Replacing Subscriptions with NFTs?

NFTs as a viable alternative to SaaS subscriptions

With the current craze of generative art drops and massive PFP collections, the question around NFTs with utility continue to pop up into the greater NFT space.

The more obvious utility that these larger blue-chip collections suggest consist of doing merchandise drops based on their IP, air dropping more NFTs, or simply creating IRL events for holders only. While these perks are great in the short term for these NFT projects that hold such strong brands, what about the greater opportunities in the Web 3 and NFT space? Surely the benefits of NFTs are not supposed to be condensed to a rich handful that own multiple blue chip projects, right?

And that thought would be correct. Most builders in the NFT space actually recognize three main advantages that NFTs hold that can actually entirely reshape Web 2 as we know it.

1. Global Accessibility (enormous total addressable market)
2. Decentralized Public Database (greater cost savings)
3. Elimination of middleman microservices (eliminates revenue leakage between consumer and creator)

Before I dive into each advantage that NFTs can provide in Web 3 over Web 2, it is important to note that Web 3 is not a full replacement of Web 2 infrastructure, it is rather an augmentation of current infrastructure in Web 2, but made into better and more equitable parts.

A lot of Web 3 natives continue to push the narrative that Web 3 will suddenly change everything and decentralize all of it, but the reality is, we are standing on the shoulders of Web 2 giants and all of our behaviors have been shaped by the technologies of the cloud and costs have been abstracted away by centralized servers. But I promise you (the reader) that despite the fact you will have to pay for every interaction on the blockchain, the benefits of Web 3 will eventually outpace the technology in Web 2 and will create a brighter tomorrow. With that, let’s dive straight in.

Global Accessibility

In the early 2000s, one of the biggest economic concerns in the world was how globalization was going to affect developing countries and how it was going to further the economic disparity/inequality in the world. To a large extent, the concerns of globalization did come true (a topic I’ll dive into at another time), but it also led to some of the biggest leaps in accessibility and quality of life increases globally. Similarly, blockchain advancements since its conception has led to modern advancements in financial accessibility globally with BTC and ETH’s biggest markets being East Asia and LATAM.

This is great and all, but the question boils down to “how does this relate to the topic around NFTs and subscriptions?”

If you’ve been following along well, the keywords to take away here are: “global”, “market”, and “accessibility”

Putting these keywords together you get: Global Market Accessibility

The limitations with the subscription model is that when using financial subscription services like Stripe or Securion, purchases are limited to the regulations of the currency being used and also restrict the types of currency that can be used on the services. The reason for these limitations is the costs associated with international wire transfer fees that end up getting passed over to both the creator and consumer. Thus, often, countries outside of the service area of these companies end up being restricted access due to the costs.

With NFTs and blockchain, these restrictions largely disappear. As long as you have access to the internet, a phone, and a decentralized exchange (DEX), you can participate in the Web 3 space.

But Jorrel, aren’t NFTs just .jpgs???

They’re not JUST jpegs!!!

Jorrel’s amazing photoshop skills :)

NFTs are unique digital assets that are traceable and public on the blockchain (we’ll dive into it in the next section). Unlike cryptocurrency which acts like money and can be exchanged, NFTs are unique assets with varying values and because of this, NFTs can be used nearly identically to how membership passes are used (peep BAYC). We’ll dive more into how else they can be used, but the point stands. NFTs can be accessed anywhere, which unlocks a much larger user market than the limits that subscription services are beholden too.

Decentralized Public Database

Ok, so I admit that I might talk about it too much, but I’m a Data professional. And as a data professional, I absolutely love getting access to new datasets!!! And blockchains are literally the largest public databases on the planet (they’re actually so large that it’s a bit too overwhelming!)

For outsiders that continue to hear about blockchain data and don’t really know why it’s so exciting, let’s start with the basics about what companies in Web 2 have.

Companies in Web 2:

• Host their own databases (they gotta store all the actions and inputted info somewhere)
• Use centralized servers like AWS or Google Cloud Platform to host their applications (most companies don’t host their own servers these days, but on-prem is included)
• Collect information from user to create user profiles (Register for an account you know?)

With blockchain (thus companies in Web 3/2.5):

• No need to host your own database (you just need to be able to read the data)
• Files and contracts can be uploaded on decentralized protocols like IPFS (no need to save things yourself or worry about it costing a lot)
• Collecting personal information is unnecessary since all/most users login using wallets (Wallets are like universal logins)

The benefits of the above comparatively all boil down to costs at scale. At a small scale, Web 2 companies are cheaper since most of the costs get abstracted by services, and then incentive structures optimize for lifetime value (LTV) or recurring revenue. Since blockchain and NFTs are still relatively new and infrastructure is still being built, costs are still expensive to use the technology at a small-scale since new companies have huge development costs or are spending a lot of money on blockchain transaction fees (more into these on a future article). Tools like Rampp that focus on NFT infrastructure and technological accessibilities will continue to lower costs for small scale start ups, but for now, larger scale companies with resources and dev teams will continue to reap benefits of blockchain and NFTs.

Elimination of Microservices (No more middleman)

You’ve probably been reading a lot by now, so I’ll keep this section short. All SaaS companies in Web 2 have pricing models that rely on subscriptions that lead to predictable MRR or ARR (it’s just how it goes if you want to become a blessed unicorn). As mentioned in the earlier section, subscriptions rely on services like Stripe (a transaction intermediary), but SaaS companies also rely on cloud servers like AWS or GCP (file storage and application storage intermediary) which costs at scale increase dramatically with traffic volume. As SaaS companies scale, the fees passed over to these services add up and can result in being one of the most expensive aspects of running the company. On the other hand with NFTs, the company wouldn’t need to use subscription services or cloud infrastructure, and the model can change from MRR and ARR into tokenomics and royalties (also more on that in another article).

So I’ll just pause right here!

Your brain is likely melting at this point, so I won’t go into more detail, but I’ll leave you with: we want to eliminate middleman that increase risk, decrease efficiency, and add more costs.

Of course, it’s not just as simple as blockchain/NFTs good and subscription microservices bad, but this written piece is trying to highlight the benefits that this space can offer, in order to add some more conversations around NFT utilities. The main drivers in business are costs and revenue, so I’m making a case for how NFTs can address both!

Thank you reader for coming along this absolute unit of an article, but after consuming all this information, you’re probably wondering how you can actually action on any of these advantages that NFTs have, so comeback sometime and I’ll write a more comprehensive follow up article soon explaining a possible tech stack that can potentially completely replace the SaaS model, but until then, happy building!