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At this point in 2021, it seems reasonable to say that the year will go down as one of the greatest in the history of crypto so far. Record market highs, a DeFi segment in the rapid ascent, and institutional and VC funds are flowing into the space like never before. However, even against all these success stories, NFTs have been perhaps the biggest rising stars in crypto in 2021.
While they’ve been around since late 2017, NFTs only really began to take off in popularity during the later months of 2020. But in early 2021, they hit the mainstream in a big way after Christie’s, one of the oldest and most prestigious art auction houses, made history with its first sale of a fully digitized art collection based on NFTs by digital artist Beeple. The sale made history a second time when it fetched a staggering USD 69 million at auction, making Beeple the third-most valuable living artist in the world.
Inevitably, pundits and critics have spent much of the rest of 2021 speculating that NFTs are just a bubble. But the crypto community has largely ignored the skepticism and made hay while the sun shines. The NFT markets have continued to grow – partly in digital art and media but also fueled by a craze for play-to-earn games like Axie Infinity.
While most people still think of art and gaming as the only utility for NFTs, the reality is that the earth is already moving. Thanks to a wave of innovation, there’s already so much more people can now do with NFTs. Here are four new ways for creators, curators, collectors, and investors to explore the emerging value in NFTs.
NFT Collectibles to Build Loyal Communities
When an artist or creator sells an NFT collection, they’re creating a loyal subsection of their audience who can be identified as the owner of an NFT via a blockchain record. This feature gives NFTs unique power to attract and incentivize loyal communities who use their NFTs as a kind of credential to demonstrate their VIP status.
Artists, musicians, celebrities, and even household brands are only just waking up to the future potential of NFTs in driving engagement and participation. While a few early movers are prepared to navigate their own way through the choppy waters of a nascent NFT space, many will find it challenging. And that’s where a project like Envoy comes in.
The team behind Envoy has identified that there’s a gap in the market for a professional onboarding to the NFT space, supporting artists in creating, marketing, and managing their NFTs as strategic assets. Envoy provides a platform for celebrities, artists, and brands to launch innovating NFT projects, create a rallying point for their community, and offer a rich system of rewards for fans and collectors through the ENVOY token. The token is designed to stimulate community participation through incentives.
Envoy has gained over USD 2.5 million in backing from investors, including 3comma, Prometheus Labs, Solidity Ventures, and others.
Unlocking the Liquidity in NFTs
One challenge around NFTs in their evolution so far is the fact that they’re generally illiquid assets. Like physical art or collectibles, NFT-based assets can be an expensive investment. Once funds are tied up, it’s not always necessarily easy to access the liquidity tied up in them if needed. This lack of liquidity limits the attractiveness of NFTs as investable assets, which is a problem Drops sets out to solve.
Drops aims to reduce the opportunity costs of holding NFTs, by allowing holders to unlock their liquidity. For example, they could deposit their NFTs as collateral and take out a loan. They could also stake NFTs to earn yield.
The net effect of such a benefit also offers stability to the NFT markets too by reducing sell pressure due to a lack of return on investment. As such, Drops also makes NFTs an even more attractive proposition for issuers, as they can offer extended utility for NFTs as yield generating assets.
Drops recently launched on testnet, the first milestone of three in a phased rollout. NFT owners can apply to participate using testnet versions of the platform’s native tokens, dNFT and dTokens. These tokens represent NFT collateral in Drops’ permissionless lending pools.
Gamifying Fair Distribution in Play-to-Earn
Play-to-earn games have been one of NFTs biggest success stories in 2021, with the income-earning opportunities proving to be a massive hit, particularly in South East Asia. However, as soon as any particular segment of crypto begins to become more successful, rent-seekers and bots tend to move in. This pattern holds true in play-to-earn, where scalpers and bot traders dominate the market in newly-issued NFT assets at the expense of legitimate loyal players.
Splinterlands, the most-played blockchain game with nearly 400k daily users at the time of writing, has developed a solution for releasing new assets in a way that excludes non-gaming traders and allows gamers to access assets in a fair way. For its most recent release, the Chaos Legion expansion card packs, the project introduced a new VOUCHER token.
Each card pack requires spending the standard fee of USD 4 along with one VOUCHER token. The only way that someone can acquire VOUCHER tokens is by playing Splinterlands and staking the game’s SPS currency. Therefore, the new card packs can only be bought by players who actually engage with the game. Given that a significant proportion of the audience for these games is based in lower-income countries, such a fair distribution model protects the user base against market manipulation by wealthier, non-gaming profiteers.
Get Rewarded for Creating and Curating NFTs
NFTs are increasingly becoming linked to social network activity as more of our lives move online and into the digital metaverse. Some weeks ago, Twitter released a sneak preview of a function that would allow users to link their NFTs to their Twitter profile as they would other kinds of media like videos or photos. Facebook has also confirmed that its efforts in building a metaverse will involve NFTs.
Yup is already one step ahead of both, with a blockchain-based social media network that rewards curators of content, which includes NFTs. The project works similarly to Pinterest, allowing users to curate content from other sites into collections on their profile. The core difference with Yup is that they’re rewarded for doing so in native YUP tokens, not merely in likes and shares. And the net result is that rather than being served content by a murky algorithm, the Yup model favors community moderation, allowing users to determine what they want to see in their feed.
Yup recently rolled out its reward program a step further with NFT Creator Regards. Artists can now earn YUP tokens when people rate or like their NFTs on marketplaces, including Opensea, Foundation, and SuperRare. The initiative provides an additional revenue stream for artists and creators who already incorporate NFTs into their content strategy.
In October, Yup successfully raised USD 3.5 million from investors, including Dapper Labs and several notable angel investors.
As the NFT space continues to mature in 2022, we will see more innovations emerge from the sector. One thing is clear – the current wave of new developments indicates that there’s plenty still to come from the nascent NFT sector.