Are NFTs an Implicit Backdoor Adoption to Crypto?

Bird Keeper by JUNG. Source: Async.art

Marie Tatibouet is the Chief Marketing Officer at crypto exchange Gate.io.
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While it took around twelve years for crypto to reach the “early majority” stage in the tech adoption curve, non-fungible token (NFT) adoption is moving much faster. NFTs are bringing crypto to your average, everyday folks, including beatboxers, drummers, and a wide variety of artists tokenizing their art.

When asked what compelled him to buy a “JPEG” for USD 69m, the buyer of the Beeple NFT said, “the 440 M-pixel image is a truly, digitally native artwork. If it were a physical image, we’d need a 5-floor building to enjoy it. It is a work of art that includes 5,000 images and 13 years of the artists’ life which is very special to me.” NFTs are about creating a value-tech ecosystem for digital art and culture, for everyone involved (curators, artists, buyers). The art is validated on a blockchain that creates digital scarcity and hence more desire. It eliminates the middlemen and empowers the creator because whenever the buyer sells it further, the creator gets a cut.

NFTs are changing the perception of ownership and value. Now, this has given crypto and blockchain tech a chance to create implicit associations of desire and ownership with and for everyday users. This kind of implicit technology adoption is more baked into consumer consciousness.

Mainstream adoption

Jumping for the chasm from being a niche use-case to mainstream adoption is one of the biggest obstacles faced by emerging tech. To properly make this jump, the tech should have:

• Flexible use cases that don’t pigeonhole the tech
• High level of abstraction to keep usage simple

#1 Flexible use-cases

The gaming industry is worth >USD 50bn, with Playstation owning around 57% of the market share. One of the key characteristics of PlayStation is its use of Blu-Ray devices. Blu Rays are used daily for mainstream movies and security. However, it’s a little-known fact that the driving force behind the adoption of Blu-Ray technology is the porn industry, among all things. Similarly, joysticks are now being used in the military industry to fly drones remotely; however, we all know that they gained acceptance through the gaming industry.

This shows us that a new technology tends to find serious mainstream adoption through seemingly innocuous use cases. NFTs could potentially be THE simple use-case that can help spread blockchain technology and cryptocurrencies into everyone’s household. Your average Joe doesn’t know how to “ape into your liquidity pool and farm yield.” However, bigger chances are that average Joe in the US knows who Rob Gronkowski is and – if they are a fan – they will want to own his collectible.

#2 High-level abstraction

One of the cardinal rules of product development is KISS – Keep It Simple Stupid. We have seen many products fail to hit the mark due to their inability to present the simplest solution possible to a complicated problem. Think about epic failures like Juicero, and you will learn a simple lesson – no one’s going to use a product that requires a lot of technical understanding.

Towards the end of 2017, the Cryptokitties game got so popular that it clogged up the entire Ethereum (ETH) blockchain. The SophiaTX team was forced to delay its initial coin offering (ICO) due to the congestion. The reason behind its explosion is that it’s far simpler to play a game where you mint, breed, and sell digital kittens rather than understanding the crypto-economic implications of a public automated market maker.

Because of this ease-of-use, such an eclectic group of celebrities has already flown into this ecosystem in droves. It will be ironic if blockchain technology gains mainstream adoption due to the one property that stops NFT from being a currency – non-fungibility.

The bubble question – Is NFT boom a Tulip mania?

Many investors see the current NFT marker as a classic bubble. There may be parallels with the 2017 crypto market, with heavy speculation dictating the flow of the market. During the 2017 bubble, the crypto market was flooded with useless projects with absolutely no fundamentals and brought in zero utility. The only reason why they existed was to luck into their own million-dollar ICOs. Eventually, the market went through a major correction and just got rid of all these sub-par projects, and only the good ones survived and thrived.

Maybe, the NFT market will go through a similar wild speculation period as everybody tries to jump on the proverbial gravy train. However, if the bubble bursts, it will be intriguing to see how digital artists will react.

As per a popular infographic shared by the “Cabeza Patata,” the crypto art industry’s current state is similar to that of a pyramid scheme.

Sharing this excellent and informative infographic made by @cabeza_patata, you can find the original post on their Instagram by the same name (1/4) pic.twitter.com/E0PwS6fQ5f

— Kim Parker (@thatkimparker) March 13, 2021

One particular thing that they noted is that there are no genuine art collectors in the NFT world right now. Collectors are people who acquire art to appreciate its artistic value. They have no interest in the resale of the artworks. However, in the NFT world, art is mostly used as any other asset.

According to them, NFTs fulfill several key requirements of a pyramid scheme as outlined by the US Securities and Exchange Commission.

1. There is no genuine product since digital art was freely available online.
2. There are promises of high returns in a short time period.
3. There is the promise of passive money.
4. You are needed to buy-in since you need to pay to display your artwork.

While this does make some valid points, there are some contention points, especially the first point. The idea of “digital ownership” is still in the early stage, which is why it may be hard for everyone to understand. Leveraging NFT technology turns these digital art pieces into actual products, wherein ownership can be transferred between parties.

NFTs may make blockchain tech synonymous with everyday life. However, we will need to wait and see how the NFT market works after the initial hype has died down to know whether they are worth their salt or not.