NFTs: Empowering the Next Generation of Communities?
A sense of identity and belonging lie at the heart of the human experience. Defining one’s identity is perhaps the most important exercise one can undertake, because it also defines one’s reality. Strong communities and tribes are what allow us to not only survive but also thrive. NFTs provide a new type of community, and offer a digital identity that is easily displayed and instantly recognizable.
NFTs as Identity
First, it’s imperative to understand how transformative and important the digital experience is in the world today. Most would rather go without heat or air conditioning than without the internet. Americans spend nearly 8 hours per day in front of a screen. To many, the digital world is more important than the physical. Those who do not understand the value of NFTs continue to underestimate this dynamic.
Profile pictures (PFPs) may initially seem like a trivial use case for NFTs; but taken in the context of identity and appearance, the value is abundantly clear. The amount of time humans spend getting ready each day is a testament to the value that is placed on appearance and identity in the physical world. Identity & appearance exist in the digital world too, only in this world everything is magnified exponentially. A skeptic once quipped ‘What can you even do with an NFT? Buy a digital frame and ‘hang’ it on your wall?” Gary Vaynerchuk had an apt response (paraphrased): “By using it as a profile picture, I can hang it up on my digital wall (profile) and it can be seen by millions of people each day.” How we represent ourselves online is arguably more important than our 'offline' representation.
An NFT PFP project offers identity and status, and it just so happens to come with a jpeg. The value may or may not lie in the perceived beauty or quality of the art, but it certainly will be found in the perception of the brand & the community behind the PFP. The image associated with an NFT PFP is simply a representation of that community, similar to a mascot or a logo. In this sense, individuals can leverage the existing goodwill and status of existing brands through ownership of their NFTs.
NFTs as Community
Identity is defined by association, and the communities we join help us find our place in the world. Communities offer purpose, a sense of belonging, and a place to simply have fun. NFT projects offer all this and more by adding a built-in, verifiable ownership model on a transparent, immutable ledger. And because they are digitally-native social communities, NFT projects can grow (and die) as fast as the internet can transmit data.
Furthermore, NFT projects offer opportunities for individuals to grow with a brand from the outset. Early believers are rewarded and are able to participate in an evolving organization, which can bring both financial and social benefits. The Bored Ape Yacht Club (BAYC) is the most stunning example.
Within one year, this 10,000 PFP collection of cartoon apes became a multi-billion dollar powerhouse brand at the center of this online movement. Anyone who minted a Bored Ape at launch (cost was ~$200) and never sold, at one point was sitting on $750,000 worth of assets. How is this possible? Yuga Labs, the creator of BAYC, has turned this project into the most desirable online community in the world, with celebrities and influencers joining regularly. Owning a Bored Ape not only offers exclusive access to merchandise and events, but it has also resulted in access to other NFTs created in the BAYC ecosystem. Yuga recently launched its own version of the ‘metaverse’, and could be on its way to becoming the next Fortnite with one key differentiator: the game will be composed of NFTs, enabling ownership of land, artifacts, and characters. By introducing this new permissionless dynamic of ownership, anyone can trade, buy, or sell NFTs in an open and unrestricted manner. The result of such success is that we now find an extremely passionate community, many of whom claim they will ‘never sell’ their ape.
NFTs are nothing more than unique digital tokens which represent ownership. It’s the ownership component that allows NFTs to become such a powerful technology and catalyst in the formation and growth of today’s communities, the most important of which are largely online. The tokenization of communities alters the social and incentive structure, leading to very positive outcomes if done correctly. The current NFT PFP projects are just scratching the surface of what can be done.