The NFT boom of the past two years looks definitely over for average consumers. For large social networks, however, it looks like the work has just begun.
The latest platform to adopt non-fungible tokens is Reddit, which on Thursday announced the arrival of “blockchain-backed collection avatars– unique profile pictures of artists riffing on Reddit Alien mascot “Snoo”, giving buyers the right to use them on and off the site. Avatars can only be purchased with fiat currency; Reddit takes a 5% discount on every transaction.
In a sign of the severity of the damage to the crypto brand, Reddit’s announcement strives to never designate these avatars as NFTs, even if they are stored on the Polygon blockchain. Instead, in marketing copy, they’re simply “collectible avatars.”
“We see blockchain as a way to bring more autonomy and independence to communities on Reddit,” the company said in its announcement. “Reddit has always been a model of what online decentralization might look like; our communities are self-built and managed, and as part of our mission to better empower our communities, we are exploring tools to help them be even more self-sufficient and self-sufficient.
Reddit is just the latest social network to offer users a way to set an NFT as their profile picture. Last week, Facebook has started allowing some creators to feature NFTs they own on a new “digital collectibles” tab in their profile. The move took place a month later. Instagram added a way for creators to show off their NFTs. Spotify started letting some artists use NFTs as profile pictures in May.
What makes these moves remarkable is that they came just when demand for NFTs and crypto products was typically falling off a cliff. This is Dan Milmo, writing on Saturday to Guardian:
NFT sales totaled just over $1bn (£830m) in June, according to crypto research firm Chainalysis, their worst performance since the same month last year when sales were $648 million. Sales peaked at $12.6 billion in January.
The cryptocurrency market, worth around $3 trillion last November, is now worth less than $1 trillion.
In January, platforms like Reddit had several good reasons to consider adding NFTs to their products. For enthusiasts, it seemed the technology had solved a long-standing problem for digital artists: their work can be reproduced instantly and endlessly online, reducing its value. By encoding art as non-fungible tokens, it appeared artists could better capture the value of the work they create and share online – and allow tech platforms to capture a healthy percentage of the transaction.
Demand for NFTs has grown throughout 2020, ultimately giving owners of “blue chip” collections like CryptoPunks and Bored Ape Yacht Club a measure of social status. In September 2020, Twitter announced that it would allow subscribers of its premium offering, Blue, to authenticate their NFT ownership and highlight their purchases with hexagon-themed profile pictures. This feature arrived in January, just in time for the market to peak.
You know what happened next: Russia’s invasion of Ukraine, rising inflation, crashing tech stocks, and plummeting cryptocurrency valuations. The less the crypto was worth, the less people traded it. (Except, of course, for some high-profile cases in which too many people tried to withdraw their money, causing various crypto lenders to file for bankruptcy protection.)
The cultural value of NFT collections seems to have fallen in proportion to their price floors on OpenSea. Last month, net-art noted that some of the celebrities who have pushed NFTs the most — and who might have been able to profit from these sales financially — quietly removed them from their Twitter avatars. Among them: Jimmy Fallon, Serena Williams, Reese Witherspoon, Shonda Rhimes, Lil Durk, Travis Barker and Meek Mill.
What once seemed fancy, at least to a subset of extremely online and crypto-zealous Twitter users, suddenly seemed unbearably goofy.
Of course, by then, the social platforms had all formed large teams to figure out how to integrate NFTs into their own products. And a bunch of products that started development in January, when any junior product manager could have convinced them, arrived several months later looking outdated.
If social media ever got the memo about crypto’s decline, they have so far refused to acknowledge it. Whether out of optimism about the future or in recognition of the huge sunk costs involved, companies’ NFT product roadmaps appear to be largely intact.
I reached out to Reddit, Meta, and Twitter today to see if they would tell me about the status of their NFT efforts; none agreed to speak with me. It is a measure of their confidence in an eventual return of NFTs that they are at least release their NFT storefronts, as indifferent as the user base seems to them so far.
Meta in particular has continued to champion the long-term potential of NFTs, even positioning them as a foundation for the virtual reality metaverse it seeks to build. The fact that NFTs are privately owned means in theory that they can be moved from service to service, platform to platform, creating a more interoperable version of the internet than we have today.
“Ideally, you should be able to log into any metaverse experience and whatever you’ve purchased should be there,” Mark Zuckerberg said in a Facebook post from June. “There’s a long way to go to get there, but this kind of interoperability will provide much better experiences for people and greater opportunities for creators. In other words, the more easily you can use your digital assets, the more you value them, which creates a bigger market for creators.”
Stéphane Kasriel, head of fintech at Meta, say it FinancialTimes this week that the company would not change its crypto plans “in any way” due to the current crash. “The Opportunity [Meta] sees is for the hundreds of millions or billions of people who use our apps today to be able to collect digital collectibles, and for the millions of creators who could potentially create virtual and digital goods to be able to sell them through our platforms “, he told the newspaper.
Maybe this opportunity will eventually materialize. It seems entirely possible that the platforms have the basic idea here – that people really want to own unique digital items – but the execution of the product is wrong. Or maybe they’re just too early.
In the meantime, however, social platforms continue to release NFT features only to be met with shrugs. As the tech slowdown drives layoffs across the board, it’s worth wondering if NFTs still deserve such a high spot on the product roadmap — or if they belong on the growing list of items that these companies simply can’t afford it anymore.