NFT’s: a new instrument for innovative business models (not just JPG’s)

Controversial Dinner Topics for Thanksgiving 2021: Crypto & NFT's

There is no shortage of controversy for dinner table debate this Thanksgiving in the United States.

Outside of vaccines and the pandemic, social and economic inequality, the pending Supreme Court ruling on the Texas abortion law, and politics overall, one of the popular topics at the dinner table will likely be Crypto.

A recently published survey showed nearly 2/3 of the GenZ’ers and nearly half of Millennials surveyed believe they’ll become crypto millionaires.

If you didn’t have a topic to spark a fight at the table between boomers, X’ers (the best generation), millennials, Z’s, there you go. 

To be honest, this is huge part of the issue when rational people want to discuss the merits of a new method and protocol that, once refined, has the potential to transform nearly every business sector. 

Last week, we discussed NFT’s as the digital velvet rope of Web3. But as a counter-punch to the scam narrative that rug pulls and seven-figure JPG’s have provoked, there is legitimate value creation happening and emerging use cases for NFT smart contracts that apply to a wide variety of business segments. We’ll highlight a few below.

The key is—we are early—much of the infrastructure and application within blockchain is just getting starting and new innovative applications will be developed over the next few years.  

Gaming

Gaming is a natural use case for NFT’s because it’s native to the gaming experience—today represented as game packs, or in-app purchasing. However, one example, Axie Infinity, a new virtual world, has emerged as a viable and valuable model for new gaming applications on the blockchain. Axie requires an NFT purchase to join the “Pokémon”-like game where you battle other characters. But unlike Pokémon, each character is unique and minted on the blockchain and evolves over time based on the investment and time spent within the platform. To “train” your character for battle you invest in a P2E and marketplace model. More importantly, each member in the community is invested in their Axie Infinity token, which has appreciated from $.14 USD to ~$128 USD. As the number of daily active players expand, additional value is created for these users because they are vested in the economic success of the ecosystem. It should be noted that the game is not available in the App store(s). It is only available via browser or side-loaded on Android devices, which makes this destructive to the Google and Apple App store marketplace monetization model in the future.

Fashion & Apparel

Italian fashion brand Dolce & Gabbana (D&G) dipped their toe into the NFT fray with a series of NFT’s that included ownership of digital and physical art and access to real-life experiences. The highest grossing NFT, Doge Crown, was awarded to a winning bidder for 423 wETH ($1.8M). The exclusivity, scarcity and signaling that can be created in the World of fashion makes it a natural model for limited series NFT’s—and into the future Metaverse. More broadly, the combination of apparel and gaming is an exciting one with Nike filing multiple patents on the future of “virtual” fashion.

Sports

Sports collectibles is an easy one. Between the trading card and memorabilia market, migrating these to digital profiles is a natural. However, there are new interesting applications that have emerged that take advantage of the unique qualities of the Web. NBA Top Shot and NFL’s pending partnership (NFL x) with Dapper Labs that allows users to “own” highlights from famous or noteworthy plays, games and players and showcase them in their social and virtual profiles. Part of what we are building at Data+Sports is a web3 social platform for sports fans and sports wagerers, creating a new sports focused community that can leverage the trading, signaling of sports-related NFT’s, to empower creators to build their own NFT’s.

Music/Events

The music industry has been disrupted many times, but the future of music and events may lie in the smart contract which can help distribute proceeds for any transaction to the litany of entities in the music ecosystem (labels, writers, publishers, artists, promoters, etc.), and allow new businesses to be built through token raises, giving “ownership” to fans.

Media

In many ways, each industry on this list is media. But for the purposes of this discussion, we are categorizing media as the ecosystem of media distributors (publishers, broadcasters, MVPD’s, platforms), content creators (production companies, talent, etc.) and advertising technologies (creative optimization, measurement, programmatic, verification and audience targeting). The current business models around media, though valued at more than $2 trillion USD globally, are in the early stages of disruption. The Walled Gardens (Alphabet, Amazon, Apple, Meta) capture the vast majority of advertising revenues globally. Regulation (governmental and platform), designed to reign in these dominant platforms, have only emboldened and entrenched their power, and traditional media companies’ primary defense is in mergers to leverage shared services and low-cost debt to compete. With the emergence of Web3, there are new paths that can transform the industry. The combination of play/attention to earn, powered by dynamic currencies fully integrated into the media applications, and an incentive and governance structure that turns the community from tenants into “owners” can be the flywheel in the future of media. A model that we are embracing at Data+Sports, is similar to what Brave has developed with the Basic Attention Token ($BAT), that developed a user and content owner incentive program with a fully integrated wallet at the core. This has the potential to transform the zero-sum game in media to a cooperative game theory inspired community model where everyone wins.

Next week we’ll dig-in further on decentralized applications for media…

Have a Safe, Healthy and Happy Thanksgiving everyone.

Thanks,

Mike