worried about the longevity of the games. If players begin to pull out and take their winnings or the money slows down, the whole game can collapse.
If the game were to diversify their revenue channels to include outside money (such as advertising), the game could survive. Players play for the money earned from display ads and the advertisers get daily impressions from high value users. I am sure FTX would love to advertise to the players of Wolf Game. I am sure Amazon would too. It would be fair to assume that Riot Racer players are interested in cars and car advertising wouldn’t be too distracting for the players. Riot already has partnerships with Citroen.
I would also feel more comfortable playing a play-to-earn game if I knew that the game is able to create outside money. Normal console video games make money from people paying for the game AND they take in-game advertising money.
Bringing us back to the current state of NFTs.
POINT: Gone are the days of high mint prices.
This might overlap a point I made in the top section, but it can be argued that NFT buyers are learning to expect more from their NFTs. An undoxxed team can’t drop a 10k Rad Rhino collection for 0.1ETH and expect to sell out anymore. That’s one way to look at it.
Another way to look at this is, projects should be looking to start slow, build up a community, and avoid the pressures of a high mint price.
The best NFT projects all started slow. Whether we like it or not, first impressions and expectations can crush a project before it gets started. Overdelivering is key, and when the moonboys arrive in the Discord, overdelivering can become a fool’s errand.
Organically building a strong community is effectively building your company on a strong foundation. If you’re an existing business like Bud Light or a new pfp NFT company, it might be in your best interest to go low and slow.
The gold rush of overnight NFT millionaires is coming to an end. I mean how many times can we get rugged by the same people?
COUNTERPOINT: High mint prices will only get worse.
I may have been misleading in saying “gone are the days of high mint prices” when I meant initial mint prices. I think existing projects that start slow will be able to do what BAYC did with Mutants and RTFKT did with Clone X.
The counterpoint here is that, if we truly believe that NFTs are just beginning, than mint prices will continue to go up. Projects will continue to want to sell their projects at what the expected floor will become.
This is actually okay with me. If a project can sell at a high price, around what their floor is, it will discourage flippers from entering the project to capture value.
I ALSO believe that new projects will learn how to deliver more value, thus resulting in higher mint prices. Speculation is only speculation if we have never seen a project deliver before. The NFT playbooks will become more straightforward as we go.
My prediction here is that we will see more Dutch auctions again soon with the most anticipated projects and teams. I don’t have much to extrapolate on here. It’s more of me using my argument that “NFTs will continue to grow” against myself. If they grow, were going to see the best project demand the most money. And that’s okay with me because it’s better than them selling low and letting flipper ride the price up.
That’s it. Was it fun? Buzzfeedy and shareable enough? I think I made my points, so let’s copy and paste the comment part and end it!
Agree? Disagree? Comments? Questions? Let me know! Possibly some typos.