The Sunday Drip #7 | How many more NFT drops can there be and when does this all end!?
NFTs are in a massive learning phase. Are they just learning to sellout NFTs or are they learning to deliver value to holders?
Welcome to The Sunday Drip from the Sunday:Drip Society crew. Each Wednesday, we’ll breakdown a broad web3 topic and share our thoughts on what’s really happening beneath the surface.
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(I’m in a weird mood today.)
If you are up on your NFT news, you probably know by now that literally every single person, brand, and movement has an NFT coming out. We are getting to the point that if you are a brand without an NFT or a hard seltzer, are you even relevant anymore?
Right now, I would put us in the “throwing sh*t at the wall” phase of NFTs.
And I’m not kidding, people are creating every NFT you could possibly imagine, including a group trying to buy a golf course, a simp army for an influencer, selfies of a kid from Indonesia named Ghozali, and of course NFT farts in a jar (apologies LinksDAO for lumping you in here). We’re throwing everything.
And it’s working! That’s the crazy thing. So many of these insane projects cost hundreds to buy into. (Fart jars are roughly $160 for those asking)
If you are like me, you’re probably wondering, “how many more NFT projects can possibly succeed? When does this all end?” Well, this isn’t easy question to answer, but I’ll try.
Spoiler alert: This is never going to end, but we’re going to get better and better at it.
What are NFTs actually good for?
A person asked me recently, “I don’t get NFTs, can you just explain NFTs to me?”
Despite starting a web3 company, recording a weekly podcast (stealthy plug! give us a 5 star review), and writing a Pulitzer-worthy Substack newsletter, I don’t think I did a great job of convincing him that he should care about NFTs. I tried, but he didn’t look convinced. I would classify this person in the right-click-save crew, so it was never going to be an easy task. Me of all people should have been able to explain NFTs, but I get so ahead of myself that I end up explaining a very small use case and miss the bigger picture.
NFTs aren’t just profile picture. They aren’t just memberships. They aren’t just equity and they aren’t just digital fart jars.
NFTs are data. NFTs are smart contracts. And NFTs can be used in a million different ways by people, brands, and movements. NFTs are also going through a branding problem, but that’s okay.
I now start my explanation with, “NFTs are basically contracts and digital property,” before jumping into specific use cases, often using skeuomorphic examples, such as “a gym membership you own,” before caveating that there are both good and bad examples of NFTs out there.
We’re still figuring out what works.
Part of the “throwing sh*t at the wall” phase is figuring out what sticks. And we are doing that too! But this part takes significantly more time (except in Ghozali’s case, that took him 4 years).
There is not really a leading model being used to value NFT communities right now. And rightfully so. On one hand, you could value an NFT like a share in a company, but on the other you can value it like art or a SoHo house membership. We’re learning from the hundreds of projects launched in the last year, but there are still so many promises that need to be fulfilled by the NFT collections. How do we know who’s doing well?
In order to value NFTs, we need to make some predictions. We need to look into the crystal ball like early Uber backers did when they realized that people would be completely fine jumping into the back of a strangers car for a ride.
Right now, I’m asking myself questions like these:
Will the DAOs raising money to start businesses actually work? Why DAOs over traditional financing?
Do gamers want P2E games over regular video games? Can you join a P2E game late? Will they peak and die?
Which membership models will flourish and which will fizzle? How many memberships can one person really manage? Are there multiple winners/categories?
Can brands and influencers be successful with NFT communities? How long will they be loyal to their holders? Are these just email lists I pay for?
Could Bored Ape Yacht Club possibly keep going up from here?
Right now, nobody really knows what the best use for an NFTs is. We’re trying to analyze them, but the world hasn’t seen enough of these communities run their course. And preferences will change.
My favorite example of preferences changing is the Microsoft Zune. Do you remember when Zune, the competitor to the iPod, came out? Subscription music spectacularly failed against song by song purchasing on the iPod. But preferences changed. Maybe not by choice, but you get my point.
Let’s look at some new NFT projects.
Let’s take a look at a few NFT projects, and deconstruct why they used an NFT and how they will evolve. Maybe this will help us figure out how to best utilize NFTs.
LinksDAO | Raised money to build a membership business
Why NFT? LinksDAO likely used an NFT to raise money, spread awareness, and create advocates. They’ll use the mint to buy a golf course and the holders of their NFT will get access to the course, and some other perks along the way.
Possible Pitfalls? Managing a golf course is not easy, but let’s assume they find the right team for the right cost. A major issue will be the upkeep of the course and how they generate ongoing revenue. Holders might be envisioning free golf forever on a top 100 course, but the course will need to generate revenue to offset the massive costs of operating a golf course.
Outlook? LinksDAO will need to hope they generate a combination of enough revenue and NFT creator fees to operate a golf course each year. They likely will be able to come up with enough membership perks to keep the absentee holders happy, but they cannot succeed with just a single upfront cost for a lifetime golf membership. Look for LinksDAO to pivot. Maybe they become an advertising machine for golf companies? LinksDAO has an extremely valuable community of golfers. The community itself, can profit off of itself.
Full Send Metacard NFT (from Nelk) | Influencer membership
Why NFT? Full Send sold an NFT to raise money because they are looking to “launch more FULL SEND branded ventures, which include lounges, gyms, festivals, casinos, and restaurants.” I am going to categorize them as the influencer category, even though they are describing a membership pass, the benefits of their NFT are only related to merch and access to them.
Possible Pitfalls? The utility of the Metacard includes an NFT mint pass, event pass, physical location pass, and merch. So… exactly what they do now for their fans, but you pay $3k for access. Their NFT is as valuable as what their fans will pay for access to the team. Also, opening a casino, lounge, gym, restaurant, and festival is hard work. The team made ~$24M from the mint, but can that pay for everything they plan on creating?
Outlook? The Full Send NFT is feeling like a massive cash grab from the Nelk team. A major question here is how long will the benefits last, how long will it take to achieve their goal, and will they continue to be loyal to their NFT holders if the floor comes out? I won’t rule them out yet, but their NFT may bring more problems than they wanted. I have a feeling their inner circle made money and their fans paid for it. This likely is going to become a freemium NFT for holders.
Okay, whew. I started with “when does this end,” then talked about how the space is evolving, and then talked about two newer projects.
What’s the point of this?
My point today is that were going to see more and more and more NFT projects come out. Right now it is a
golf gold rush and many projects are trying to hoover as much capital as they can from buyers. Were not at our peak yet, but we will be soon, likely mid 2022. We’re still learning and we need time to learn.
What’s going to happen is two things that hopefully balance each other out, but likely will not.
1) projects are going to learn from each other, figuring out how to sell the most NFTs in order to hoover capital. Not good. This is going to come in the form of huge promises and likely failed delivery.
2) projects will learn from each other on how to deliver value to their NFT holders. This will come in the form of under promising and over delivering. And community. At the end of the day, the strength of NFTs are in the community. Creators need to be aware of the power of
My advice to creators (and buyers), is to be aware if your project is falling into the second camp. How much are your promising? Can you achieve that? Will you give up if your floor falls? Learn as much as you can from the community. Build and act on behalf of your community.
Also, if you say you’re going to build a casino-restaurant-lounge-festival, then build a casino-restaurant-lounge-festival.
Agree? Disagree? Comments? Questions? Let me know! Possibly some typos.