NFT: From Fandom to Social Token

Beyond Art

Published in

Coinmonks

7 min readApr 19, 2022

NFTs arrived at the public discourse first as a technology for digital arts, a niche whose popularity skyrocketed perfectly along with the shutdown of art institutions worldwide during the pandemic lockdown. People had nowhere to go for arts, thus turning their attention to something virtual only. Approximately eighteen months after the boom, NFTs have evolved much farther than where they initially gained attention through CryptoKitties and later Beeples-styled arts.

Currently, an NFT is not that different from a membership exclusively circulated within a somewhat tribalistic fan club. You could get a gym membership via a physical card in the past, and now, you can get an NFT issued by the same gym.

What’s the main difference here, though? This new digital membership is a tool for monetization. The fluctuated prices of ETH, SOl, or even ADA — the native tokens of the base chains where the NFTs are built — impact how we perceive NFTs as a medium with a speculative prospect.

Yuga Labs-backed Bored Apes Yacht Clubs is one of the most well-known NFT projects endorsed by numerous celebrities. It sits at the pivotal point of fractionalized ownership through its DAO’s native token, ApeCoin, and leverages the value of Bored Apes NFTs. As I’ve stated in the previous article, those who can’t afford a Bored Ape can invest in ApeCoin instead to have a taste of the exposure.

NFT as Leverage on Fandom

NFTs are not just JPEGs pictures ( have they ever been?); instead, they function as leverage that unlocks the economic potential of fandom.

NFTs came to fandom naturally as a form of digital membership, a pass that differentiates members or users based on their commitment to the community. If one believes in the DAO he subscribes to, he would intuitively purchase the native NFT to unlock more activities exclusive to the NFT holders. It is a stepping stone for NFT utilities to be extended to daily applications.

At least for now, most DAOs operate like fandom but with a higher degree of democratization. The introduction of fractionalized tokenomics has made fundraising more accessible and transparent, with “fans” or supporters of a startup allowed to influence the decision-making process.

The idealism of Web 3 is founded upon blending the digital and physical world altogether seamlessly. If NFTs exist as a “custom checkpoint” like a visa document for the virtual world, then the financial value of NFTs will not be limited to art and digital membership. Positioned as a technological tool that bestows digital items with crypto- denominated value, a virtual asset divisible, if needed, to fungibility through token issuance, NFTs are likely to be utilized as leverage for monetizing fandoms.

Let’s look at a few examples of how NFTs may enter the offline space as something more than just files of digital arts.

Social Tokens?

Flyingclub.io is an organization that has collaborated with more than 100 top Asian bars. Its issued NFT, Paperplane, has a total supply of up to 10,000, each on sale for around 0.18ETH. They call the NFT a pass, allowing holders to access all the unique and rare cocktails in the partnered bars. Of course, members would meet up and cultivate a sense of community.

That’s just what Friends with Benefits(FWB) has been doing over the past year. Still, the difference is that FWB chose to issue its fungible tokens, requiring members to hold at least 75 of its native token FWB to be eligible for memberships. Fundamentally, they are operating out of the same playbook.

Since crypto writer Net Eliason has extensively written on blending DAOs into real-life applications, I would not repeat what he already elaborated. Through the case studies he offered, we may glimpse how DAOs, tokenomics, and NFTs could be all integrated into a new business model.

Eliason used an example called CoffeeDao, an online DAO directly affiliated with a physical cafe in the offline world. At first, the DAO operates simply as a fundraising hub. People interested in opening a cafe at a specific location could fund the project by buying the Coffee NFT. With the money raised from these NFTs, the ones leading the project could pay the rent, buy the coffee machines & beans, hire baristas, and start generating revenues for the cafe.

NFT holders, as the stakeholders of the cafe, are eligible to vote on the operational and treasury plans. The DAO, comprised mainly of NFT holders, can stake unallocated capital on Defi protocols for earning passive income. Within a set amount of time, NFT holders can make a percentage of dividend out of the profits created from the cafe — not even mentioning “membership only” services, discounts, and community-based activities exclusive to the club members. Ideally speaking, members clustered around the cafe, which functions as a physical pivot of the organization.

But, on top of the staking part not replicable in Kickstarter, what’s its distinction from other mainstream crowdfunding platforms? Decentralization? Transparency?

Joma Tech, a Youtuber with 1.6M followers, recently has raised $23.4K within 42s via a collection of self-minted NFTs on the Solana blockchain. The previous employee of both Facebook and Google is one of many influencers issuing their own NFTs to acquire fundraising from their supporters. By re-branding his channel from tech-oriented to drama-oriented, a shift that aims to approach his goal to be a film director one day, Joma said he would use the money to create more content reflecting what he tries to speak to his audiences, who also happen to be his investors, clients, and fans.

https://twitter.com/jomaoppa/status/1515353698964283408

“I gotta make the films I wanna make with the money raised from the NFT sale now, ”he said, “because often enough when I’m making a regular Youtube video, sponsors limit how I make the videos.”

Fans fund the creator’s dream; in exchange, the creator tailors content for his VIP fans. Joma invited his NFT holders to participate in his shoots as extras and watch his not-yet-released videos in a physical theatre. These are bonuses prioritized for those who have funded his dream with real cash ( sorry, solid SOL).

The Dilemma of Social Tokens

The examples stated above all face the potential issue of liquidity crises. If the projects, one day, lose momentum to attract new fans — with the cafe going bankrupt due to mismanagement or simply the project lead deciding to abandon everything and disappear — what would happen?

People would try to sell their NFTs ASAP. And the inadequacy of liquidity in NFT markets makes it hard for holders to get out. No one would try to catch the falling knife when the hype is gone.

NFTs, at the current stage, are validated through social and cultural consensus. To avoid a potential liquidity crisis, an NFT creator needs to market his project as a phenomenon where a brewing amount of network effect is proven to grow consistently. But that’s nearly impossible. No NFT projects can constantly recruit die-hard fans pushing up the demand for their NFTs. Credibility determines how far a project could reach a new population.

To Youtubers who issue their own NFTs, keeping the projects sustainable by creating more hypes and then drawing crowds into the projects is a must. High demand stimulates the surge in price if the supply remains unchanged. In the case of Joma deciding to issue its Vaxxed Doggos NFT, the project would decline in popularity if Joma couldn’t regularly upload new and engaging content anymore. The core idea of utility tokens is that everything digital is monetizable, whether fungible or non-fungible, as long as the narrative justifies what you’re selling to your audience.

The creator economy branded by the glow of NFTs and tokenomics can give birth to a somewhat odd business model based on the competition of “finding the latecomers whom you can dump your NFTs on.” In principle, it shares in common with how Defi farms offer insanely high APIs to incentivize users to deposit assets as a liquidity provider.

The project lead — either an influencer or a business founder — controls the circulating supply of an NFT project and thereby can set where the top is and thus pre-planning his exit strategy. The differences between fungibility and non-fungibility become not much of a matter here. NFTs can function like fungible social/fan tokens as well.

Summary

Am I being overly bearish on the future of NFTs? Not at all.

In contrast, I believe NFTs will be increasingly beneficial to content creators and small businesses. With the creator economy topping $100 billion and NFT marketplaces like OpenSea and LooksRare making over $100 million in daily volume, NFTs could be an excellent tool for creators to monetize their creative talent.

However, for any influencer or entity issuing NFTs, the key is to lay out a transparent strategy plan and specify the exact supply of the tokens. Investors or fans who go after NFTs either as a donation or an investment must ask themselves if the NFT in that context is replaceable. If not, why is it a must to fund their beloved stars or business ideas?

As the creator economy continues to grow in the post-pandemic era, centralized fundraising platforms like Patreon and Kickstarter are at the highest risk of being challenged by blockchain technologies that champion peer-to-peer transactions without intermediaries charging fees to both sides. If gas fees for on-chain transactions can be significantly reduced without compromising the base chain’s security, people would naturally rather receive donations through tokens without the middleman taking a cut.

Join Coinmonks Telegram Channel and Youtube Channel learn about crypto trading and investing