Exploring the NFT Future…in Person

tl;dr: What I saw and learned at the world’s leading NFT event, NFT.NYC

Back in March 2021 when the artist, Beeple, sold his artwork at Christie’s for $69 million, it made really big headlines.

The news was significant not only because it was one of the most expensive pieces of art ever sold by a living artist, but because it was sold as an NFT, or Non-Fungible Token.

We’ve talked about NFTs before, but in brief, what NFTs do is go above and beyond what “normal” digital assets do, by extending provable digital scarcity into the realm of provable digital uniqueness.

Think of it this way. One quarter is like any other quarter. You’ll gladly trade yours for mine because they are ‘fungible.’ 

A baseball with Mickey Mantle’s signature is not “fungible” with another baseball, even if it was made in the same manufacturing plant on the same day. Even two baseballs that both have a Mantle signature on them are unique because of the backstory associated with each one.

This concept that two things may be of the same mold or even look alike, but are uniquely different underpins the idea of NFTs, something that is made possible by the arrival of decentralized technology (e.g. blockchains).

I bring all of this up as context for where I spent 3 days this month, in New York, at the premier NFT event in the world, appropriately named NFT.NYC

Hyped…and Here to Stay

What I saw was simultaneously both the acceleration stage of yet another massive crypto-industry hype cycle AND the arrival of a disruptive force that will (eventually) deliver on its promise to liberate large swaths of the artist, music, fashion, and designer industries from the current profit framework, which depends on either large organizations or multiple layers of intermediaries.

In short, NFTs will enable all types of “creators” to establish direct relationships with their community of fans/supporters AND monetize those relationships in ways that are both familiar and completely novel.

A few themes emerged from my discussions, presentations, and observations of the exhibition floors.

• Digital artists are genuinely excited about the possibilities of NFTs
• The ideas for NFT-based business model innovation far outpace the readiness of the technology that is needed to support NFT-based business model innovation. (Spoiler alert: it’s consensus that Ethereum is not the long-term answer).
• The consensus expectation is that the NFT bubble will burst, possibly before the end of 2021

Now that I’ve been through a few crypto cycles, I’ve become a bit more sanguine about the length of time required for this innovation to get deployed in the “mainstream,” despite the success and fame of notable projects like NBA Top Shot. There is still too much friction.

For example, at lunch one day, my friend and I struck up a conversation with the man sitting next to us. He was pitching his idea of a “carbon-neutral NFT” (honestly, I didn’t really follow it) and said “we’re doing an air drop of 8,888 collectibles. Do you want one?”

An “air drop” is basically crypto-speak for a free promotional direct mail campaign with a bit more tech baked in.

What most people at the event do is build NFT portfolios. It might be difficult to pick the winning artist from 100 starving artists, but if you obtain 100 pieces of art in total, all you need is 1 Beeple to get an ROI on the collection.

So, though my personal NFT collection is small, I said “sure.” Here’s where things get rough.

He asked for an Ethereum wallet address. I did not want to give someone I just met an address that had any funds in it (he doesn’t need that info and he can see it all on the blockchain), so I had to give him a “clean” one. Then, I had to copy the address, scan his LinkedIn QR code and send him a LinkedIn message…all so he could send the NFT to me at some unknown date in the future.

Yeah, it’s a hassle for me… and I know what I am doing.

So, as I listened to the pitches of blockchain-based gaming companies, digital artists, multiple kinds of projects doing NFT ‘air drops’ and way too many efforts to connect “real-world” physical items to establish blockchain-based provenance, I could recognize the gaps in the go-to-market strategies as well as the shortcomings of the technology stack strategy.

For example, Ethereum’s base layer (a.k.a ‘Layer 1’) is simply not practical for mass adoption or experimentation of NFT-based business models. And even other chains, like Solana, where some NFTs have gone, do not have the tools ready for mass, and rapid, development, deployment and iteration of NFT-based business models at low cost and with low friction for end users. Good luck getting your Solana wallet set up. That being said, chains like Unique Network (disclosure: advisor) represent exactly the type of platform on which these creators will innovate to find product-market fit.

Bottom line: There’s a ton of new, interesting, and wild and crazy ideas for NFT-based businesses out there, some decent prototypes, and even some launched applications.

The bad news is that far too many of them will die. Most of them, in fact. I mean, I just don’t see the Svalbard Coin picking up steam, but you never know.

As they say, “there will be blood.” When? No one really knows, but the hype cycle, as evidenced by the takeover of the billboards in Times Square by NFT projects and the launching of NFTs by brands such as McDonalds, directors like Quentin Tarantino, who will sell 7 never-before-seen clips from ‘Pulp Fiction’ as NFTs, the team behind Law & Order, and even the United States Postal Service…selling NFT stamps is certainly in full swing.

Liberation of the Creator Class

But none of that changes the critical fact that the people behind projects like Star Nomads or the artist Don Allen III are, to put it mildly, extremely fired up.

What NFTs represent for them is an opportunity to “get out from under the corporate overlords” and get a fairer price for the work they do.

I met Allen casually over lunch and he showed me a glimpse of the future, where artists like he can create outfits and “skins” for the avatars (digital representations of each of us) that are going to inhabit the Metaverse (not Facebook’s version). All of these items will be NFTs and those NFTs will be assets that have “real value.” You’ll be able to put them up as collateral for a loan, buy and sell fractional share art and digital wearables, as well as buy and sell derivatives for them.

But, before we even get to that future, en masse, you’ll be able to buy a piece of digital art (an NFT) that you can “hang” on an actual wall in your home, and which is only visible to people using an augmented reality application on their phones. Soon enough, that capability will be built directly into our glasses/contact lenses and you’ll experience a “mixed reality” world where the wall to the house is yours… as is the digital artwork that you see hanging on it. Even better, unlike an actual frame on the wall, if you decide you want to move it, you can do that with a swipe, just like moving through an iPhone screen.

Today, Allen builds “skins” that he allows people to download in Snapchat or Instagram. He gets $0 for it.

In the NFT-enabled future, he’ll make money for it—as he should. So will millions of others.

And odds are, one day, you are going to own more than one.