By the end of 2023, we will see a resurgence of interest in NFTs. NFT brands are sell products in major physical and online retailers. We are seeing the launch of major blockchain-based games. And more established companies are entering the NFT space. As a result, NFT-based branding will be a key driver of Web3 adoption in 2024.
The next wave of successful NFT products will likely look very different from much of what we’ve seen before. Rather than focusing on a small number of high-value assets, many of these products will be produced in large quantities – and sold at more affordable prices, aimed at the broader consumer market. They will focus on direct value creation, rather than speculation. And many customers will acquire and use these digital assets without even realizing they run on crypto rails.
We’ve already seen experiments with mass-market NFTs as digital collectibles from, among others Nike, Reddit Starbucks – and yes, even former US President Donald Trump. And in the same way, NFT-native brands love it Chubby penguins, Cool cats, and Kitaro Studios has produced ‘phygital’ activations, where a physical product comes with an associated NFT, either linked directly to the product or via a claim code delivered at the point of sale. At the same time, both major players love Ticketmaster and newcomers such as tokenproof and YellowHeart are testing NFTs for event tickets, memberships, and other forms of fan engagement.
These types of products offer consumers unfamiliar with NFTs the opportunity to experience the digital ownership that comes with this new technology. They are typically sold at what we might consider “normal” prices for consumer products – tickets cost what they normally would; physical prices are generally comparable to regular prices for the physical item alone.
While early access to NFTs required users to navigate complicated self-custodial wallets, these NFTs are often packaged in a platform design that immerses the underlying blockchain technology through a partially or fully custodial wallet system. Still, this hasn’t stopped consumers from getting utility from the tokens and integrating them into their digital identities on social media and other platforms. It also doesn’t stop them from participating in the broader NFT ecosystem if they wish (in many cases, they can even transfer their branded NFTs to self-custody if they wish).
Meanwhile, making digital assets more accessible – both technologically and price-wise – dramatically expands the potential market and provides a foundation on which brands can build.
As we describe in a book coming out in January: The Everything Token (you can pre-order here) NFTs give a company or creator a way to capitalize on the power of decentralized value creation by turning their customers into community: the property itself forms a network that connects holders to the brand and to each other; At the same time, ownership encourages the consumer to share the brand with others and help build it.
Starbucks Odyssey members, for example, have set up a whole third-party websites dedicated to the program that hosted unofficial meetings and events without Starbucks’ direct involvement. This has also extended to the digital world, as members have set up their own group chats with friends from Starbucks’ public server, meaning community members who wouldn’t know each other without these NFTs now stay connected on a daily basis in both the digital and the physical world. .
This can be just as effective for small businesses and solo creators as it is for large companies. But it works best when the community can be broad and growing.
Ultimately, if a brand like Starbucks or Nike wants to make the most of their NFT products, they need to be able to bring those products to their entire global customer base. Conversely, if a customer wants to be part of the brand’s digital ecosystem, they should be able to do so. (This is even more true for companies with a more local following.)
This implies that the smaller, more widely accessible NFT products we’ve seen aren’t just experiments, but the future. The success of “open edition” creator NFTs in early 2023 illustrated how effective this strategy can be for creators. And over the course of the year it became clear that companies have discovered this too.
So we expect brands to go big with ‘small’ NFTs in 2024. And if they do, they’ll likely bring a lot more consumers to the space.
Disclosures: Both Kaczynski and Kominers own digital assets, including fungible and non-fungible tokens from some of the companies mentioned. They also advise companies and serve as experts on marketplace and incentive design, Web3 strategy, NFT brand building, and other topics.Additionally, Kaczynski is Community Lead for Starbucks Odyssey; and Kominers is a research partner at a16z crypto, an investor in crypto projects, including NFT projects and platforms (for general disclosures about a16z, see https://www.a16z.com/disclosures/).