The NFT market has been a rollercoaster over the past year. We have witnessed an incredible level of hype help establish a platform for artists, influencers, and brands, to monetize their digital assets. At the extreme end of this, artists like Mike Winkelmann (AKA Beeple) sold a piece of digital art for $69M (The Verge). This comes less than a year after he was selling pieces for just $100, so it’s not exactly surprising that NFTs have simultaneously been lauded as next generation collectibles and criticized as an inflated bubble of useless aggregations of pixels.
While the jury is still out on the future of NFTs, there is one word above that can no longer be associated with digital assets: useless. Over the last several months we have witnessed countless projects that are finding innovative ways to make NFTs functional, and therefore intrinsically valuable. Here are a few examples to provide a sense for what is happening:
Axie Infinity: The success of Axie Infinity as a case study for effective play-to-earn gaming mechanics can overshadow the fact that each Axie (characters in the game) is actually an NFT. Axies are mandatory game chips that unlock the ability to battle other NFTs, breed new NFTs, and earn real cash. Considering there are people in developing countries leaving their jobs and earning a better living by playing Axie Infinity (CNBC), it’s tough to argue against the value proposition of Axies as valuable digital assets. As investors in the platform, the Konvoy team is certainly excited about this trend.
Bored Ape Yacht Club (BAYC): Beyond gaming, BAYC demonstrates that NFTs can be used as membership cards to exclusive social clubs. Consider this a virtual country club where members are given unique channels to communicate with each other. With 10,000 unique ape NFTs minted, there is certainly some level of scarcity that has already proven to be lucrative to original holders. While all apes were released at a flat price of 0.08 ETH (~$165 today), demand for membership has skyrocketed. If you want to join the club today, the cheapest NFT you will be able to find on the open market (OpenSea) is 6.81 ETH (~$14,000). If the community aspect of this sounds like a fluke, some evidence to the contrary is an in-person meetup that happened in Los Angeles this week (Twitter).
Million Dollar Rat: Another unique experiment, which essentially turns NFT ownership into a lottery ticket where the prize is more NFTs. There are weekly events in the “Art Heist” where rat owners are entered for a chance to win through a random number generator drawing that is live streamed on Twitch. The maximum supply of rats is 3,310 NFTs that are currently trading for 0.2 ETH (~$400), and each drawing offers roughly three NFTs that are more valuable than rats themselves. Once the initial sale of rats has completed and the developer team stops purchasing NFTs to give away, the functionality does not go away. Rather, the team has announced there will be a new mechanic coming later this year (Announcement). Million Dollar Rat appears to offer constantly evolving functionality for its users.
Takeaway: Just as we’ve seen the potential for gaming to be a vehicle for broader blockchain adoption and expansion, gamifying NFTs is adding a new layer of value for digital assets that have frequently been written off as worthless. While we don’t know exactly what the metaverse could look like, new social spaces and digital experiences that are provided through creative NFT projects may be giving us a preview of how online communities will look in the future.
Speaking of evolving digital interaction, a major trend we’ve seen recently is the creation of identities for the metaverse. While the concept of a true metaverse is still very theoretical, one visual manifestation of this is already coming to life. Earlier this week, Wolf3D launched its Ready Player Me cross-game avatars in an effort to power the next generation of online identities (GamesBeat). The avatars are already available in more than 260 games and apps, and are purpose-built for functionality across games, apps, and VR experiences. Considering that the metaverse is not one place, but rather an interconnected network of experiences, a portable identity seems to be an extremely relevant solution with immediate ramifications on digital worlds.
Wolf3D is not alone in this pursuit. The market is filled with other competitors such as Genies, Bitmoji, and Facemoji that want to be the identity provider of the metaverse. One of the most promising frontiers that could unlock the next phase of differentiation in this market is NFTs. Considering any iteration of the metaverse will be built on the blockchain, it makes sense that digital avatars and their accessories would have unique identifiers.
Fashion in the physical world has always been an outlet for self-expression and we see that translating into the digital world. Earlier this summer, estate owner and digital real estate firm Republic Realm, acquired a plot of land for $913,808 worth of MANA to turn into a virtual shopping district. This district, called Metajuku (modeled after the Japanese shopping district, Harajuku) houses two brands that sell digital-only items for your avatar: Dress-X and Tribute Brand (The Block). IMVU, another metaverse, held the first fashion show in the metaverse and launched a fashion NFT marketplace earlier this year - which featured the work of various fashion designers including Collina Strada’s Hillary Taymour, who released a collection of both original virtual pieces and virtual pieces based on existing physical products (Vogue, Glossy).
Takeaway: Although we don’t know exactly what the metaverse will look like, we are already starting to see pieces of it come together. The recent innovation in interconnected digital self-expression is a critical step towards establishing an open and transferable ecosystem that people want to spend time in. As online communities gain traction and change the way we interact, avatars and NFTs are likely to continue gaining importance.