The Real Problem With the Last NFT Boom
By Omri Lachman, CEO and Co-Founder of LEAP
The emergence of Bitcoin and crypto over a decade ago sparked in early true believers the hope of a financial utopia, where everyone could break their dependency on banks and a new era of economic prosperity for retail investors would be ushered in. Yet despite demonstrating the potential to promote financial inclusion and provide other benefits, crypto and its underlying technology, blockchain, has too often been exploited by the very wealthy and cyber criminals.
Over the past two years, NFTs emerged as the latest iteration of crypto’s promise, this time to empower little known artists and open high-end art investment to retail investors. In practice, however, much of the last NFT boom was driven by celebrity hype and corporate greed, which pundits were correct to call out as a cash grab for many companies as well as the celebrities themselves. The million-dollar crumb Paris Hilton swept up from selling her “Iconic Crypto Queen” NFT is an insignificant cherry to top of her $300 million net worth.
NFTs played a major role in crypto’s last bull run, but if they are to contribute to a future bull market, they are in dire need of a makeover.
In search of a new use case
The key to this makeover, or a new use case, may lie in providing some sort of utility, rather than just ownership of a few lines of code. The idea that NFTs need to offer utility to thrive has become a failed cliche at this point. That doesn’t mean it isn’t true, but it does miss the deeper problem with the market today. The root of this problem is that NFTs don’t actually serve the underdog (in this case, little-known artists and retail investors), an idea supposedly at the core of crypto, blockchain, and ultimately the entire Web3.0 industry.
The idea that NFTs’ main utility over the past few years was to make already-wealthy people even richer contradicts the very idea crypto, and by extension NFTs, are meant to represent. The original idea certainly didn’t aim to establish a mechanism for celebrity endorsements, corporate exploitations of loyalty, and pump-and-dump schemes.
It’s safe to say that these are key factors behind the decline in NFTs taking place. In June, weekly NFT sales dropped by over 70 percent from a high of nearly 1 million units in January. Investors are also losing faith in the once nascent technology, as NFT resale profits dropped 46 percent between the first and second quarters.
Returning NFTs to the little guys
Instead of relying on celebrity hype, an alternative use case for NFTs could support and empower up-and coming musicians, artists, athletes, and other types of content creators. These self-starting individuals work hard to promote themselves and build their followings in hopes of becoming a star one day.
But in the constant competition for attention, social media algorithms often tend to play gatekeeper for certain types of content. This makes it hard for certain individuals to monetize their work or get the same amount of exposure as, for example, someone who publishes cat or dance videos.
NFTs represent an opportunity for these types of up-and-coming stars to connect with and expand their fan base. At the same time, these NFTs would serve as an investment, whose value would be determined by the talent’s future success. Ideally, these NFTs would be purchased directly from the talent, enabling them to support their own endeavors, while providing exclusive access to the talent along their journey to stardom—think of the perks Patreon subscribers receive.
Imagine a 17-year old street musician with a modest social media following who wants to raise money to record a full-length studio album. The money she earns from busking is minimal, so she turns to an NFT launchpad geared toward empowering independent creators, influencers, and talents to aid her with the technical side of the launch. Now, when she performs in public she can promote her NFT collection to passersby. These people might stop and realize she has a real star quality and decide to purchase her NFT to support her album while simultaneously investing in her future.
Ideally, the NFT holder would gain exclusive access to the talent’s content. For a musician it could be free song downloads on Apple Music or behind-the-scenes access at a concert, and for a rising star athlete it could be free merchandise or exclusive entry to workouts, tryouts, or competitions. This type of use case provides a unique type of utility and an asset that possesses a real potential to rise in value over time, while boosting a young talent’s dream of stardom.
The utility and potential value this idea provides NFT holders along with the idea of supporting aspiring talents can help revive the NFT space. The biggest challenge to this concept is making sure that any platform that helps the aspiring talents create and market their NFTs doesn’t bleed them dry. While there is nothing wrong with profiting off this idea, the motivation needs to be aligned with the original principles of crypto and Web3.0.
The last bull run fed big companies and celebrities, but the next one could potentially serve blockchain’s democratizing principle by allowing a new generation of young talents to make a name for themselves.
About the author:
Omri Lachman is a serial tech entrepreneur and executive with over 15 years of experience in launching and scaling disruptive ventures across various impactful markets. He is CEO of LEAP, a next-generatIon sports-discovery and endorsement platform, which he co-founded in 2021. Omri has dedicated his entrepreneurial journey to steer innovation through groundbreaking technologies, inspiring to change and improve our day-to-day life in a profound way, on both consumer and enterprise fronts.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.