The darkest hour has not yet come, but NFTs will not die

Original Author: SLEEPY

Original Title: “Field Investigation: The Darkest Hour Hasn't Come Yet, But NFTs Won't Die”

Recently, I think there's no need to recap the recent events. I've privately discussed the opinions of a certain team with many friends, so I won't "kick someone when they're down" here. The market situation doesn't need me to summarize for everyone either. The purpose of writing this article is actually to share my expectations and understanding of NFTs from the perspective of an ordinary practitioner. If possible, I also hope that everyone does not lose hope in the industry.

How to Classify NFTs?

First, let's talk about this point that I've always wanted to complain about.

Online, people generally divide PFP and utility NFTs into two categories. However, as a practitioner, I would like to ask everyone to think carefully about whether this classification makes sense. Because of this statement, there was a time when I didn't want to refer to Little Ghost as a PFP NFT.

The premise of classification is that they belong to the same level. Just like you can't categorize music into Black music and rap, you also can't categorize NFTs into PFP and utility types.

At the end of the day, images are just a form of expression. It doesn't mean that if it's an avatar, it can only be a worthless token, nor does it mean that if it has utility, it can only be a boring and uniform card.

The basis for utility is the act of "holding an NFT," while whether it has utility and what kind of utility it provides completely depends on the team behind it. Little Ghost is an avatar but can also provide holders with whitelists, alpha information, music festival tickets, discounts on physical goods, and other benefits. I've also seen many non-avatar projects that claim to be "utility NFTs" only provide holders with a whitelist for some projects. (P.S. I will always promote Little Ghost, after all, I'm the founder, haha, but I try not to step on others.)

What Exactly is PFP?

Recently, many people have said, "The narrative of PFP is over." So what exactly is PFP?

First, let me share my viewpoint: PFP is a financial product that can consolidate cultural consensus. In the future, it may become a consumer product, but in the current Web3 environment, it cannot be treated as a consumer product.

I used to avoid discussing the financial attributes of NFTs, but everything has two sides. If used properly, financial attributes are not necessarily a bad thing. Bored Apes transformed public perception from "will be killed by Meebits" to "the number one IP in Web3" thanks to a price surge, and Azuki survived the first crisis due to skyrocketing prices. Another realistic example is that it was very difficult to discuss brand collaborations for Little Ghost when its floor price was around 0.1, but when it rose to around 0.3 to 0.5, things became much simpler.

Consensus based on finance (floor price) is easy to form, but consensus based on culture is often confusing because culture emphasizes roots. People often equate cultural consensus based on finance (floor price) with rooted cultural consensus. In my personal view, cultural consensus based on finance (floor price) is always lacking in vitality, just like many young people trapped in life calling Jack Ma "dad" while "enjoying the blessings of 996."

Since PFP is a financial product that can consolidate cultural consensus, the "gathering" work before the project launch becomes crucial. To be honest, Little Ghost did not consider this issue at all during its launch; we didn't find a group of whales in advance or engage market makers, which to some extent led to the price not skyrocketing like other projects at the same time. However, we also view this as a good thing; not leveraging finance when the foundation is unstable turned out to be key to protecting us in a bear market.

We can also ponder an interesting question: If the Az project experiences another price surge, will you still be "swayed" by it? Will you still invest a lot of effort into "building the community"?

Why Has Doing IP Become the Original Sin of NFTs?

Another viewpoint I've seen frequently is that NFTs should not develop towards IP; NFTs need a new "narrative."

Indeed, the IP route carries a lot of uncertainty, and developing IP is a process that requires a long time to settle, which means greater uncertainty and time costs for the crypto circle. However, compared to many unverified and quickly debunked "narratives," the IP route is a path that has been validated by the market, and the world will always need new IPs.

However, Web3 IP is very different from traditional Web2 IP. Most Web2 IPs capture a large number of fans through content output first and then monetize through derivatives, but Web3 IP currently lacks the ability to output content. If you say, "But Hasbro also sold Transformers toys before making the Transformers animation," well, Hasbro at least has the capability to make toys. However, this does not prove that the track is problematic; it only proves that the team's capability is lacking.

I understand their skepticism towards the NFT IP development path. We have also gone through the complete process of product design, production, and logistics, which is exhausting. But we don't need to completely deny the entire track, as Pudgy Penguins has set a great example for us. Besides Pudgy Penguins, I recently had some exchanges with the Karafuru team, and they have decent revenue in Southeast Asia's Web2, enough to cover the team's operating costs.

It seems that NFT IP development is not as difficult as many people imagined; it just doesn't appear as "spectacular" as many crypto projects.

However, another challenge lies in how to give back to these OG NFT holders after making money in Web2. Since it involves Web2 business, it must comply with legal regulations, and how to "share profits" (or give back) under legal supervision is itself a challenge.

Moreover, beyond the commercial closed loop, IP development means that more people must be brought in. If not handled properly, it can greatly dilute the value of OG holders, which is also a major reason for this incident. However, there are only so many people in the Web3 circle. If expanding the audience still relies on internal users, it is unrealistic. As mentioned above, project parties generally lack content creation and channel expansion capabilities. Without content creation and channel expansion, it is impossible to break out of the circle. Therefore, if we want to expand the audience, we can only mint more NFTs, but currently, no one sees NFTs as consumer products. If we keep issuing tokens, it will inevitably lead to a bubble burst.

Are We Web3 People Overestimating Web3?

I admit this subheading is a bit clickbaity, haha, but this is something I've always wanted to discuss with everyone.

What do I personally believe Web3 is about? I think it is definitely not about technical aspects; I don't understand code and programming, but from my intuitive feeling, the shock brought by AI is stronger. I believe the most transformative aspect of Web3 is the way of thinking it brings to the world. The iteration of productivity is something everyone can feel, and the shock is normal; however, the transformation of production relations is hard to feel unless you participate.

Bubble Mart had a revenue of 4.62 billion in 2022, with a net profit of 570 million. What can Web3 bring them? Is it necessary to issue Molly NFTs? Not really; there are only a few people in the Web3 circle. From the perspective of productivity, Web3 is unlikely to bring them significant growth. But what if we think from another angle? Bubble Mart's current self-owned IP mainly relies on acquisitions, which often means significant upfront investment, including financial investment and betting on whether it can become popular in the future. Web3 can help Bubble Mart quickly build a new IP from scratch and rapidly capture early seed users. As for why Bubble Mart hasn't done this yet, I guess it may be worried about balancing the financial attributes involved, fearing that the risks outweigh the rewards.

Recently, I chatted with a friend in the clothing industry who wanted to help Web3 IP with "empowerment," assisting these Web3 teams in creating physical products they wouldn't normally make. However, after discussing with investors, he felt it was not feasible because most Web3 IPs have a short lifecycle, while designing and producing physical products takes time.

In fact, staying in the Web3 circle for too long requires us to lift our heads and look at the world. For a while, I would point to Mondrian's geometric paintings and say, "They look a lot like the artworks on Art Blocks," and I would point to Keith Haring's paintings and say, "They look a lot like that silly NFT." Web3 is an interdisciplinary field that requires us to continuously draw nutrients and broaden our horizons from a wider world. Ultimately, Web3 is still a small circle, but every upright practitioner has a vision to change the world, and the world cannot be changed by looking down.

The Darkest Hour Hasn't Come Yet, But NFTs Won't Die

Some say, "Our circle has been flowing with Ponzi blood since its inception."

Ponzi signifies danger and opportunity. To put it bluntly, a burst bubble is called a Ponzi scheme, while an unburst bubble is called finance. Our work in Web3 IP requires us to navigate between culture and finance, seeking a balance between the two.

To be honest, in my view, the darkest hour for NFTs has not yet arrived. Aside from the liquidity of 20k ETH that has been drained, the score mining on Blur is becoming increasingly malicious, and inappropriate mechanisms are negatively impacting the entire ecosystem. NFTs may continue to decline for a while.

Beyond price, I see a large number of NFT players being hurt. Many of them may never participate as actively in community building again; many may only engage in trading in the future. This loss of vitality is, in my view, a more frightening thing.

But as a practitioner, I won't declare the entire industry dead because of the actions of one project. I see the changes it has brought to my life and the momentum that the Little Ghost IP has built up in just over a year, which even surpasses some IPs that have operated for years in Web2. I see the momentum of Little Ghost continuing to grow stronger, and I will always be bullish.

I don't believe there will be a chasm between Web3 and Web2 in the future, nor do I think NFTs will forever be an endless Ponzi bubble. Even if I am surrounded by "gamblers flowing with Ponzi blood," I still look forward to more Martin Luther Kings.