One of the most common criticisms of the NFT scene is the underlying technology that powers them. New users are pitched on the premise that pictures and artwork are permanently embedded into the blockchain, creating an immutable asset that can be held, traded, and publicly examined for authenticity. But that’s not entirely true. The pictures changing hands ($3.5B worth in a single month just on OpenSea alone) are not actually on the blockchains, nor are the images they represent all particularly permanent, which means you could wake up tomorrow to find that your NFTs aren’t loading, the names of them have changed, or worse yet, they’re suddenly all pictures of something else.
Everything seems to be working as it should, except both references for that NFT live on our servers, not any blockchain’s. So if I sell that one to you, control over the content of that NFT remains with ME. Having run several tests, I’ve since turned that NFT into an animated gif of Theodore Roosevelt, a video about two people discussing regulation, a random logo file, and then back to a stick figure. I then changed the name and the description. Throughout this experiment, there would be nothing that the owner of the token, assuming it wasn’t me, could do about it.
Hopefully you were already aware about these limitations if you’ve made NFT trading a hobby or business. If not, now you know.
Turning a weakness into a strength
While any seasoned crypto enthusiast will simply point out that the metadata file and image file could’ve been uploaded to a decentralized server instead of ours to limit the vulnerability stated above, millions of NFTs on the open market are set up just like mine. And if I can change what’s in your wallet whenever I want, perhaps that’s not so bad, because the ability to amend the content over time could unlock untapped potential. Candy Digital, for example, is now offering Baseball card-style NFTs of players where the stats are updated in real time. Maybe a living NFT such as that, could be more valuable than a static collectible.
Below are a few ideas:
Fixes to defects in NFT artwork could be applied
Artists could update attributes of artwork over time to give them a modern, relevant, or trendy polish, or even supply a new piece of art to the same NFT
An NFT holder could be alerted to the fact that they’ve won a prize or raffle by modifying it to something designed to get their attention
An NFT could be updated frequently with news updates, i.e. a news NFT where it switches between images and video clips with whatever the latest news is
While it’s become trendy to market NFTs as a virtual membership card that can unlock access to Discords, events, and clubs, one should consider that the NFT itself could be the club. Like the Amazon Echo, the NFT could be the conduit for content that can be updated and upgraded on the back-end without having to buy another NFT. MetaMask or OpenSea or perhaps another platform altogether could provide an enhanced interface to consume it all.
Marketers could even find a whole new market for airdrops if they can turn the mass deployed NFTs into active pieces of content that at times convert into ads or commercials throughout the day. That Bored Ape could turn into an ad for Geico for 30 seconds every hour or something. Maybe that’s not what you want to hear, but given how much NFT content already lives on centralized servers, it is only a matter of time before creators start to consider the opportunity that perceived weakness affords.
Products and services that provide access to liquidity in blockchain holdings, primarily NFTs, are in high demand as more and more cash pours into the buying and selling of digital assets. This, complemented by the logical implications brought upon by smart contracts in the funding process, has created a peer-to-peer lending space that companies like NFTfi have developed marketplaces in that are now facilitating multi-million dollar loans.
According to NFTfi, their latest $8.32M loan at 10% APR for 90 days “eclipses” the previous record of an NFT-backed loan that was funded earlier this year, that used 101 Cryptopunks as collateral to unlock $8M of liquidity within those NFTs. The borrowers were all anonymous.
When asked about how to balance crypto’s fundamentals of decentralization while also making an effort to actively incorporate blockchain technology into legacy financial institutions worldwide, NFTfi CEO Stephen Young told deCashed that it comes down to the digital-nativeness of the user.
According to him, despite the access marketplaces like his give to either those who are holding lots of value in NFTs and are cash poor, or those who are looking to put their digital assets to work as lenders, it’s not for everyone.
“There are certain people that more of a centralized offering is better for,” said Stephen Young, CEO of NFTfi. “If I was going to get my Mom to buy crypto, I would just tell her to buy it on Coinbase and keep it there.”
Young spoke about how many people don’t want to deal with things like digital wallets and private keys that make up crypto’s “ideologically pure” ‘decentralization’ mantra. “For my Mom, self custody is not appropriate.”
Young touched on how easy-to-use centralized platforms allow different types of financial products inspired by blockchain technology to become accessible to a larger pool of potential borrowers.
“I can see centralized institutions like Coinbase making peer to peer loans viable to users via their platform,” said Young. “With all of their normal KYC, customer support, and everything they do, but they use something like NFTfi as a settlement layer underneath that actually just executes the loans.”
With APR-based scrutiny from regulators pertaining to disclosure being a major factor in the ongoing struggle in the American small business lending space, crypto regulation’s looming presence on the horizon in the states brings lending marketplaces like NFTfi into serious question when it comes to their function in regulated space.
Despite showcasing that their record funding came with an APR of just 10%, some of the loans being processed in the NFT space have calculated APRs of well over 100%.
When asked about how to justify the fairness of a financial product that has APR percentages in the hundreds, Young spoke on the financial literacy of his customer basse, citing play-to-earn gamers who have created streams of digital incomes or NFT flippers looking to unlock liquidity as part of a broad moneymaking strategy.
“Almost all of [the borrowers] are making way more than that in return by putting that capital to work,” said Young. “Obviously it doesn’t always work out for people, but these are people using these things as financial tools as part of a broader strategy during in which that type of transaction makes sense.”
In such a new space, Young said right now his focus is on facilitating a place where those with large amounts of digital assets can best leverage them for their liquidity. ‘These people are NFT rich, and cash poor,” said Young.
When asked about long term practicality, Young hinted at the smart contract being the key facilitator and point of value in these types of financial products being widely incorporated. “[Smart contracts] allow a speed of a transaction that you can’t really do in the real world,” he said. “I think that it’s also going to allow us to involve financial products that you can use in the real world.”
iHeartMedia has announced they’re pouring hundreds of thousands of dollars into buying multiple NFTs, in an effort to create an NFT-infused podcast network. Executives told Axios they plan to make “10-15 investments over the next several days” on various types of NFTs that’ll include tokens from CryptoPunks, Mutant Ape Yacht Club, and World of Women.
This isn’t the audio platform’s first dive into Web3. Back in January, the company announced an expansion into the Metaverse by committing to the launch of a token via Roblox, attempting to leverage their consumer reach of “90% of Americans every month” into engagement via their web3-infused online communities and other iHeartMedia platforms.
This is one of the largest investments into the mainstream NFT space by a legacy media company as of yet. With a history of paying big bucks in acquisitions, iHeartMedia looks to have begun to bring those same spending habits to their Web3 efforts.
Executives also told Axios that the company plans on “testing five to ten of its existing podcast shows as IP for DAOs.” Khalil Tawil, EVP of strategy at iHeartMedia, compared this leveraging of IP attempts via NFTs as a way to avoid the problems faced by comic book companies when trying to combine characters from different stories into one film or series.
“There’s no real precedent for this,” said Tawil.
The ideas from iHeartMedia on how to initially utilize their investments into Web3 are based upon creating shared virtual spaces. According to iHeartMedia, the concept is to bring together the IP from the NFTs they acquire into content that it will call the “Non-Fun Squad” universe.
Conal Byrne, CEO of iHeartMedia’s Digital Audio Group told Axios, “we can world-build for them, creating narratives around them, and bring those stories to life via podcasts.”
The first content of this network will be called the Non-Fun Podcast Network, which will feature characters from the Non-Fun Squad. Members of the squad will be characters represented by NFTs, and voiced by real people that portray the characters.
This intersection between audio-based media and digital art will be an interesting thing to watch for those looking to capitalize on the media surrounding Web3 and digital assets.
Rapper Pip has become a “self-taught expert” in crypto, and has begun leveraging digital assets to promote his music career
Hip-hop artist Thomas Pipolo has leveraged digital assets to promote his music while also putting some serious cash in his pocket in the process. Pipolo, who goes by Pip, has launched a crypto-crowdfund titled Cotton Candy Skies that netted him 6.8eth ($20,000) on its opening day, after launching a successful membership club-esque NFT promotion prior.
“I genuinely want to show other independent artists that it is possible to give your fans meaningful access to you and your music, and the opportunity to invest in your brand,” said Pipolo. “Through blockchain technology, it’s possible for artists of any caliber to maintain ownership rights of their work, establish a fruitful career in the music industry, and get their music heard.”
Pipolo has been a crypto-native rapper for some time. His NFT collection gives their owners exclusive backstage passes to his events, access to studio recording sessions, exclusive meetups and more. His NFTs are currently supported by mirror.xyz.
His NFT’s include tiers like the Platinum Pass, Gold Pass and the Silver Pass. Fans and investors can collect one or multiple NFT’s up until the allotted cap, allowing them to gain immediate access to an exclusive members-only platform.
These NFT ‘backstage passes’ as they’re called can give holders lifetime concert tickets, unreleased music, access to live studio sessions, merchandise, meet-ups and more. The first exclusive content includes early access to the first single of the Cotton Candy Skies EP titled MONACO, which drops March 25 to the public.
“The fans and supporters investing in these Backstage Passes are giving me and my team a chance to make our dreams come true. That’s why I’m so excited to launch our upcoming record label Cotton Candy Records on the blockchain, which will allow us to help other artists with their projects,” Pipolo said.
He continued on the outlook of his embracement of blockchain technology in music. Besides the idea of artists leveraging NFTs for representation of their music or concert ticketing, Pipolo believes that this is just the beginning. According to him, blockchain technology is going to change the way consumers interact with their favorite artists.
In his future plans, Pipolo plans to roll out the first “on chain” record company. Dubbed Cotton Candy Records, this will be one of the first record labels on the blockchain according to him.
“This will be revolutionary in the Web3 space and in the music industry as a whole,” said Pipolo.
