Degen Ape #9420, from the Degenerate Ape Academy

Building a Digital Scene: Road to the Metaverse

Over the last few months I have written about the basics of Non-Fungible tokens (NFTs), the link between the digital and physical realm through this technology and internal improvements to Ethereum for wider adoption.

Since then, the NFT space has exploded well beyond where I thought it could go in a very short amount of time.

The crypto resurgence of the last couple months has actually been driven forward by NFT demand. Retail investor appetite for new avenues of investment(?)/speculation has pushed NFT trading volume to astronomical levels on marketplaces like OpenSea.

There is something a little more complex here that makes this most recent boom both new and exciting.

In the book How Music Works, David Byrne (front man for Talking Heads) talks about the creation of a social scene as “a special moment when a creative flowering seems to issue forth from a social nexus.” He then goes on to list certain conditions and rules about the actual space and vibe.

CBGB in NYC

David created this list based on his experiences at the famous CBGB bar in New York City (see above), which was the birthplace of punk music. Through the process of developing the Talking Heads concept, and watching others break into the scene, he noted that “the venue and its policies make a music scene happen as much as the creativity of the musicians.” Alex Danco introduced the idea that a collection of NFTs can be a digital gathering point.

“This current burst of speculative interest around owning Lebron dunks or whatever is really cool, don’t get me wrong. But it’ll conclude, at some point, in its current form. But something really important got created in the meantime, which is a shared understanding and a common gathering point for creatives and developers who want to creatively represent digital scarcity, for any use case.”

While the technical structure of a NFT sets some general rules, an individual NFT isn’t the scene equivalent to CBGB. A NFT is just a generic bar with some variation of normal bar trappings (pool table, dart board, sticky bar top, beat up stools, etc.). The community that creators are building around their NFTs is what will eventually lead to a digital CBGB. These communities will eventually turn into full-fledged businesses all independently interacting within their own ecosystem.

This NFT-anchored, web3 economy is growing quickly and evolving across Twitter and Discord. Last Saturday (8/28), the Bored Ape Yacht Club project sold 10k new NFTs in one hour, netting the team $96M. That’s good business.

How do I evaluate the projects against each other?

From “Status-as-a-Service” by Eugene Wei

There is plenty of speculation in this space as some people are using the chaotic growth to flip their NFTs for a nice profit. The folks early to this scene, and who plan to stay for awhile, should use a framework developed by Eugene Wei to evaluate various NFT projects based on Social Capital, Entertainment and Utility.

Not every project has been, or will be a success.

OpenSea (a marketplace for Ethereum based NFT projects) and Solanart (a marketplace for Solana based NFT projects) are littered with projects which launched and had no meaningful user/customer adoption.

Over the last six months the following projects have achieved wild success based on some variation of the axes described by Eugene:

Various Cryptopunks
  • Cryptopunks (left) +616% One of the original NFTs that could have been bought for $40 three years ago, “In February 2021, $77 million in Cryptopunks were sold. In the last 24 hours alone [8/24/21], $101 million were sold.” This is a legacy project that confers immense social capital to the owner due to its historical significance to the community.
  • Vee Friends +1000%. This NFT doubles as an admission ticket to future VeeCons which provides both entertainment and utility to the owner in the form of access to Gary Vaynerchuk.
  • Bored Ape Yacht Club +20,000%. This project has a little bit different value proposition than the above two. While BAYC does register high on the Entertainment and Social Capital axes, the majority of the Utility this project promises is in the future. The BAYC creators provide a public roadmap that details future development of the “club” along with merchandise and collaborations only accessible to NFT holders (see below for roadmap).
From #roadmap-updates in Bored Ape Yacht Club Discord channel

One more element to evaluate a team on is ability to Execute against their proposed roadmap. NFT holders are driving up the price of assets based on the future vision so it follows these teams should also be evaluated on their potential to carry out that vision. BAYC is very well funded, immensely popular and has a lot more money than other projects to build out their vision. Early winners will continue to win in this space.

The BAYC roadmap recently revealed plans for a 3-D BAYC avatar for each of their NFT holders. Key projects are transitioning their NFTs into metaverse components…but where will all these avatars live?

Enter Big Tech

One only needs to look to the success of the big cloud services AWS (Amazon), Azure (Microsoft) and Google Cloud to see how these companies will support the metaverse. Big Tech will provide the infrastructure and platform for creators to launch their NFT projects. The new battlefield for these companies will be a nicely packaged abstraction of the current support systems around this key primitive of the metaverse.

A few of the Big Tech metaverse visions:

  • Microsoft They are focused on the “enterprise metaverse.” Satya Nadella at Microsoft’s Build developer conference,

“Finally as the virtual and physical worlds converge the metaverse made up of digital twins, simulated environments, and mixed reality, is emerging as a first-class platform. With the metaverse the entire world becomes your app canvas. With Azure Digital Twins you can model any asset or place with Azure IoT and keep the digital twin live and up-to-date.”

  • Facebook — They are focused on the “retail metaverse”. Ben Thompson from Stratechery,

“There is likely to be good business in building private metaverses for private companies, in a not-dissimilar way to Stephenson’s Franchise-Organized Quasi-National Entities made it easy for small-scale entrepreneurs to set up their own franchise-states. Facebook’s goal is more audacious: the company already serves 3.5 billion users, which means creating a shared reality for over half of the world is a plausible goal. That reality, though, will likely sit alongside other realities, just as Facebook the app sits alongside other social networks. This metaverse is universal, but not exclusive.”

  • Epic Games— Building on the success of Fortnite…Tim Sweeney CEO of Epic Games,

Next Steps

The next big project on my radar is “Project Akira” from the RTFKT team who recently pulled in $8M in seed funding led by a16z. This team will soon have the brand power of Supreme in the NFT space. Project Akira would be the first blue chip NFT that includes a 3D Avatar for the metaverse (BAYC is scheduled to be a couple months behind them).

The public release of “Project Akira” should happen in late September/early October. Check out their Twitter account and follow the Discord link to join the conversation and decide if you want to get involved.

*Important* — Before you can join a NFT drop make sure you have a decentralized wallet to purchase and carry your crypto and NFTs [Metamask (ETH)/Phantom (SOL).

Note on Solana— I have written about the benefits of Ethereum before but the gas fees (the amount of money/ETH needed just to conduct a transaction) has made transactions increasingly cost prohibitive as volume has exploded beyond expectations. Solana processes transactions faster and with reduced transaction cost than Ethereum. Keep an eye on Solana as the NFT space opens to a wider audience.

More metaverse material — One of the key posts about metaverse construction written by Matthew Ball, includes the below graphic which touches on all sorts of aspects of this space I haven’t covered. I will try to educate myself and tie this into a future post.

Final Ask

If you know of any interesting projects in this space, with teams positioned to execute on a clear and exciting vision for their community, drop me a line (Twitter: @beyourhuckberry).

Life Long Learner. Product @SailPoint. Ex-Amazon.