NFTs are stuck in Web2

While the crypto and NFT markets have continued to spiral down over the past 12 months, many builders (including myself) are still building Web3 consumer products.

What we’re betting on is that much more value can be created from bringing the mythical “mainstream” from outside the ecosystem than from catering to the fixed pie of degens.

In terms of the “how,” I believe NFTs are the best shot to onboard mainstream users on-chain (despite some bad press), simply because more people care about culture and social signaling than financialization.

(F)utility today

NFTs have two indisputable niche consumer use cases, which I won’t contest here — financial speculation (similar to stocks or memecoins) and collectability for superfans (just like mail stamps, Beanie Babies or high art).

However, when we look at all the other NFT utility cases today, I argue that the mainstream is getting just a refreshed marketing flavor of the same fundamental benefits that already existed in email-based apps. The ratio of benefit to effort for the mainstream user is insufficient for NFTs to cross the chasm.

For example, transparency of your earnings and redemptions is already readily available on credit card portals and brand apps; moreover, communities like TPG help cross-compare the value of points or perks across the ecosystem. Interoperability between brands also already works in Web2: Amex has points transfer partners; Delta Airlines has points partnerships with Starbucks, Lyft, Instacart and Ticketmaster.

Meanwhile, on the NFT side of things, Nike’s SWOOSH “Virtual Creations” NFTs are in fact non-transferable outside its ecosystem, and can only be used with official curated partners (like EA SPORTS).

Reward redemptions for NFTs from on-chain to IRL require a mailing address and an email account to track and ship, as in the case of Starbucks Odyssey NFT free drinks benefit (I got vouchers in the email-based Rewards app) or branded merch (shipped to address) — even my ETH Denver NFT ticket was ultimately sent to me as a QR code in an email.

I won’t argue over the value of loyalty programs and their gamification in general. I do argue, however, that as of today, we have discovered too few “10x” mainstream use cases for NFTs which could not be done just as well with email.

Understanding the mass consumer

When you think about NFTs as a novel business tool for creators, artists and brands, the value prop is quite clear.

As a creator, you can find or segment your 1,000 superfans, derisk from Web2 algorithms by “owning” a direct relationship with your audience and experiment with more sustainable monetization models than ads and brand deals. As a brand, you can collect zero-party data and target new demographics even when internet cookies get discontinued.

All this sounds great, but the missing piece is the consideration of why the mainstream internet user (rather than the early adopter) would consistently show up to interact with these NFTs — given that a more significant onboarding effort is required as compared to any Web2 app or platform.

The inconvenient truth is that mainstream users won’t adopt new products just for philosophical or political reasons. Users inherently follow the path of least resistance, and the motivators that work best to go the extra mile are either financial incentives or a 10x functional (or emotional) improvement over what already exists.

Ambiguous buzzwords like ownership, exclusivity, community, and above all — the mythical “utility” — feel abused in marketing comms and conferences, and too empty to convince the mass user.

The future is 10x

To accelerate great innovations, I think our minds should shift in directions well beyond replicating the Web2 experience and utility for end users.

Collectibles are uniquely solving the problem of provable scarcity for social signaling and self-expression in virtual communities powered by digital assets. Reddit’s Collectible Avatars are already providing clear social utility in subreddits and act as connective tissue between users and creators.

Moreover, with young generations spending only more and more time online (e.g., three hours a day on Roblox), the social value attributed to provably scarce digital goods will only continue to grow, and it will cost just as much to brag about an original Gucci bag online as offline.

When it comes to fan engagement, NFTs rewarded for micro-actions or micro-transactions across the web and collected into a dozen tiles on a “coffee card,” dynamically unlocking a new experience, are simply a much more fun and trivial experience than tracking a dozen of scattered emails or posts from your brand or creator. Pair it with permissionless multiplayer co-creation, and you’ll tap into consumers’ emotional attachment and psychological ownership.

Finally, NFTs and on-chain records can also solve for information asymmetry between audiences and creators across platforms, serving as a fandom “cookie” to distinguish superfans from occasional followers and speculative bots. This could significantly improve the allocation of scarce unique assets like event tickets or 1:1 meet and greets to those who care the most, where creators can rely on the provable fandom history instead of the shallow algorithmic social media feed.

The NFT markets are not immune to fundamental economic laws. The path forward is to balance this equation.

On the price side, we need to reposition digital collectibles for the mainstream and induce smaller and more frequent interactions (akin to TikTok’s gang gang phenomenon). To drive the cost of effort down, we should radically abstract away any Web3-native frictions (like “deploying protocol,” “testnets,” or “transaction approvals”) so that anyone can start experimenting without a steep learning curve or PR concerns.

On the utility side, we should drop the illusion that email-parity utility and perks are good enough to push NFTs into the mainstream, and instead start obsessing about the mass user’s dilemma: “Is there a 10x benefit for me to make the effort?”

Otherwise, just like with the dreaded abundance of work meetings, you’ll wish it could have been just an email.

Kuba Szewczyk is a Senior Manager for Strategy and Product within the ConsenSys NFT group. He is responsible for commercial and product strategy, as well as business and corporate development across the NFT space. Kuba has 5+ years of experience in top tier strategy consulting, having advised a number of Fortune 500 clients while at Bain & Company. Kuba holds an MBA from Harvard Business School.