NFTs
How NFTs will return in 2024
In late 2023, we are seeing a resurgence of interest in NFTs. NFT brands are selling products at major physical and online retailers. We are seeing the launch of major blockchain-based games. And more established companies are entering the NFT space. As a result, NFT-based brand building is expected to be a significant driver of Web3 adoption in 2024.
The next wave of successful NFT products will likely be quite different from much of what we’ve seen before. Rather than focusing on a small amount of high-value assets, many of these products will be produced in large quantities – and sold at more affordable prices, targeting the wider consumer market. They will be focused on direct value creation, not speculation. And many customers will acquire and use these digital assets without even realizing that they are operating on cryptographic rails.
We’ve already seen experiments with mass-market NFTs as digital collectibles, from companies like Nike, Reddit, Starbucks – and yes, even former US President Donald Trump. And similarly, native NFT brands like chubby penguins, Cool catsIt is Kitaro Studios have produced “phygital” activations, where a physical product comes with an associated NFT, linked directly to the product or via a claim code delivered at the point of sale. At the same time, both major players, such as Ticketmaster and newcomers like tokenproof and YellowHeart have been testing NFTs for event ticketsassociations and other forms of fan involvement.
These types of products offer consumers who are unfamiliar with NFTs the opportunity to experience the digital ownership that comes with this new technology. They typically sell for what we might consider “normal” consumer product prices – tickets cost what they normally would; phygital prices are generally comparable to normal prices for the physical object only.
While early entry into NFTs required users to navigate complicated self-custodial wallets, these NFTs often come wrapped in a platform design that submerges the underlying blockchain technology through a partial or full custodial wallet system. However, this does not prevent consumers from receiving utility from the tokens and integrating them into their digital identity on social media and other platforms. Nor does it stop them from participating in the broader NFT ecosystem if they so choose (in fact, in many cases they can even transfer their branded NFTs into self-custody if they so choose).
However, making digital assets more accessible – both technologically and in terms of price – dramatically expands the potential market and provides a foundation on which brands can build.
As we describe in a book coming out in January, The symbol of everything (you can order here), NFTs offer a company or creator a way to benefit from the power of decentralized value creation, turning their customers into a community: the asset itself establishes a network that connects holders to the brand and to each other; at the same time, ownership encourages consumers themselves to share the brand with others and help build it.
Starbucks Odyssey members, for example, created third party websites dedicated to the program and organized unofficial meetings and events without direct involvement from Starbucks. This has also extended to the digital world, as members have created their own group chats with friends on the public Starbucks server, meaning community members who wouldn’t have met without these NFTs now stay connected daily both on digital and physical world. .
This can be just as effective for small businesses and individual creators as it is for large enterprises. But it works best when the community can be large and growing.
For a brand like Starbucks or Nike to make the most of its NFT products, it needs to eventually be able to bring those products to its entire global customer base. On the other hand, whenever a customer wants to be part of the brand’s digital ecosystem, they need to be able to do so. (This is even more true for businesses with more local followings.)
This implies that the smaller, more widely accessible NFT products we’ve been seeing aren’t just experiments – they’re the future. The success of “open edition” NFT creators in early 2023 illustrated how effective this strategy can be for creators. And over the year, it’s become clear that companies are figuring this out, too.
Therefore, we expect to see brands go big with “small” NFTs in 2024. And in doing so, they will likely bring many more consumers to the market.
Disclosures: Both Kaczynski and Kominers hold digital assets, including fungible and non-fungible tokens from some of the companies mentioned. They also advise companies and serve as experts on marketplace design and incentives, Web3 strategy, NFT brand building, and other topics.
Additionally, Kaczynski is a community leader for Starbucks Odyssey; and Kominers is a research partner with a16z crypto, which is an investor in crypto projects, including NFT projects and platforms (for general a16z disclosures, see https://www.a16z.com/disclosures/).