Everything You Should Know About NFTs - The State and Future of NFTs Today
Cooper Turley goes in-depth about NFTs and social tokens, explaining how NFTs have evolved
The State and Future of NFTs with Cooper Turley
(March 11, 2021 - 38 minutes)
Cooper Turley (@Cooopahtroopa), Head of Crypto Strategy at Audius
Venture Stories by Village Global takes you inside the world of venture capital and technology hosted by Village Global partner and co-founder Erik Torenberg
INTRODUCTION
How did Cooper first get into the NFT space?
Cooper saw that the financial upside for someone helping creators in the creator economy was very limited and explored crypto for creative ways to make money. NFTs allowed people to coordinate and share capital with one another without getting middlemen involved.
How has it evolved over the years?
It created a new creator economy that allowed creators to be sustainable because they can build projects with hundreds of true fans supporting everything they do.
What is an NFT and how does it work?
An NFT (Non-Fungible Token) is scarce, digital content, similar to that of Pokemon cards or vinyl records in the real world. There are 2 types of NFTs: limited (for one specific piece of art) and open (with an unlimited number for a fixed period of time).
Different NFTs are tied to a specific event and can also be other things besides art: legal contracts, gaming skins, music, etc.
For example, musician 3LAU raised over $11M in his NFT drop by immortalizing his album and turning it into an auction platform, where top bidders receive exclusive NFTs related to his album with extra perks like lifetime backstage passes, etc.
Why are NFTs taking off now and not before?
NFTs platforms have improved significantly recently with applications and products allowing people to purchase customizable NFTs.
Creators are starting to see crypto as more than an investment. NFTs can be used to tie their brand back to something that aligns with their mission statements and creative outputs in the world.
The creative nature of an NFT combined with artwork and the crypto nature of tokenized data on the blockchain is appealing to many people.
How does the market map of different players in the space look like?
Protocol layer — Allows NFTs to be created in a variety of different ways
Market layer — Contains the infrastructure to support NFTs
Marketplace — Displays the NFTs
Creators — People making the NFTs
Collectors — People buying the NFTs
Applications — Showcases and supports the NFTs
Discovery layer — Allows people to show off the NFTs they collected
What are tokens?
Tokens are tied to a brand individual or entity, i.e. personal tokens and community tokens. Community tokens are more popular because it allows fans to contribute to the creator’s success on a granular level that’s democratized and open to anyone in the world.
Any advice on doing NFTs well?
Fewer than 1% of the creators getting into NFTs actually know how to do it well. People can detect creators treating NFTs as immediate cash grabs when these creators have no prior communication or interest in linking with builders before suddenly dropping NFTs.
The real value accrues deep in the community ownership where the creator is headed. NFTs are packaged specifically for an ephemeral moment, and also around the publishing rights of their catalog. It’s the purest way of building a true fanbase by enabling them to participate.
Strategy: If you have a single coming out in 2 weeks, release an NFT a few days prior and give a signed print to the NFT holders when the song is finally released.
THE CURRENT STATE OF NFTs
Do NFTs rise in value?
There’s no guarantee that flipping NFTs is profitable — it’s up to the collector to decide. Collectors who flip NFTs do form efficient markets, but there are also people who are just there to collect culture and support their favorite creators. They focus on the long-term viability and impact of the creator, being empowered through community ownership.
NFTs provide a way for collectors to showcase their identity and things that they believe in and support. They can also benefit both reputationally and economically. The more you lean into a specific niche, the more you create a name for yourself associated with the economic upside.
So what’s the big deal about NFTs?
For now, NFTs are expensive and unsustainable in the short term. The long-term goal is to find tools that allow democratized access to the collective vehicle.
Intellectual property like song licenses will be immortalized as NFTs. Since NFT tokens are uniquely distinguishable from each other, these intellectual properties have provable owners. You can share a screenshot of someone else’s NFT but the owner is the only one whole can sell that file.
This unlocks an economy where digital content can be owned for the first time in history, and that digital content can have a market around it, including viral content.
What is fractionalizing?
When an NFT gets released and people start collecting it, the creator is not the only person receiving the sale revenue because it’s distributed pro-rata to the backers of the post. It’s a powerful primitive that goes far beyond the NFTs created.
Cooper crowdfunded the starting half of his blog post NFT to work on his thesis, then fractionalized ownership and shared proceeds with his supporters.
What is quadratic funding?
Quadratic funding allows the number of contributors to be more powerful than the total sum of dollars.
It’s more important to try getting $100 from 10 people than &10,000 from one person.
How are NFTs reshaping the music industry?
Major labels may take advantage of celebrity NFTs and just take the capital out of the community instead of reinvesting in it. It’s more about building more bespoke platforms to facilitate creators’ and celebrities’ unique drops.
How do social tokens work?
Social tokens capture the collective ephemeral moments, so someone doing multiple NFTs can have a social token that backs all those different projects. Creators looking to launch social tokens release NFTs to bootstrap capital.
Personal tokens may gradually evolve into community tokens by primary creators who have a vision for a community. They bring on contributors responsible for owning the project and decentralizing its long-term sustainability. This allows the creator to be more flexible in how they contribute.
If you’re selling NFTs, you’re basically giving ways for others to be exclusive owners of ephemeral pieces of content. It also deepens the relationship between the creator and his fanbase.
What is governance mining? What do protocol politicians do?
Anyone in the community can upgrade the protocols, and a protocol politician works with them on building the systems to empower the community. They get the context and situation in the space, package them into a proposal, and present it to a project for implementation and get paid.
They differ slightly from the government RFP system in 3 ways: no need to go through an entity, they can make open proposals to the community, and they can get voted to work on it by token holders and get paid to implement them.
How does Audius help aspiring musicians get into crypto?
Audius runs crypto strategies for those unfamiliar with the decentralized streaming protocol so they aren’t thrown off the deep end at once, thus creating a platform where artists can upload content and own the value that they create from that.
It’s like a SoundCloud experience for artists to get comfortable before incorporating NFTs into their strategies.
What happened to CryptoKitties?
CryptoKitties was the most viral NFT product in 2017 that clogged the entire theorem network because of the high demand. They stepped back and built their own product and blockchain, partnered with NBA, and brought NFTs in a very natural way because people were already actively collecting NBA collectibles. The collectibles just got a lot better and more exclusive.
What is the prediction for the future of NFTs?
The NFT bull market will probably end in 3 months, with more NFTs listed than sold. We’re going into a bear market where everyone thinks NFTs are not valuable. Nonetheless, mainstream scalable products will still be issuing NFTs to fans all over the world.
EQUITY
Is the ecosystem leaning towards music or venture capital?
There will be groups of individuals buying up specific NFT collections and incubate projects. Rather than being captured by a few small stakeholders, it will be shared pro-rata amongst all the members in that collective.
What’s the 9-9-1 rule?
1% of the contributors actually add value on a daily basis, 9% are loosely involved, and the other 90% just lurk around.
How to improve the protocol governance?
Get people to care by giving them an incentive, thus opening up ways for governance in the long term. For on-chain proposals, you need to know how to go through a governance forum, how to upload it on-chain, how to implement it on a tactical level, and thus create more democratic systems like a discord poll but with a token mechanic to it.
If projects are able to find a core group of 50 core contributors overseeing every aspect of governance, you can start opening up the puzzle for anyone to come in and earn. It’s a promising future for ownership.
Are NFTs a way for creators to get equity?
At its core, NFTs are a revenue stream — they’re a way to sell scarce digital products to collectors, issuing rights with those NFTs and giving collectors ways to utilize the benefits beyond just holding the asset.
Collectors may be able to trade the NFTs for X amount of discounts or Y percentage of options in the future.
However, equity may not exist within the next 10 years — for now, the long-term goal is to find ways to make it work on a global scale without worrying about restrictions, understanding equity, and owning it in the first place. Not many people know what equity is nor its value, so the focus should be on education first, followed up by participation.
Will ICO’s come back stronger than before in a new form?
Initially, ICO’s did poorly because of the lack of legal protection, but ICO’s today just resemble equity raises — like a private seed round where investors with the right connections can build around and get 25% of the supply.
The only way to earn tokens is by participating in the network. You need to find a middle ground to unlock the first level of access to your users and a way to secure capital for the team. Access to these products and services is very valuable.
How to get into creating tokens or NFTs?
Educate them on what’s happening, what’s working well, and just let them find their way into it instead of forcing it.
NFTs will become mainstream in the next 2 years. Prime people for when the psychological tools are available and influence them meaningfully instead of encouraging them to do it now — hold off, let the market simmer down, then only start considering it seriously.
What is the necessary infrastructure required for a project?
Having funds topped up in a theory and non-custodial Ethereum wallet to interact with DFI NFTs. It should focus on fractionalization and peer-to-peer payments.
Social tokens in general work around the usability of these products.Creating ecosystems in which people can transact freely in real-time
Are demo days for creators helpful?
Demo days show what it’s like building a discord community and what it’s like to transact in Web 3.0 in a non-custodial manner. It shows people that there are ways to issue kickbacks to people in real-time with freely liquid transferable value.
What’s the best way to contribute to the ecosystem that maximizes your skills and interests?
Find a niche that speaks to you. It’s not about being educated on everything that’s going on, but about finding a small sector that excites you and making sure you’re seen as an expert in that space.
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