After a Tough Breakup, NFTs Found Their Rebound: Communities and Unique Incentives
July's Update
Somewhere, right now, in a Discord group:
“Bro should I sell, I think it’s all over”
“Soft. This game isn’t built for the faint of hands 💎💎💎”
“It’s a sunk cost, it was fun to tell people I owned a JPEG, but no one cares anymore. Want to buy it from me?”
“Absolutely not”
Why NFTs are treated like the Bernie Madoff of assets
The more society talks about crypto art and uncreative digital collectables as THE use case for NFTs, the further away we stray from the core purpose of NFTs. The raison d'etre for NFTs is to build communities around an idea, business, or creator. These communities provide an opportunity for everyone, from the underdog to the superstar, to make a living doing what they love by capturing the maximum consumer surplus from their loyal fan base, as laid out in the widely circulated 1000 True Fans blog post. Unfortunately, I have to do the walk of shame every time I leave my house as someone who runs an NFT Agency, as everyone shouts “NFTs are a scam” or “my JPEG isn’t worth a penny, and I paid $1,500 for it yesterday”.
For some, NFTs were just another way to make a buck quickly. It’s another speculation market for them, like BTC or meme stocks. Like with all markets, there will be winners and losers, but my guess is most of these market participants will lose, because they aren’t seeing the forest for the trees.
While 2021 has certainly been The Year of the NFT, exuberance for the majority of the market is nowhere near where it was 4 months ago.
The trailing 30-day sales volume and number of transactions are $82M and 160k, respectively. On March 18th, they were $255M and 180k (The Non-Fungible). While prices have come down by 64% ($1,416 → $512 avg.), there are plenty of bright spots in the NFT world.
While the decline is noticeable, perspective here is critical. Total sales in the first half of 2021 were $2.5B, compared to $13.7M in the first half of 2020 (Reuters).
NFT sales are bouncing back
There has been a healthy bounce back from 2021’s low, as weekly sales volume since May 2021 has grown 120% month-over-month, reaching $78M in the last week of June (Dapp Radar, The Block).
The sales rebound since May has not been driven by the same Minute-Made NFT pablum that propped up the market in Q1’21 but rather by well thought-out NFT projects that deliver strong digital first-impressions, build natural communities, and offer incentives that can’t be found elsewhere.
Version 1 of NFT Avatars: strong first impressions (digitally)
As our physical and digital worlds collide, as our Instagram and Twitter personas become how people first meet and interact, the importance of first impressions digitally is paramount. NFT Avatar projects such as CryptoPunks are collectables that serve the purpose of allowing individuals to represent themselves online across various platforms. NFTs allow us to play the same social status games we play in the physical world in the digital one.
CryptoPunks were released in 2017 as one of the first NFT projects, and only 10,000 of them will ever be minted, each with varying degrees of algorithmic rarity. Recently, the Institute of Contemporary Art in Miami just announced they have acquired a CryptoPunk, marking the “first NFT to enter a major museum collection.” CryptoPunks are the new Rolex.
There are a number of popular NFT Avatar projects listed below, which in aggregate generated $350M in secondary sales in Q2’21 (Messari).
It’s important to realize that there are countless NFT Avatar projects that will never accrue financial value or a community. Projects that lack narrative development and community engagement do not last longer than a millisecond, as people buy, speculate, and quickly forget.
Version 2 of NFT Avatars: The Roman Forum and a new micro-economy
“Community” is one of those words that has the stench of Silicon Valley all over it, like “disruption”, so I try to avoid it. However, when done correctly, NFT centered communities legitimately feel like Roman Forums, where those who wish to participate can gather to discuss, debate, and vote on the future. Projects that create natural evangelicals of their Avatars have succeeded.
One such project, The Bored Ape Yacht Club (BAYC), is effectively a membership, allowing holders to access private metaverse locations and participate in community discussions. There is a communal art wall where members can add doodles to a never ending mural. It has seen $70M in trading volume since releasing in May (The Street).
BAYC takes “ownership” to the next level. Owning a BAYC NFT allows you to commercialize your digital avatar, such as selling t-shirts or artwork without fear of Copyright infringement. Most NFTs do not grant the buyer access to the intellectual property of the NFT, as they are explicitly for viewing purposes only. BAYC has opened the IP door of to the NFT world, creating an entire micro-economy by allowing creative buyers to increase their ROI and utility of their NFT holdings. Buyers can become marketers. You own the rarest Ape in the BAYC collection? Feel free to place it in a Porsche advertisement.
The Bored Ape Yacht Club (BAYC) is an NFT community that created 10,000 unique digital ape avatars that provides owners access to special features such as a digital graffiti wall called The Bathroom. Source: BORED APE YACHT CLUB
Incentives that can’t be found elsewhere, commemorated into collectable NFTs
What do you get when you mix super-fan experiences with digital collectibles that point to iconic moments in history?
Answer: high prices.
Much like how sports fans point to owning sports cards as owning a piece of their hero’s career, NFTs allow fans to not only to own, but to engage with their heroes.
This year, the Golden State Warriors auctioned off a “Golden Ticket” on OpenSea, combining 74 years of historic Warriors moments into one digital ticket stub. Along with the digital collectible, the winner is eligible to sign a one-day contract with the Warriors and participate in a shoot-a-round with the team before the game.
The Los Angeles Dodgers followed suit, releasing a 1/1 NFT package that includes: the NFT, a physical 2020 Dodgers World Series Champions ring and a VIP first pitch experience at Dodger Stadium.
Before NFTs, these types of experiences may have been auctioned off at a charity, severely limiting the number buyers that would see them. Furthermore, without an NFT component, there’s no possibility of monetizing from secondary or tertiary sales.
We.new, a brand new marketplace co-founded by Beeple (the $69M man), has built a unique physical display device for purchased NFT clips, similar to a trading card display for a rare Rookie card. Their highest value offering commemorating Andy Murray winning Wimbledon sold for $177,777. The highest bidder received a 30-minute hitting session with Andy, VIP Wimbledon 2022 seats, and the physical screen that displays the clip (pictured below).
New Projects:
The first NFT feature-length film, starring Anthony Hopkins, will debut on Vuele.io Summer 2021
Vuele.io is betting that the DTC model that has proven successful in eCommerce will translate to movies
Fox Corporation invested $100M into a new NFT Studio with Bento Box Entertainment to help show creators utilize NFTs to connect with their fans
Notable recent NFT sales:
Creator of the World Wide Web, Tim Berners-Lee, sold an NFT representing the web’s source code at Sotheby’s for $5.4M
FEWOCiOUS, the 18-year-old Trans Artist, sold NFT artwork depicting his life story at Christies for $2.1M
An investment vehicle, Republic Realm, purchased a patch of virtual land in the blockchain-based metaverse Decentraland at auction for more than $900,000
Sotheby's recently auctioned their first CryptoPunk, one of which fetched $11.8M at auction
Talk to us!
If you are looking for an expert* opinion on your NFT project, or want to talk generally about the market, please reach out for a no-obligations 20 minute phone call. We have a number of technology partners at En Passant Digital that help us execute layered NFTs, some of which may be helpful for your project.
Let us know what you’d like to read about in our next edition. This is a new initiative, and we want to make sure it’s as useful as possible.
Email: bryce@enpassantdigital.com
*Anyone who claims to be an expert is a charlatan. They are generally snake-oil salesmen who probably also told you to buy OneCoin. From the last 4 years of our experience, we’ve realized that there are no experts in the space, as it changes by the second.
About the author: Bryce Baker is the co-founder of En Passant Digital, an NFT-focused agency bringing innovative market guidance and strategy to top-tier brands & celebrities.
Our other co-founder, John Tabatabai, has led investments for Crypto VCs and consulted for projects across the NFT space. He recently had an active role in advising, designing and creating the mechanics and infrastructure for the famous B20s, aiding in creating more than $250,000,000 of value in less than 45 days.