Crypto by Harvard Business Review

Author:Harvard Business Review
Language: eng
Format: epub
Publisher: Harvard Business Review Press
Published: 2023-02-14T00:00:00+00:00

The Advent of NFT Ecosystems

As marketplaces have sprung up around NFTs, creators have taken advantage of their possibilities in different ways.

The best-known examples are the digital art market, described above, and digital collectibles platforms, such as Dapper Labs’s NBA Top Shot, which enables users to collect and exchange NFTs of exciting plays from basketball games—videos called “moments,” which are effectively digital trading cards. Top Shot has been building in gamified challenges and other reasons to own the cards beyond just their pure collectible value, even teasing that moment holders may eventually receive real-world benefits from the NBA.

But what’s emerged more recently is a model of active ecosystem-building around NFT-native properties—leading to novel organizations developed entirely within the NFT space. These products start with an NFT series but project forward a road map under which holders of the NFT gain access to an expanding array of products, activities, and experiences. Revenue from initial and subsequent NFT sales is fed back into the brand, supporting increasingly ambitious projects, which in turn drive up the value of the NFTs themselves.

The Bored Ape Yacht Club, for example, comprises a series of NFT ape images conferring membership in an online community. The project started with a series of private chat rooms and a graffiti board, and has grown to include high-end merchandise, social events, and even an actual yacht party. SupDucks and the Gutter Cat Gang similarly began building communities around NFT image series and associated online spaces; the former has bridged into a boardwalk-themed metaverse game, and the latter has focused on real-world benefits like extravagant in-person events.

People often take on membership in these collectives as part of their personal identity, even using their favorite NFT image as their public profile picture on social media. Each NFT community has different personalities and purposes, and there are so many by now that almost everyone can find a group they can call their own. In this way, NFT ownership provides an immediate shared text that people can use to connect with each other.

Moreover, in many of these communities, ownership also conveys partial or full commercial rights—or even some degree of governance in how the community is run—which means members can build properties on top of their NFTs that grow the value of the overall brand. Crucially, this creates a channel by which engaged fandom can feed back into the brand itself: “Jenkins the Valet” is a Bored Ape member-created project that has effectively become its own sub-brand. Individual SupDucks members have created art and character identities around their NFTs that have been absorbed into the SupDucks metaverse. And community-created fan projects have built out parts of the Gutter Cat Gang story arc.

All of these benefits make owning the associated NFTs more valuable—and almost paradoxically, this increase in the value of ownership comes in a form that helps separate the value of ownership from the purely financial opportunity of reselling.

Building on this phenomenon, a few well-known brands have recently introduced NFT series that serve to identify, reinforce, and expand their existing communities of brand enthusiasts.

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