On Nov. 14, as the rapidly widening contagion from the FTX exchange’s collapse was thrusting crypto into an existential crisis, shoemaking giant Nike launched its bold new Web3 platform, SWOOSH.
The initiative, which will allow Nike sneaker fans to buy and sell the brand’s digital wearables and to create their own collectibles powered by non-fungible tokens, is one of many such projects from household brands that are powering along as if nothing has happened in the wider world of crypto. These include Starbucks, the National Football League and its players, Instagram, Budweiser, Adidas, Dolce & Gabbana and Time. The list goes on.
It’s why a common refrain I heard, during conversations with the NFT crowd during Art Basel in Miami this week, was that crypto will be saved by brands.
That may be the case, and it’s all well and good that spending on such projects will help offset the big pullback in expenditure by native crypto companies. But it also evokes concern among many who were drawn to this industry’s rebellious, disruptive appeal and by its promise to level the playing field by giving creators and users greater control over their money, content and data.
The question we must ask is: As crypto gets corporatized, will it lose its edge?
To an extent, the answer is unavoidably yes. The crypto industry will have to bend to the legal and marketing concerns of image-conscious, bureaucratic public companies. Already it’s clear that trigger words like “crypto,” “blockchain” and even “NFTs” are being excluded from materials in favor of the generic idea of “digital collectibles.”
All is not lost, though. So far, brands’ activities in this space seem born of the right, inclusive spirit. There is a real effort, for example, to give artists, musicians and writers greater control over their work, to dramatically boost the royalties they receive and to seek out diverse creative backgrounds and styles. At a Miami event honoring the artists behind Time Magazine’s Timepieces NFT series, many said they felt appreciated and empowered by what Time, under the leadership of outgoing President Keith Grossman, has built.
There’s even a similar vibe at Instagram, which as a subsidiary of Meta Platforms is often viewed as an extension of the social media giant’s massive control over people’s data, content and lives. The platform’s latest trial with a group of NFT-savvy influencers not only allows them to make, buy and sell collectible content, they can also use the technology to build new exclusive-access business models, working directly with their most loyal audience members. At least in spirit, it hews to the Web3 principles of pushing control and ownership to creators and users.
But before we start celebrating the liberation of struggling artists everywhere, let’s recall that Meta itself started out its metaverse project with plans to charge fees of up to 47.5% for the privilege of using it. That monopoly-like pricing model prompted both anger and laughter from the crypto community.
Already the Web3 economy emerging from these brands’ ad hoc projects is rife with contradictions. We must disentangle them if we are to properly assert the principles of competition and ease of access that are needed to assume an open, disintermediated Web3 future.
Consider the pricing and fee structure that artists working with the new Instagram NFT project face.
On the one hand, it bars influencers from pricing their works higher than $1,000. Although this in itself is a form of market restriction, the price limit is being welcomed as a way to allow more inclusivity than, say, marketplace OpenSea, where NFTs sold at multi-million-dollar prices to crypto-rich collectors at the height of last year’s boom. It could encourage broader participation and allow the NFT business model to evolve into one that’s more inclusive of the mainstream.
On the other hand, artists involved in the project are having to hand over a fee of 30% for each sale.
Is this, yet again, the curse of control by an overly powerful, intermediating internet platform? Well, yes, but it turns out the monopoly is not Instagram’s, which isn’t charging anything to its artists, but Apple’s. The iPhone producer is hitting Instagram with its routine fee for all products sold over apps purchased via its app store.
But before you get into a lather of outrage at CEO Tim Cook, let’s look at that egalitarian pricing structure. Where did it come from? Turns out it’s also based on Apple’s rules.
All of this offers a reminder that in Web2, centralized platforms like Meta and Apple have enormous power to shape the information, art and entertainment markets on which society, indeed our democracy and culture, depend.
This is why open metaverse projects such as Punk 6529’s Om and Lamina1, founded by Bitcoin pioneer Peter Vessenes and sci-fi author Neal Stephenson, are important. In different ways, they are both built on first-principle frameworks that aim to prevent anyone from controlling any core applications or infrastructure and from setting up rent-seeking gateways through which creators or users would have to enter their worlds.
It’s not enough to depend on the goodwill of legacy platforms and of the mega-companies that use them to reach audiences and customers. We must deliberately build systems over which those corporate machines can’t exert control.
That is the core spirit of crypto and it provides a message to the rebellious coders and censorship-resisting creators who’ve been drawn to it: It’s okay to accept these companies’ money but look hard at what strings are attached, and then make sure enough of that funding finds its way to those who can build the decentralized protocols, applications and APIs needed to keep the system open.
(For more about the growing participation of brands in Web3, check out my colleague Sam Ewen’s and Vayner3 President Avery Akkineni’s new podcast, “GenC”.)