By now, it’s quite clear: 2021 is the year of NFTs.
A day doesn't go by when there isn't some news of another huge celebrity coming to the NFT space, or some new auction setting new records, or some new community driven collectible taking over the Twitter-sphere.
Over the last month, we've seen NFTs appear:
- as a part of the Oscar gift bag (and also contribute to some controversy)
- in an upcoming Christie's auction with model Emily Ratajkowski who is using NFTs to "buy herself back"
- in an action by Ellen to support Chef Jose Andres World Central Kitchen
- and of course, in a new collection of Eminem digital collectibles
This last one is particularly interesting for two reasons. First, it's not just an auction but it’s designed to be a part of an entire virtual experience 'Shady Con". This is reflective of the idea that NFTs are serving not just as a way for artists to monetize their content, but as a new platform to think creatively about digital experiences and events.
The second reason Eminem's drop matters is that it is the capstone to NFT’s breakout mainstream moment a few weeks ago. On the March 27th edition of Saturday Night Live, a Pete Davidson-led ensemble rapped "What's An NFT?" over Eminem's "Without Me" - creating exposure to the term to millions in the process.
Like we said, in case it wasn't clear, 2021 is the year of NFTs.
But, like many cultural phenomena, something that seems like a lightning bolt out of nowhere tends to actually be the byproduct of years of development.
Head back to the heady days of late 2017. The world was turning to crypto in a big way. Of course, much of that in retrospect was nascent ideas being overhyped, and some of it was down right "get rich quick"ism. However some of it showed the promise of what would come next.
Easily the most iconic crypto-powered application of that bull run was CryptoKitties. The app saw thousands of people spending even more money to breed rare digital kitties (not to mention kit them up in hats). There was so much activity it very nearly ground the Ethereum blockchain to a halt.
On the one hand, CryptoKitties seemed frivolous and silly to some. On the other hand, to use a16z partner Chris Dixon's classic phrase: "The next big thing will start out looking like a toy."
Even as CryptoKitties was exploding, the team behind them was thinking about the future. Over the next four years, they spun out a new company specifically with the intention to build around digital collectibles - which were starting to be more widely known as Non-Fungible Tokens (NFTs for short). We'll come back to them in a minute.
As they were experimenting and laying the foundations for what would become the most successful NFT platform (by a wide margin), the team at Circle/Centre Consortium were thinking about the same space but from a different angle.
Some of their answers were obvious: crypto finance apps and even some wider fintechs. But another category they considered right from the beginning was what they then called "digital content apps on blockchains."
The idea they had was that these experiences were going to need to be able to interact with stable value. The volatility of non-stablecoin cryptoassets could be fundamentally limiting. At the same time, the team thinking about USDC also imagined that many would be designed to attract users who weren't even a part of the crypto industry, and we're going to want to interact with these "content applications'' in much more traditional ways.
It was around this time that Circle started collaborating with Dapper Labs, the team that had spun out of the company that had designed CryptoKitties. The companies worked closely, taking advantage of nearly every Circle API to ultimately design an experience that was not only stable but incredibly user friendly.
“People show up and they want to participate in the crypto economy, but they have bank accounts, they have debit cards—they don’t have Ethereum," said Circle CEO Jeremy Allaire. "So being able to have blockchains and stablecoins underneath is a huge advantage. These things go mainstream when the actual technology is invisible, and I think we’re all just trying to play a part to create that connection for people at the user experience level.”
Dapper Labs was working on an exciting new project - a new type of sports collectible for the NBA they called a Top Shot. The project was a long time in the making - a careful combination of designing a unique new product, working with a mainstream partner like the NBA, and ensuring that the underlying technology infrastructure was ready for primetime.
We said at the top of this piece that 2021 was the year of NFTs. That's true, but it started in the second half of 2020 when Dapper Labs released NBA Top Shot. It was not a slow burn. Instead, it was an instant hit, driving incredible fan engagement and creating an entirely new collectibles market.
Importantly though, it wasn't crypto natives who were the early adopters. It was NBA fans - many of whom didn't even realize they were interacting with "crypto".
“There’s nothing crypto about it. It’s not Crypto Shots, there’s no ‘NFT’ anywhere on the website, there’s no ‘Blockchain’ anywhere on the website, so you don’t have to know what the technology is to interact with it,”said Dapper Labs CEO Roham Gharegozlou.
This was exactly the sort of thing Circle had imagined a few years earlier. A native digital content experience that allowed people to interact without having to be stalwarts of the crypto industry. That said, the underlying infrastructure couldn't be a short cut and it didn't very much need to be truly crypto. Gharegozlou continued:
“But it was critical for these things to be real NFTs, for them to be on a real blockchain, for every wallet to be a crypto wallet, for third-party tools to be able to read off the blockchain. There’s more transparency than much larger, more established markets, and you can see every transaction through all time because it’s on a blockchain. These are the kinds of things that change people’s minds about crypto and blockchain, but it’s after they already feel the benefit.”
The combination of accessibility, great product, beloved IP and true blockchain power underneath is a winning one. Over the course of its life, NBA Top Shot has seen more than a half billion dollars in sales. Unlike many other proto-NFT collections, these sales aren't grouped with a small number of enthusiasts but represent a much broader market. CryptoPunks, the second largest NFT set by sales volume, has about 2,232 owners. NBA Top Shot has 441,637.
“What’s happening now is a maturation of the NFT space,” said Allaire. “On the one hand, some of those who are learning about NFTs because of some headline or an SNL song are falling down the rabbit hole and discovering this incredibly rich technological landscape. On the other, most are just discovering a new array of really cool art and digital artifacts that are expanding fandom in really meaningful ways. This is the new frontier of mainstream crypto adoption.”