Every generation has a new technology or form of art that, upon its introduction, is looked at with raised eyebrows by a skeptical majority. Ask someone who was around when email first hit the scene if they thought back then that business would be conducted solely through it. Or talk to anyone around before the age of the cell phone and ask if they thought we’d all end up with one in our pockets. And it was only a few centuries ago when novels, now an alternative to “brain-rotting” TV, were frowned upon.
So it should come as no surprise that blockchain technology and NFTs are looked at by some with a dubious eye. And frankly, it’s understandable. With a deluge of news about million dollar NFT sales and crypto coins of all stripes flooding the market, you can’t blame anyone for thinking twice about this stuff. That’s because what’s not being talked about is the utility of NFTs.
Cryptocurrency and NFTs have utility in the real world. And even the uses for them that some would call “impractical” are often misconstrued.
BTW: Before we move forward, this article will assume the reader has at least a baseline familiarity with blockchain, NFTs, and crypto, so if you want a quick 101 (or just want to brush up) check out this article here.
Physical Collections in Digital Spaces
After answering what NFTs are, the inevitable question is “What’s the point?”
For starters, the NFTs most people have heard about, Charlie Bit My Finger, NBA Topshot packs, Beeple’s art, are collectibles that are no different than collectibles that have existed forever. These collectibles just happen to exist online.
For people who don’t understand the value of these collectible NFTs, one needs to look no further than stamp collecting.
Unless you’re a stamp collector, a stamp that costs $8.3 million doesn’t really make all that much sense. It’s just a stamp after all. But there are people out there who do value it at that price. And same goes for NFTs, or really anything for that matter. The value is determined by the group of people who see stamps, or basketball cards, or NFTs of poptart cats as valuable.
So when people “don’t get NFTs” there’s really nothing all that complicated to get. For the most part, the NFTs that are in the news are basically just collectibles. These collectibles are one-of-a-kind due to the blockchain attached to them, which is the same thing as an artist signing their name on a painting or a watermark on a sports card. And instead in a binder or hanging on your wall, the piece or collectible is online.
It’s really as simple as that.
The Impractical Becomes Practical
Writer Maria Shen wrote this fantastic piece in Electric Capital exploring new frontiers in NFTs. In the piece, she predicts ways in which NFTs will be used in the future by giving concrete examples of how they’re being used today. And these examples aren’t the typical use-cases that come to mind when you think of NFTs.
Two of the examples that she gives center around the fan/creator relationship. She talks about creators on sites like Patreon using NFTs to validate patronage. Eventually, this will lead to creators building miniature economies around their art or content. Shen predicts that Patreon, a website used by creators to crowdsource direct financial support will, at some point in the future, look much different.
Decentralized, crypto-native Patreon will not look like Patreon today, where fans subscribe for content. Creators will use NFTs and social tokens to create an economy around their communities. Creators using new platforms will seamlessly (1) sell NFTs, (2) gate access to content and pictures based on NFT or social token ownership, (3) stream payments to themselves in real-time based on the types of access tokens their fans own, (4) distribute revenue from NFT sales back to their community based on active members who have contributed.
Shen’s prediction is on track to become true, as creators are already adopting NFTs to help open up additional streams of revenue. Third Act, the first NFT marketplace for the theatre industry, is helping its partner creators recoup investment in Broadway shows by creating NFTs to sell on their marketplace.
In this way, NFTs have real world utility. Smaller Broadway productions, for instance, can take advantage of an NFT marketplace like Third Act to capture their audience’s attention outside of the theatre. This will allow the audience and creator to interact “offline” by meeting up online. This is a practical application of NFTs that results in real-world, material gains for artists and creators, and allows artists, especially the “little guys,” to own their own alternative revenue stream.
Shen also discusses the future of curation and discovery platforms. While she predicts a future where there exists more product search engines specifically for NFTs, there already exists platforms which not only sell NFTs, but highlight the social aspect of this new frontier.
Third Act is a social marketplace that allows theatre fans to not only purchase, sell, and browse NFTs directly on the platform, but gives theatre fans a space to connect over a shared passion. Adding on to Shen’s prediction, the internet, with its ability to foster niche communities, will only become more atomized as crypto, blockchain, NFTs, and concepts like the metaverse grow from theoretical to real.
Atomization often comes with a negative connotation. In this case however, we’re using atomization to mean the forming and solidification of small communities based around niche interests. On a marketplace like Third Act, for instance, not only is the community centered around theatre lovers, through that community smaller groups based on even more niche interests (smaller, lesser known shows) can emerge.
For example, a group of people find themselves bidding for an NFT that’s based on a small show only a handful of people have heard of. They connect over their interest in this cult show, and a new community has formed. The show’s creators benefit both financially and in terms of publicity, from having that community, and so too do the people who belong to the community.
NFTs are a new frontier. As we move into the future, it’s important to remember that there exists practical applications for a new technology that could, oftentimes, seem a bit ephemeral. As more creators and companies, like the ones Shen points out in her article, adopt NFTs and blockchain, both technologies will, no doubt, become more permanent fixtures in art, culture, and business.