The biggest NFT projects around in 2021 and 2022 (so far) started off without a clear strategy about what they were going to do with the funds from minting and royalties. They were focused on selling first, then figuring out what value they will provide to their investors and customers. I don’t think I need to point out that this is not a viable business practice. Imagine Amazon charging you with a subscription for Prime without telling you what you get for it and instead saying that “the subscription brings benefits for community, access to future projects and whitelists”.
Leading the (bad) trend
A lot of other projects copied (and are still copying) this approach in hopes of a blank cheque from investors on the market. Just go on Opensea and check out any trending project at any time (around the writing of this article, summer of 2022), go to their websites and see if any of it makes sense. Most of the times, you can read a few mindless stories, usually focusing on the art itself, without any real substance or value proposition for the NFT buyers. Everything is built on expectation, future potential and hype. Naturally, this does not strengthen the trust relationship between the founders and the investors. Not to mention that, by randomly checkout top trending projects, you will find that the most of them don’t have any privacy policy or terms & conditions on their websites; this may seem trivial, but in fact, it’s leaves a big door open for liability.
Basically, the business efforts and resources of the NFT projects are allocated in their vast majority to community building in a network of influencers and alpha groups in the hopes that a manufactured hype will drive their NFT sales. This is a blank shell: there is no business idea behind, no business plan, no assessed value proposition. In the meantime, whatever is promised by the founders lacks detail, the plan to achieve it is missing, team competences are unclear, and people are just expected to buy into that.
So why are we in this predicament?
The internal issue of these NFT project is with the definition of the success of the project, or — in other words — the mission and the objectives of the project.
In a normal business world, the sell-out of all NFTs would be a measure of performance (call it a North Star if you will), not an objective itself. But as NFT ownership is driven by their value as an investment, a (quick) sale of all available tokens usually means a demand/supply ratio in favor of the increase in their fair value.
The issue is that, without a substance of the project, or the reliance on an underlying genuine business that provides a driver of the demand for the NFT based on products and services delivered to a customer base on a free market, the demand for NFTs can fall just as quickly as it was manufactured. At the same kind, this kind of approach promotes lack of accountability from the founders, having a real impact on the project’s credibility due to the considerable risk of a rug pull or unsuccessful sell-out, as well as a cascading impact on the credibility of the NFT market and ultimately, on blockchain adoption as a whole.
The mindset for NFTs has to evolve
It is funny in a way, how in an industry that provides all the tools for trustless ownership, transfer of ownership and transactions, there is still a lot of progress to be made to build, feed and maintain trust of the investors. One would have expected that the values of the technology would contaminate to the values of its users, but we don’t live in an ideal world.
In the end, it still human flaws that make their mark in this very early adoption phase, and that is where we need to work to have a structured approach to overcome the challenges that every technological, economic and financial breakthrough faced in the past. Only this time, it is in the context of a very promising and maybe civilization-altering Web 3.0 paradigm shift.
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