NFTs are here. They’re no longer fringe. Specifically, art and collectible NFTs have gone mainstream with breathtaking speed – faster than even the most starry-eyed, to-the-moon crypto bull could have dreamed. We now have a better idea of why. As I wrote in the beginning of this cycle, NFTs (especially art and collectibles) are fun, visualizable, culturally relevant and they’re easy to understand in a way that many blockchain concepts are not.
Then there’s the development that many in the space – myself included – dramatically underestimated: the community angle. The social angle. When you pony up for a Bored Ape Yacht Club, CryptoPunk or World of Women NFT, it shows that you get it. It shows that you belong in the club. “People identify with them on a personal level,” said Maria Shen, a partner at Electric Capital, a blockchain-focused venture capital (VC) firm. “Ownership says something fundamental about their identity; it says something about their interests.”
Only a year ago, art and collectible NFTs were mostly ideas with “potential,” but no one outside the crypto space took them seriously. What categories today are in that same phase of early speculation, which are likely to erupt? What goofy-sounding NFT will get endorsed by Tom Brady in 2022? What bold, industry-disrupting NFT will Ariana Grande promote in 2023? What are the next chapters of this wild narrative?
I consulted with a brain trust of NFT insiders – investors, founders, people who live and breathe non-fungible tokens – to give us a glimpse into the (possible) future. Some of these categories will seem obvious. Some will seem far-fetched. Some might even feel absurd. Yet considered en masse, they have the potential to change how we consume content, how we spend and make money, how we prove our identities, how we attend events, how we dress or even how and where we spend the bulk of our time.
Jamie Burke, CEO of Outlier Ventures (a U.K.-based blockchain VC and accelerator lab), was originally encouraged by research showing that “people spend five times more in a blockchain game than in a conventional game.” He said that skeptics originally “poo-pooed” this research, but then came Axie. The Axie juggernaut is proof, said Burke, that if the gamer can exit the game and cash out with crypto, and if they’re free to “do whatever the hell they want with the money,” then they’ll spend more money. “It feels really obvious now,” he said, predicting that Axie is just the very beginning of a much larger boom in gaming that will be “huge in the next decade.”
Just two weeks earlier, at London Fashion Week, a new brand called Auroboros, which describes itself as “the first fashion house to merge science and technology with physical couture,” unveiled a line of digital apparel that you “wear” using augmented reality (AR). For perspective, this was not at a crypto conference. This happened at London Fashion Week.
Fashion wearables might just be scratching the surface. Shen imagines that NFTs could create new ways to monetize and invest in fashion. Take sneakers. “In order to flip a sneaker you have to take the physical inventory,” she said. “Imagine if you could increase the speed in which you can flip items.” Or maybe new financial instruments, fueled by NFTs, could allow people to invest in the fashion sector. “You can create financial products, like an index of the top-selling sneakers today,” said Shen, which could let you invest in a pool of the 100 hottest sneakers, for example, instead of tossing the dice on a single pair.
Think about that loan. When you hand over the CryptoPunk as collateral, you automatically get it back when you pay off your debt. And if you default? Thanks to the wizardry of smart contracts, the NFT gets transferred to the lender, eliminating the need for debt collection and bounty hunters. That’s just the beginning. As my colleague David Z. Morris has written, NFTs are being fractionalized (to provide more liquidity), they’re acting as quasi-securities and they’re becoming finance-y enough that they might soon curry interest from the U.S. Securities and Exchange Commission (SEC).
Burke expects the innovation to continue at a rapid clip. He imagines a rise in secondary markets, or even “derivative” markets. Imagine that for whatever reasons, Epic Games decides not to integrate NFTs into Fortnite. Perhaps some derivative NFTs could fill in the gap? “Let’s say I’ve got a sword, and it’s a really valuable sword,” said Burke. “And I want to cash out of the game. The sword is so valuable, it has the ability to pay off my student loan, or buy a house.” He continues, clearly enjoying the thought experiment: “S**t, I love my sword but I need the cash.”
In that vein, Burke thinks it’s far more likely that we’ll see growth in the new, creative, blockchain-enabled financial products before we see the NFT-ization of things that already exist in traditional finance, such as the deed to your home. “Where’s the growth in DeFi going to come from? In this regulatory environment, it’s sure as s**t not going to be real-world assets, or anything that remotely resembles a security,” said Burke. “That’s going to be a decade-long fight.”
This future is closer than you might think. “What excites us is NFTs being used in the real world,” said Carolin Wend, co-founder of Mintbase, an NFT-minting platform. Take an upcoming festival in Lisbon, the NEARCon, which is anchored around the NEARProtocol, a smart contracts system that Mintbase uses instead of Ethereum. “The festival founder wants to do 100% NFT ticketing,” said Wend, and this could (one day) include “staking” your ticket, meaning that you could earn a profit on what you plunk down for the ticket.
Remember those Dolce & Gabbana NFTs? Now imagine that you’re the lucky person who bought one. Pretend you’re the proud owner of the crown jewel of the set – literally a crown – called the “Doge Crown,” an almost comically ornate piece of jewelry. (Alas, the “Doge” refers to the Doge Palace in Venice, not the Shiba.) The crown looks like it came straight out of “Game of Thrones.” How do you store it? Maybe you keep the physical crown in your private vault, or perhaps you showcase it, modestly and tastefully, atop the throne room in your Mykonos villa.
But what about the digital NFT? What do you do with it? Or as Burke puts it, “Where do you flex that?” Think about it from Dolce & Gabbana’s perspective. “If you’re a high-end luxury brand, it’s all about controlling the retail experience,” said Burke. He guesses that trying to render such a lovely, intricate crown in a pixelated metaverse like Decentraland might – at least in today’s version – make for a “pretty sh**ty wearable.” (Burke notes that for this very reason, Dolce & Gabbana is giving the buyer of the NFT two years to figure out where to render it.)
So Burke predicts some kind of environment where people can gather, chat and flaunt their NFTs. Maybe it’s a form of AR, or maybe virtual reality (VR), or maybe something Web 3.0-ish or maybe something else entirely. The point is that there needs to be a good environment for experiencing NFTs. “What are the platforms of networks? That’s going to be the big trend,” said Burke.
Shen has a similar idea with a different twist. She envisions “a home for NFT communities,” or, more precisely, “a social network that’s made for NFT owners.” Perhaps this network is connected to your wallet that owns a Bored Ape, and it can only be accessed by verified users who own certain NFTs.
A wise investor once said, “Land. It’s the one thing they can’t make more of.” The investor was Lex Luthor. And his advice might ring true in the metaverse. Virtual worlds like Decentraland, The Sandbox and Cryptovoxels give their real-estate a hard cap, meaning that – in theory – a finite supply will become more valuable if the demand soars.
“This is quite promising,” said Matty “DCLBlogger,” an influential voice in the NFT community who has been something of an oracle, dashing off a widely-shared Twitter thread in 2020 – over a year ago! – that outlined 25 future use cases of NFT. The thread looks prescient, correctly calling the rise of art, collectibles and gaming. Matty is just as bullish on virtual land. “Look at Axie Infinity,” he said. “There are a million-plus players,” and some of these players will think, “maybe it makes sense to own that land.”
Once you begin to wrap your brain around the idea that people could profit from digital real estate, the possibilities are dizzying. Maybe you own a plot of land, you build a virtual office building, and then you rent out the building for a virtual conference. And when the conference attendees want to blow off some steam, maybe they’ll want to gamble during their cocktail hour, so you rent out a casino game that lets them win and lose real cryptocurrency. As Matty said, “It gets real crazy.”
Self-sovereign identity (SSID) has long been one of the most intriguing applications of blockchain technology, and NFTs could be the key that unlocks the door. (Why does SSID matter? Here’s my primer from last year.) Laglasse views Ethereum Name Services, or ENS, as a useful example. “Now you can link your Instagram account, your Twitter account, and almost every social media account to ENS,” said Laglasse. “Since it’s decentralized, you can truly own the name you show to the community.”
Laglasse categorizes these as “Utility NFTs,” in the sense that you can’t typically exchange them for money (like art and collectibles), but instead they exist to prove that you own something. Another idea in the same vein: NFTs of college diplomas. This would let a Vietnamese student travel to the U.S., for example, and decisively prove that she has a diploma. Laglasse predicts, “It’s going to happen one day.”
This one’s a little squishy, a little tough to visualize. But stick with it. “Think about all the digital value created through social media platforms,” said Burke. He’s referring to that elusive and hard-to-quantify concept of “online influence.” Currently, Burke argues, the only real way to monetize that influence is through advertising, and the influencer only earns a small slice of the revenue pie. But what if this influence could be quantified, scored, and captured as an NFT?
This “Influence NFT,” let’s call it, wouldn’t be as simple as just rewarding the number of Twitter followers. “It’s a form of atomized socialness,” explained Burke, where “I can atomize every bit of content, and I can quantify the relationship I have with my community.” He said this NFT might factor in variables like online reputation, trustworthiness or even the ability to curate and create good content. “This is the hardest one to explain,” he said with a laugh.
Remember the “Klout” score, in Twitter’s early days, where an algorithm tried to quantify users’ social mojo? Klout never seemed to catch on, and it went belly-up in 2018, but you can see the idea’s (arguably evil) appeal. “Literally any form of digital value flow could, in theory, be turned into an asset,” said Burke, who also envisions this NFT being plugged into a DeFi ecosystem, such as being used as collateral in a loan.
Shen thinks of this concept as a more refined version of a credit score, but one for credibility and influence. “You can actually have NFTs that form parts of your identity and reputation,” she said. She points to the example of Rabbithole.gg, where users can earn cryptocurrencies, tokens or NFTs by proving that they have certain skills or have completed certain tasks, such as registering for an ENS name.
Steinwold likes another example: Galaxy.eco aims to use on-chain data to reward people for certain verifiable activities. Maybe if you have 1,000 trades on Uniswap, you earn a Master Trader badge. Or if you’re a big and longtime holder, you get Diamond Hands. Maybe I should mint you an NFT if you can prove you’ve read this far in the piece.
Or maybe NFTs, music and DeFi could all merge. “If music masters could be actually pooled and then fractionalized, you could then receive income as dividends for streaming,” said Shen. She then whips up another possibility: Imagine if the rights to each song are captured as an NFT, and then you pool together the top 40 songs of the month, you fractionalize the pool, and then you could buy a piece of that pool and receive streaming income. “That would be interesting,” she said, “We just haven’t gotten to that point yet.”
NFT Search: “Right now, NFTs are this interesting but muddled and chaotic category,” said Shen, adding that they “look a lot like websites in the 90s before Google came in.” She has a point. There’s no clean search function for NFTs … yet. Imagine a Google for NFTs. Or a decentralized Google for NFTs.
“We’re spending most of our waking hours online,” Steinwold reasons, arguing that this is a trend that will continue to accelerate in the next 20 or 30 years, and that soon “we’re going to have a lot of digital goods.” In the future, said Steinwold, if he buys a cool pair of Air Jordans (physical ones that go on your feet), he’ll want its NFT companion. He’ll want the NFT so he can flaunt it, flex it and perhaps to use it in a metaverse or a play-to-earn game.
This content was originally published here.