How NFTs Will Make a Comeback in 2024
At the close of 2023, we’re seeing a resurgence of interest in NFTs. NFT brands are selling products in major brick-and-mortar and online retailers. We’re seeing the launch of major blockchain-based games. And more established companies are coming into the NFT space. As a result, NFT-based brand building is poised to be a significant driver of Web3 adoption in 2024.
The next wave of successful NFT products will likely look quite different from much of what we’ve seen before. Instead of focusing on a small quantity of high-value assets, many of these products will be produced in large quantities – and sold at more affordable prices, targeting the broader consumer market. They’ll be focused on direct value creation, rather than speculation. And many customers will acquire and use these digital assets without even realizing they’re running on crypto rails.
We’ve already seen experiments with mass-market NFTs as digital collectibles, from the likes of Nike, Reddit, Starbucks – and yes, even former U.S. President Donald Trump. And, similarly, NFT-native brands like Pudgy Penguins, Cool Cats, and Kitaro Studios have produced “phygital” activations, whereby a physical product comes with an associated NFT, either linked to the product directly or through a claim code delivered at the point-of-sale. In parallel, both major players like Ticketmaster and newcomers like tokenproof and YellowHeart have been testing out NFTs for event tickets, memberships, and other forms of fan engagement.
These sorts of products give an opportunity for consumers who aren’t familiar with NFTs to experience the digital ownership that comes with this novel tech. They’re typically sold at what we might think of as “normal” consumer product prices – tickets cost what they would normally cost; phygital prices are generally comparable to ordinary prices for just the physical object.
While early entry into NFTs required users to navigate complicated self-custodial wallets, these NFTs often come wrapped in a platform design that submerges the underlying blockchain technology through a partially or fully custodial wallet system. Yet this doesn’t stop consumers from receiving utility from the tokens and integrating them into their digital identity on social media and other platforms. Nor does it stop them from participating in the broader NFT ecosystem if they want to (indeed, in many cases, they can even transfer their branded NFTs to self-custody if they so choose).
Meanwhile, making digital assets more accessible – both technologically and in terms of price – expands the potential market dramatically, and provides a foundation brands can build upon.
As we describe in a book coming out in January, The Everything Token (you can preorder here), NFTs give a company or creator a way to benefit from the power of decentralized value creation by turning their customers into a community: the asset itself establishes a network linking holders to the brand and each other; at the same time, ownership incentivizes consumers themselves to share the brand with others and help build it.
Starbucks Odyssey members, for example, have set up entire third-party websites dedicated to the program and organized unofficial meetups and events without direct involvement from Starbucks. This has also extended into the digital realm, as members have spun their own group chats up with friends from the public Starbucks server, meaning community members who wouldn’t know each other without these NFTs now stay connected daily in both the digital and physical world.
This can be just as effective for small businesses and solo creators as it is for major companies. But it works best when the community can be broad and growing.
For a brand like Starbucks or Nike to get the most out of their NFT products, they have to eventually be able to bring those products to their full global customer base. Conversely, whenever a customer wants to become part of the brand’s digital ecosystem, they need to be able to. (This is, if anything, even more true for businesses with a more local following.)
This implies that the smaller, more broadly accessible NFT products we’ve been seeing aren’t just experiments – they’re 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’s been clear that businesses have been figuring it out, too.
So we’re expecting to see brands go big with “small” NFTs in 2024. And as they do so, they’re likely to bring many more consumers into the space.
Disclosures: Both Kaczynski and Kominers hold 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, which is an investor in crypto projects, including NFT projects and platforms (for general a16z disclosures, see https://www.a16z.com/disclosures/).
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