Part 2: Blockchain Space Junk

Like many issues these days, opinions about web3 are polarized. In one corner are the WAGMI ("We're All Going To Make It") crowd, most (if not all) who have strong financial incentives wrapped up in crypto. This can result in some interesting online dynamics when it comes to different perspectives being surfaced. In the other corner are the crypto cynics. At best, they think the technology has no potential and will fizzle to nothing. At their most extreme, they claim it could result in empowering tyranny.

The reality is that, on a spectrum from utopian to dystopian, it's probably somewhere in between. Nilesh Ashra, a creative technologist with deep roots in brand, highlighted that the very name "web3" implies that we've made a shift to an entirely new Internet.

"These systems are going to run in parallel for decades, if not forever. There isn't going to be a wholesale power shift, there'll be an alternative way to make incentive structures and put the internet on currency reels, if you want that."

The hype and the speculative bubble haven't helped keep things rational. Tim O'Reilly had a smart take on the situation. Citing work by the Economist Carlota Perez, he notes that:

"Virtually every past major industrial transformation—the first Industrial Revolution; the age of steam power; the age of steel, electricity, and heavy machinery; the age of automobiles, oil, and mass production; and the internet—was accompanied by a financial bubble.

Perez identifies four stages in each of these 50–60-year innovation cycles. In the first stage, there’s foundational investment in new technology. This gives way to speculative frenzy in which financial capital seeks continued outsized returns in a rapidly evolving market that is beginning to consolidate. After the speculative bubble pops, there’s a period of more-sustained consolidation and market correction (including regulation of excess market power), followed by a mature “golden age” of integration of the new technology into society. Eventually, the technology is sufficiently mature that capital moves elsewhere, funding the next nascent technology revolution, and the cycle repeats.An important conclusion of Perez’s analysis is that a true technology revolution must be accompanied by the development of substantial new infrastructure."

We're in the midst of building web3's infrastructure. The speculative activity that goes along with it is just the by-product. We saw this with with the dot com bubble. Nilesh Ashra again:

"Early on in my career I made a lot of Internet space junk. I contributed to just trying things... that's where we are. So expect a lot more experimentation and people getting things wrong."

Once the bubble bursts and the frenzy dies down, we can strive for more meaningful and valuable progress. But we've got to try things out and see what works, as long as it's not harmful. Otherwise, progress in this space will be much harder and much slower.

The Laboratory

Let's take a look at how consumer brands are experimenting in web3 today. This is by no means an exhaustive list of what's out there. Some of these examples are interesting (🚀). Some are terrible (🗑). But it's encouraging to see a commitment to experimentation, even if it doesn't hit the mark.

The examples can be categorized in four main areas:

  1. Access

  2. Virtual Goods

  3. Community Collaboration 

  4. Digital Art

1. Access

Owners of tokens can be granted exclusive access to digital spaces, physical events or product drops. The tokens can consist of social tokens (which are fungible), or NFTs (non-fungible). An example of the former would be that a company releases their $BRAND token, with hundreds of the same coin. An example of the latter would be a unique digital artifact. Both can be traded, but the NFT is unique.

Rex Woodbury helpfully  uses this example of an Andy Warhol autograph on a dollar bill to think about fungibility:

Adidas Originals: Into The Metaverse

Partnering with 3 established players in the NFT world, Adidas minted just over 30,000 NFTs featuring Gmoney, Bored Ape Yacht Club and PUNKS comic. The NFTs sold out almost immediately, generating $22m in revenue. The NFTs will give access to future exclusive physical product drops and virtual land experiences.

🗑 or 🚀: 🚀

adidas x The Sandbox

The virtual land experience references Adidas' partnership with The Sandbox, an on-chain game. Here, people buy virtual land, then build and monetize virtual worlds on that land. The Adidas NFTs will give access to the community-centric creation of that branded space.

🗑 or 🚀: 🚀

Miller Lite x Decentraland

🗑 or 🚀: 🗑🗑🗑

Miller Lite opened a virtual bar in Decentraland during the Superbowl. The reason Miller's team think people were going to go there, is to watch their Superbowl ad, which was only available to watch in the virtual world. As Stephen Colbert put it: “it’s not only confusing, it’s also exclusive, because the metaverse bar will be the sole place where fans can watch Miller Lite’s Big Game ad. Perfect for anyone who thought, Man, I love commercials, but I wish I had to work harder to access them while my avatar drinks this imaginary can of carbonated disappointment.”

The Hundreds: Adam Bomb Squad

Streetwear brand The Hundreds has leveraged its loved mascot Adam Bomb to create its NFT series consisting of 25,000 unique Adam Bomb artworks. Dubbed Adam Bomb Squad, Each NFT gives access to Discord servers, festivals and parties, exclusive products and collections, discount codes, early release links, free products and so on. The overlap between the online and offline worlds makes this use case particularly interesting. Earlier this year, the brand launched a simultaneous physical and virtual product drop on Decentraland.

Bobby Hundreds, the founder of the brand, writes prolifically and has highlighted how Streetwear and web3 are a natural pairing:

Although streetwear can learn much from the decentralization and technological capabilities afforded by NFTs, this essay is to suggest that NFTs can learn from the success and travails that streetwear’s experienced along its journey. The overarching message is that Culture and Community must outweigh the transactional aspects of the game. Although quick flips and trading are essential to collectibles culture, they cannot become the only thing that drives a project. Once that happens — and there are signals that this is already a rampant attitude in the NFT space — the players will move on to the next soulless gadget.

Bobby readily admits that there's no roadmap to how the brand will interact in the web3 space. His argument is that, like in streetwear, you need to adapt to culture. A rigid roadmap limits adaptability. His writings exhibit a thoughtful, deliberate approach to how his brand will interact in the space. Respectful of streetwear culture, crypto culture (and what big picture success really looks like) and The Hundreds brand. This is a masterclass in a brand leveraging web3, setting itself and its customers up for authentic, high quality engagement for the long-term.

🗑 or 🚀: 🚀🚀🚀

2. Virtual Goods

Quite simply, virtual goods that can be owned on the blockchain and in time, used across different environments in the metaverse. Naturally, much of the virtual goods market will be in-game focused, but we could see virtual goods as representations of real-world goods in different applications.

Nike x RTFKT

RTFKT (pronounced "artifact") is a company that creates virtual apparel as NFTs. This enables customers to wear the items on their avatar across multiple blockchain-based games such as Decentraland, The Sandbox and Atari Metaverse. It's a deep commitment by Nike to the potential of the metaverse and shows the company's understanding that people don't only derive value from physical objects.  Not that that's news. The virtual goods market is on track to reach $190 billion by 2025. But an NFT virtual good allows players to take that item from game to game across different platforms. Not only can they use the goods in-game, they can sell it or rent it - just like they could in the real world.

RTFKT just released Nike's first NFT, coined "MNLTH", the first part of an activation that involves some sort of quest. The MNLTH does have an uncanny resemblance to RTFKT's "loot pods", so could act as a container for virtual goods. The cubes were airdropped into the wallets of users who owned RTFKT’s CloneX and PodX collections (rewarding those already in the community).

As an aside, the Nike x RTFKT partnership could have exciting consequences for the overlap of design in the two worlds, where the removal of limitations in the digital space could inspire and influence physical footwear design.

The promise of NFTs is that they will be interoperable across on-chain environments. Meaning that I can use the items not just in one game (today's reality), but in any game, website or other environment that is built on the same blockchain. RTFKT is already delivering on that functionality. Importantly, there's an off-chain game that holds great promise too: Roblox. The exceedingly popular game has been lauded for its innovation. That said, the company isn't based on the blockchain (yet).  With it's own economic system that empowers creators to develop on top of their platform, it's the closest an off-chain solution looks like to on-chain gaming. In November 2021, Nike announced Nikeland: an immersive branded area in Roblox with spaces for fun activities and Nike-branded avatars. With news of developers building on-chain areas within Roblox, it makes a ton of sense for Roblox to be exploring how to bring the game on-chain. If this does roll out, that would allow Nike / RTFKT virtual goods to exist throughout the game space, connecting the different gaming worlds and providing more reason for gamers to invest in virtual goods.

🗑 or 🚀: 🚀

StockX

The reseller is getting sued by Nike for selling digital Nike product as NFTs. Cheeky (and stupid). No doubt this will be one of many cases of copyright infringement in web3. 

🗑 or 🚀: 🗑

Walmart

Walmart might come across as a bit of a wildcard here, but they're on the front foot when it comes to innovation, including live shoppable Tik Tok feeds, shoppable choose-your-own-adventure recipe videos and virtual summer camps.

In December, the retailer  filed a bunch of trademark applications, suggesting that they're planning to leverage crypto technologies, suggesting an entry into crypto financial services, creating a digital currency and community tokens and NFTs for virtual goods.

Trademarks and patents are filed by companies all the time. It doesn't mean they'll see the light of day. But as people buy up virtual real estate and build their online existence, it seems that Walmart could be positioning itself to service those needs and possibly act as a bridge between the online + offline environments. An example of that would be shopping in the metaverse for physical objects, but retaining proof of ownership, instructions and warranty information on-chain.

🗑 or 🚀: ❓

3. Community Collaboration

This requires participation from a collective of people, usually who don't know each other, but who have similar interests or goals.

Budweiser N3XT

Compared to Miller Lite, it seems that Budweiser understand the space a bit better. Their NFTs will give token holders the rights to exclusive benefits like voting and rewards. Exactly what that looks like is unclear, but it's a step in the right direction. The brand collaborated with Nouns DAO for their recent Super Bowl commercial. This feels like a case of a brand hustling to be an early mover in the space, but without clearly communicating a strategy for community engagement or how it will continue to generate value for customers. Perhaps this ambiguity is enough for token holders, but once the hype dies down I wonder if the brand will remain committed to the program and what value the NFTs will bring holders in the long run. 

🗑 or 🚀: 🗑

Adidas : Prada Re-Source

🗑 or 🚀: 🗑

The Adidas 'Into The Metaverse' NFTs also give token holders access to another initiative, which is an open source (to token holders) community-created artwork, in collaboration with artist Zach Lieberman. The artwork was auctioned off (selling for 30 ETH) and earnings were split between contributors. Fun concept, but didn't quite stick the landing.

 

4. Digital Art

The most well known application of NFTs and arguably the lowest hanging fruit.

Taco Bell

The very first brand to mint an NFT. Taco Bell created 25 NFTs back in early March 2021, proceeds of which went to its scholarship program through the Taco Bell Foundation. Points for being a first mover and for the benefits going to a good cause.

🗑 or 🚀: 🚀

Gucci x Superplastic: Supergucci

An NFT drop that really leans into scarcity, with just 10 unique NFTs being minted. A digital artwork will be accompanied by a ceramic sculpture, both inspired by Gucci design. A very small, insignificant attempt that has bandwagon written all over it.

🗑 or 🚀: 🗑

Lamborghini

A composite photograph of a Lambo lifting off like a rocket. The 5 pieces of NFT artwork are unlocked via a QR codes that comes engraved on physical pieces of carbon fiber that were used in experiments on the International Space Station. Kind of a Lamborghini thing to do, I guess... and quite literally Blockchain Space Junk.

🗑 or 🚀: 🗑

Verdict

The most effective of these examples tie into something that is bigger than the NFT itself. That could be enabling identity across multiple platforms with interoperable virtual goods. Or using tokens for brands to grant customers' access to things they really value. Or governance rights in particular brand initiatives.

What about the examples that aren't effective? Simply, when the NFT is a dead end. When it has no additional utility or engagement. This is purely Blockchain Space Junk that we'll shake our heads about in retrospect.

It pays to consider what customers value and how the utility of NFTs could unlock that value in new ways. In the next part of this series, we'll explore a framework for doing just that.

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Part 1: What can we learn from Web 2.0?

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Part 3: Meaningful Participation