How The Balloonsville Rug Changed The Way I See The NFT Market
Balloonsville broke the hearts of the Solana NFT market yesterday. I’m familiar with the project. I watched the conversation on Twitter. I was in their Discord. I saw AMAs with the founders. I even loaded my Solana wallet to get ready for the mint. Ultimately, I passed on the project. I couldn’t get over three red flags. I got lucky. But the rug pull did have one positive impact — It made me rethink the way I view NFT projects. Now I want to share the flaws I saw in Balloonsville and how it made me rethink the way I look at NFT projects.
The Balloonsville Art Was ‘meh’
Influencers in the space were all over Ballonsville talking about how much they liked the art. Maybe I’m just an old guy that doesn’t get it, but it looked like every other project to me. I’ve FOMO’ed into a lot of them and have lost money. I didn’t see how this was different.
Not to mention, their logo was a balloon over-inflating and exploding. That didn’t give me the warm fuzzies and, in retrospect, seems like it was an inside joke by the team.
What Roadmap?
Sometimes ‘meh’ art is fine if the utility of the NFT is really cool. Maybe that would have been the case with Balloonsville, but there was no way to know. There was no roadmap in Discord and their website was always down. The team promised something cool, but it still wasn’t up before launch. That didn’t stop the NFT community from trading it up to over 2 SOL before the rug got pulled. Balloonsville had mediocre art and no use case, so what was it trading on?
The Team Was Too Young
Chalk this one up to being a cynical old guy, but the team was just too young to be able to execute. I don’t think age is an immediate disqualifier, but lack of experience is a definite red flag. In my life, I’ve managed in retail, restaurant, and finance and I’ve made mistakes in every one. I’m a stronger leader now, but that strength came from experience and learning from A LOT of mistakes. An inexperienced founding team can succeed, but they need a meticulous plan and solid guidance. Balloonsville didn’t have either.
What Does This Mean For The NFT Market?
Keep in mind my name and bio. I’m a crypto degen. I haven’t made millions and I’m far from an authority on the subject, so take the following for what it’s worth — which is probably less than a Balloonsville NFT.
I don’t think these rugs will destroy the market, but I do think it will help the market mature. Here’s how I think the market will change and what I’m going to look for in future projects.
Community is Garbage
Might as well get the most unpopular opinion out there first. Community doesn’t matter for a new project. Twitter followers, influencers, Discord members — all of it is trash. All it shows is the hype a project has. Maybe that matters for flippers, but it means less than nothing for the long-term health of a project.
Once a project is established and executing their roadmap, the value of community changes. It matters a lot and can become part of the utility of an NFT. Before launch, however, community is just a siren’s song leading you to a rocky shore.
NFTs Will Need To Show Value Beyond Pretty Pictures
Anyone can make an NFT collection. I could make one if I wanted to. So could you. Don’t know how to create digital art? Someone on Fiverr does and will do it for a shockingly low price. Get some are, buy some followers, and spend a few hundred dollars to market your project and you could have a hyped launch on your hands. But there’s no value there. Here’s where I see the NFT market delivering true value:
Work From A Real Artist
The Flower Girls is an example of this one (I don’t own any, but I’m looking to get some). Varvara Alay is a real artist who hand-drew the various elements of her collection. They’re beautiful and somewhat nostalgic in their style. Justin Aversano’s Twin Flames collection is another example. These are sitting at a 130 Eth floor as of this writing.
The artist community seems to be slow to adopt the NFT model and that might be due to the scammy reputation it has from projects like Balloonsville, but I believe adoption is inevitable. An artist can sell a physical piece once and never see another penny even if their work goes 100x in value. An NFT can provide income for a lifetime and the artist is incentivized to build their brand. Building their brand and body of work builds value for themselves and their patrons. It’s a match made in heaven.
Unique Utility
Unique utility is a little more gray. What is or isn’t unique can change. Promising a metaverse used to be a unique proposition. Today it seems like every project is promising a metaverse and I’m guessing the vast majority won’t deliver.
GameFi NFTs could fall in the category of unique utility. These NFTs provide access to a game (like ICE Poker) where you can earn a native token and generate a return on your investment.
Other unique utilities include staking (though this is becoming a common promise), event invites, physical products, airdrops, etc. If it’s something that has value to you, chances are it’ll have value to someone else. A word of warning, though — A promise is only as good as the team who makes it. Do research on the team and make sure they have a record of delivering. Otherwise you’re just buying into hype.
Historical Significance
This one’s for the collectors out there. A project with historical significance can appreciate in value, though the floor price is likely to be beyond the reach of us plebeians. CryptoPunks is the classic example. Getting in on a historical project is like buying a painting that started the Impressionist or Surrealist movements. Chances are that it’ll always have value due to its significance.
Those of us without deep crypto wallets can still try to find these projects early by speculating on good artists or unique utility.
Conclusion
Remember that all of this is coming from a Crypto Degen. This is just my opinion and even the projects I called out as shining examples of what NFTs could be might turn out to be giant turds. But I would argue (in fact, I did argue) that the NFT market is full of giant turds right now and that the current valuation of community and ‘nice art’ is a big reason for it.
I have a lot of faith in the crypto community and I believe the space will mature. All it takes is for us to value the art and innovation over the hype. Tell me I’m wrong.
