Web2 wasn't great for creative people**
“Web2 companies convinced you to give away your creations in exchange for little hearts, tell me how NFTs are the real scam?”
Web 2 was powered by banner ads and search ads. And that has been great for a few companies. Not for creative people.
It’s kind of amazing that they convinced all these people to participate. Instagram, what do they pay out? Zero. Facebook, zero. Twitter, zero. YouTube, 50 percent. Apple, just for having the phone, they take 30 percent.
Spotify proudly advertises that they have eight million artists, and 14,000 of them make >$50,000 a year. Most make nothing.
Web 2's growth should have been be a golden period. There are billions who are internet connected. You only need a thousand fans to make a living (1). This should have been the greatest time in history for creative people.
Enter NFTs.
NFTs are very broad. Chris calls them a primitive, a building block. NFTs allow you to tokenize your value as a creator.
**Tokens (NFTs) - The new webpage** (2)
NFTs as a concept is as general as the webpage.
Over this sort of 30-year period, all of these clever people come and they innovated on what a website could be. Now it’s a social network. It’s a SAAS tool. It’s a chess game.
NFTs are going to be just as broad. They are essentially turing complete (3) programmable objects that can be owned.
Footnote
Turing complete means they can handle any computation.
It’s a core, new concept - the idea of owning something on the internet.
We had this sort of renting fiefdom design in Web 2. We’ve just kind of broken it open. Imagine the amount of creative innovation that will kick off.
**NFTs as a / are a value funnel**
An NFT is not really a digital object. It is a pointer. It can function as a link between the creator and the community to funnel any kind of value.
It can be access to things. It can be recognition and reputation. It can be royalties, it can be copyrights. It can be remix rights, or it could just be direct support in the form of money.
Some More Use Cases
Limited to those discussed in the episode
Direct Patronage
NFTs allow creators to create communities and sell their tokens as access or simply as an expression of fandom.
Chris: Now I finally understand buying art, because I get to support an artist in a non-transactional way. Have a chance to innteract with them, or be a part of their online community and networks
Naval: We are establishing direct linkages, economic linkages, and governance linkages between communities of fans and artists. And I think that’s wonderful.
I want to be able to support an artist without having to buy a sneaker they are affiliate marketing. Or support a fitness expert online without having to buy some BS vitamin that they have to stamp their name on. Or support a musician without having to pay Spotify 10 bucks a month and hoping it finds its way to them.
Gaming and NFTs
Every meeting the gaming group at a16z has, involves NFTs now. The gaming community gets Web3 instantly. They are already used to guilds, virtual goods and in-game economies.
The most common virtual goods were aesthetic add-ons like character skins. These were essentially status flexes. They were traditionally brought by the player from the game company. Centralized commerce.
Compare this to NFT gaming like in Axie Infinity.
By playing the game, you create and improve NFTs which can be purchased by other players on a marketplace and then used by them. Player to player commerce.
Authentication has value
A hypothetical situation to illustrate. Let’s say we’re building a 3D virtual space. One virtual room has the authentic version of the famous NFT BAYC(4) hanging on the virtual walls. Your wallet software tells you that. A different room has an unauthenticated copy. And your wallet software immediately tells you that.
Where do you think the cool kids and the rich kids are going to hang out? Where are the parties going to take place? Obviously the space with the real NFT. It gives a space value.
So all of a sudden having NFTs in this authentication gives spaces actual value.
//twitter authentication
Self-declared Cohorts
If you’re a business, and you want to find some really good customers, people that own CryptoPunks are probably really good customers. You can see a world where, instead of the Web2 companies surveilling you and trying to figure out your interests, you’re just declaring your interest through NFTs. And so it’s done in an opt-in way.
//Kinda like facebook groups?
NFTs Are Still Skeumorphic
Going from skeumorphic use cases to native
Even disruptive technologies take time to go from skeumorphic to native.
When the Apple PC was marketed in the 80s, they always showcased kitchen recipes as a use case. For mobile they always talked about stocks and weather. But most importantly both PC and mobile were design playgrounds that led to a wave of innovation on top.
---We are in the kitchen recipe period of NFTs ---
For example: people often talk about selling tickets to things, recorded on the blockchain.
Instead, a native use case could include using NFTs instead for digital access.
The real world analogy to this might be reserving the seat in an expensive restaurant for special patrons. Why do wealthy people invest in restaurants? Its not for the cash flows. They invest to get a good table. Why not just skip the whole investing part and just have an NFT.
Will all these NFTs have value over time?
A Disclaimer
This is not a recommendation to go and buy any NFT projects and companies.
For all we know, we’re in the first generation. So in terms of Web2 companies, if you had bet everything on the Flickrs and the MySpace of the world, you wouldn’t have done well. You had to wait for the Netflix and the Facebook.
A lot of early NFT collectors who made money were initially buying because they genuinely liked the art. They wanted to support the artists. It didn’t have anything to do with making money.
So if you want to go buy NFTs, buy the stuff you like, because what you’re probably going to end up with is just a cool JPG.
Value is a Social Contract
Maybe digital assets are like fashion. Maybe different tokens have hype cycles at different time. They’re culture. They’re always emerging. They’re always composing. They’re always combining. They’re always going out of style.
And just like in the real world, anything that’s in fashion can hold value. It doesn't need to be permanent value. It could be real estate or oil, which is a real use case. It could be gold. Or it could be a pair of sneakers.
The value will be very non-linearly distributed. The vast majority of objects will trend towards zero value.
There may be flashes in the pan, but at least this gives a chance for everybody who’s coming “late” to the crypto revolution.