The following represents the last of three parts which together comprise the NFT Technologies Manifesto. Make sure to read through Parts I and II to understand the full scope of the problems we aim to solve.
As NFTs and blockchain technologies are growing, an increasing number of people and entities are growing interest in this space. Thus far, most of the biggest actors in the NFT ecosystem are ones that were early adopters and were not necessarily leaders in the pre-NFT world. In fact, the NFT ecosystem has led to the creation of new celebrities, companies, brands and even athletes.
With that being said, incumbents are increasingly willing to enter the NFT world. For instance, some of the well-known celebrities and companies of the past 20 years have purchased NFTs including Jay Z, Stephen Curry or Visa. However, the barriers to becoming an actor in the NFT world remain high thereby preventing a multitude of incumbents from entering this space.
In Part III of our Manifesto, we examine some of the opportunities and barriers preventing incumbents from profiting of the NFT ecosystem and outline how we plan to advance solutions through our third core vertical. We will cover the following subjects:
In a timespan of a couple of months, the NFT ecosystem has created new type of brands worth millions of dollars and growing at a very fast rate. NFT projects like Bored Ape Yacht Club (BAYC) and Cryptopunks constitute the next phase of commerce and can be thought of as full spectrum brands with a defined revenue and a large set of customers. However, unlike their physical brands counterpart, NFT projects focus on providing utility in the virtual world and not the physical world.
Building a brand in the virtual world through NFTs is very rewarding and can be very lucrative. This is the case for a few reasons:
First and foremost, building an NFT project in the virtual world provides favourable unit economics. Once the project is created, NFTs do not occur any cost of good sold and hence have large profit margins. Moreover, unlike physical assets, NFT projects often profit from the re-commerce activity associated with a sale of an NFT. Perhaps, it is not uncommon for an NFT projects to take an up to 10% take rate on every secondary sale of an NFT.
Secondly, because of the interconnectedness inherent to the virtual world and enabled through platforms like Twitter and Discord, virality is a lot more common for NFT projects. Growth of NFT projects has been astonishing and arguably no physical brand has been able to grow as fast as some NFT projects.
Last but not least, the virtual world is itself expanding at a very fast rate. There is an increasing number of people joining it every day and at this point, it is hard to imagine a future without virtual only brands.
When entering the virtual universe/metaverse, NFT brands have truly redefined the rules and processes of launching a successful brand, making it very hard for incumbents to enter. Each step of the value chain of launching and growing a brand is different for NFT projects.
NFT projects offer utility in the virtual world that can be analogous to the utility of incumbents in the physical world. This utility serves a lot of the fundamental human needs like providing social status and a sense of belonging. However, the processes of interacting with one another in the virtual world are fundamentally different. This has led to the design of NFT projects being radically different to the ones of physical projects. In fact, NFT projects tend to be more futuristic and colourful compared to the ones in the physical world. They also have less defined shapes and forms, they can be avatars, videos or even just text. A brand having physical objects therefore needs to completely shift its design trajectory in order to be successful in the virtual world.
Since NFTs lie in the virtual universe/metaverse, their “manufacturing” is very different from the one of physical objects. Once the design is developed, the creation of an NFT requires minting it in a blockchain. With the large number of blockchain protocols and standards, and the technical difficulties behind each one, it would be very difficult for an incumbent without an decent understanding of blockchain systems to adequately mint an NFT collection.
The theoretical codes and processes behind marketing are universal. They primarily include targeting the customers where they are and focusing on social proof (i.e. Influencer marketing). While these codes remain applicable in the virtual universe/metaverse, the platforms under which they operate are different.
Although a great deal of NFT projects also rely on influencer marketing, the NFT influencers are quite different from the ones of physical consumer brands. Many NFT influencers are for example anonymous and very difficult to contact.
Moreover, while most of physical consumer brands target their customers through the likes of Instagram and Tik Tok, NFT projects tend to grow through Twitter and Discord. Beyond this, new platforms are also constantly emerging. For instance, play to earn games are paving the way for people to interact with one another in the virtual world and marketing processes in these games are still to be defined, even for current NFT projects.
Recently, the gaming world has seen the emergence of a new business model enabled by NFTs: the play-to-earn business model. This model differs from its predecessors in that it centers on making gamers the primary beneficiaries of a game’s success. This has led to games becoming their own self-contained economy. Games are becoming digital nations and gamers the inhabitants of these nations; as a result, the growth of these games has been astonishing. To date, the largest play to earn game is Axie infinity. It has more than 1 million players and more than 60% of the players earn more than $1,000 a month.
Despite the large opportunities that these emerging games/ “digital nations” present, entering and profiting from one of these “digital nations” remains a challenging task for individuals and for brands.
For individuals. the challenges are in the capital and knowledge required to take part in the play-to-earn economies. Even though these games are free to play, players are required to purchase various in-game assets in order to progress in the game. For instance, in Axie infinity, players are required to purchase 3 Axies to start playing the game. At the time of writing this article, purchasing 3 Axies would require a minimum of $1,000. This sum of money is quite large for citizens of third world countries like the Philippines or Venezuela; communities that would likely be driven to take part in such games.
Since these play-to-earn games are becoming so-called “digital nations”, incumbent brands can profit from them as new platforms for sales and marketing. However, there are many challenges inherent to that. First and foremost, it is difficult for brands to determine which game to partner with and more importantly how to partner. Gaming companies can look very opaque from the outside and for an incumbent brand, it is very difficult to determine how to best contact them and how to best position their brand.
As previously mentioned, it is very difficult for brands and creators to launch a successful NFT projects. New skills and visions are required for successful adaptation to the virtual world. While very few tools and agencies are present to help incumbents adapt, NFT Technologies aim to bridge that gap through the first piece of its studio: its launching business. NFT Technologies’ launching business will focus on building products and services for select creators and companies to prepare and organize their own NFT launch. These products and services will allow to analyze the customer's brand, audience and platforms to determine what type of NFT may work best for them. Any work required to develop and mint the NFT, such as coding, video editing and other creative work, will be done in-house. After the NFT is created, the company will organize and execute the launch in collaboration with the creator to maximize attention and traction.
As play-to-earn games are becoming more popular, entire digital economies are developing inside these new virtual worlds. These digital economies have been attracting an increasing number of people. Perhaps in countries like the Philippines and Venezuela, it is not uncommon to see people living off play to earn games. However, as these games are becoming more popular, the barriers to enter and profit from the games are increasing. NFT Technologies studio enters in revenue share or loan agreements with select individuals and provides them with capital, assets and knowledge to allow them to successfully profit from in-game digital economies. Through its expertise, network (including head of partnership at Decentraland) and capital, NFT technologies has the capability to acquire the right in-game assets and leverage them to serve as an on-ramp for new players in the game.
To conclude, we believe that NFTs are arguable one of the first signs of the metaverse. In this metaverse, the codes of operations are fundamentally different for brands and for individuals. We believe we are best positioned to take advantage of this gap and to serve as one of the gateways to enter this new world.
Barlow, J. (2021, July 21). Axie Infinity: A Deep Dive. Retrieved from The Tie: https://research.thetie.io/axie-infinity/
Christanto, M., & Nystrom, M. (2021, March 10). NFT Marketplaces: Valuing the eBay and Shutterstocks of NFTs. Retrieved from Messari: https://messari.io/article/nft-marketplaces-valuing-the-ebay-and-shutterstock-s-of-nfts
Laursen, M. (2021, July 2). Play-to-Earn, and the New Economies of Video Games. Retrieved from TechNative: https://technative.io/play-to-earn-and-the-new-economies-of-video-games/
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