Many were surprised by the tone at NFT.NYC 2022, with artists and builders alike showing unbridled enthusiasm for the space. There were Apefest celebrations abound, gear on every corner, and galleries across the city glowing with digital walls. It truly felt like a cultural movement as conference participants traversed the event’s six buildings in Times Square. We especially appreciated the opportunity to emcee the gaming track, as well as celebrate artist Josie Bellini’s award-winning project, CyberBrokers, at her NFT-themed cosplay party. Incidentally, check out our first episode of Culture Meets Crypto where we discuss CyberBrokers and Josie’s journey as an artist!
The NFT market has been impacted by the turbulence in equity and crypto markets, with OpenSea volume reportedly down 28% quarter-over-quarter in 2Q22. Despite the volatile conditions, artists continue to discover new ways of monetizing their work through NFTs. On SuperRare, a leading NFT platform that individually selects its artists and calls itself “Instagram meets Christies,” the total number of artists has steadily increased from 1776 to 2575 despite the average price of artwork dropping from ~10 ETH to ~3 ETH (and dropping 90% in USD) between January and June 1 of this year. Original artists are beginning to take mindshare and market share from the played-out profile pics (PFPs) and metaverse land sales.
Also in June but outside of NYC, Art Basel Miami and Hong Kong were happening, each featuring artists from Tezos and its popular generative art platform, Fxhash. While Art Basel 2021 felt more like a crypto conference, in 2022, it seemed that only Tezos remained.
Even in a bear market, the art world and its collectors are looking for and finding innovation. According to data from Dune, NFT volume was down drastically in June 2022. However, the number of Ethereum NFTs traded was actually higher month over month, and the number of monthly active wallets remained flat at around 400k. This indicates that while declining Ethereum prices are driving volumes down, users are still actively trading NFTs. Given the state of the market, while the data should not be viewed as precise, it is far more likely that these are real community members rather than speculators.
On the point of land sales, the Block reported that land prices of the six most traded collections were down an average of 45.4% since January, with Otherside Deeds being an outlier, down ~74%. Volume for land sales has also dropped from approximately $40M per month in January and February ‘22 to just $3.3M traded monthly this June.
We are guessing that the enthusiasm in the NFT space appears to be largely unphased by the market correction because:
NFTs have provided an incremental and direct outlet for artists/creators to monetize their work. In other words, many had been struggling to make ends meet for years and have finally tapped into a new market of collectors.
Due to number 1, creators understand that NFTs and decentralization are changing the world, irrespective of the market cap or performance of various somewhat unrelated tokens.
The artists and builders who are here to stay recognize the multiple paradigm shifts that we often discuss. One Signum theme is Creators to the Front of the Line, meaning it is no longer the brokers and the brokers’ brokers who garner the bulk of the value from innovation, but instead the original creator who can program royalties into their work.
Creativity and collaboration are replacing “likes and followers” culture in content creation. Collaboration is community-based, and instead of the one-way communication that occurs in social media (often with bots!), community-based creation means that all community members are taking part in the value creation through participation and engagement.
Web3 Gaming Themes from the Conference
The mismatch between game development cycles (long) and crypto cycles (short)
A game can take years to get from the planning stage to final distribution, and the most successful games last many years (e.g., World of Warcraft has been around since 2004 so it is approaching its 20-year anniversary). Crypto cycles, especially sub-categories like Web3 Gaming, can boom and bust in several months. As noted by Mythical CEO John Linden, “World of Warcraft items are valuable because of longevity, not because of a cool tokenomics model.”
Markets rife with speculation and skyrocketing prices can bring in users for the wrong reasons (speculation instead of fun).
Some developers are more interested in leveraging market cycles than actually building a game, which can make all of Web3 gaming look like a scam.
IP rights management is the biggest challenge for the industry
William Entrikin, lead author of ERC-721 standard, participated in our Web3 gaming brainstorm and said, “Licensing is going to be the most important part” when it comes to brands adopting Web3 gaming.
As Pixelynx CEO Inder Phull explained, music in games is a different challenge than jpegs, as NFT standards with fully controllable, dividable, and irrevocable royalties are still being fleshed out.
Currently, ERC-721 and ERC-1155 royalty percentages can be overridden and changed between marketplaces.
While JPEGs have simple royalty assignments, it is often the case that many musicians contribute to one song. Each of these sounds could carry different rights, making royalty pathways difficult to manage on a marketplace level.
Companies such as Consensys Mesh, which spoke on Day 1 of the conference, are working on new standards like TreeTrunk protocol, a royalty-organizing NFT standard EIP-4910.
Players don’t want to use NFTs in their games because there are legitimate issues
Gamers have been suspicious of money-making schemes in their games for decades. Pay-to-win and advertising have generally failed because gamers have rejected them. NFTs are similarly seen as cash grabs at best and outright frauds at worst, not to mention the harmful environmental impacts. Most of the complaints are legitimate concerns. Bottom line - until games can offer an experience beyond DeFi with skins, we can’t expect to bring in the world’s 2.5 billion players.
NFTs don’t provide in-game utility yet. The concept of play-to-earn is more like a job than having fun. Note: Mythical’s NFT Rivals game was branded “play-and-own” to better represent traditional gamer behavior.
Multiple founders and developers said that before games have an ability to add wallets or interoperability, they need a free-to-play, fun and “sticky” experience.
Game developers, both new and old, have different ideas about NFT interoperability
Some will want to have walled gardens to control every aspect of gameplay, ensure IP protection, and contain their user base. Others will be open to giving up control so that users can access broader ecosystems and own parts of the gaming experience.
All game publishers will want the data analytics that come with blockchain wallet provenance.
The more interoperable a game, the more freedom of movement a player has, and the more data can be compiled.
Companies are mixed on the responsibility/liability of building one’s own wallet versus allowing players access to self-hosted wallets.
Users will want different levels of gaming interoperability
Depending on the game/community, users may want to bring their assets elsewhere, but this becomes tricky due to NFT interoperability standards, as well as IP management for publishers.
During the “Building Sustainable Communities in NFT Gaming” panel, concerns around interoperability were expressed as it encourages players to leave a game before its user base has critical mass.
MyNFT (Co-Founder Edouard Bessire attended our brainstorm) is aiming to solve this by building their marketplace on Moonbeam and tapping into the highly secure, interoperability of Polkadot.
We are still early to NFTs & Metaverses - fun first, NFTs second
Founder Ben Nolan of Voxels said, “We’re in the Bronze Age” of metaverses. Our tools for building interactive digital worlds are rudimentary, but are showing the direction we’re heading towards.
Games must first be fun and “sticky” and then introduce NFTs as a second layer to enhance interaction.
Mythical’s Sebastiano Bea commented that in-game marketplaces boost engagement by 33%, and increase player spend by 3x.
Most talks and panels at the conference culminated in the idea: “Yes, NFTs are revolutionary tech but it is still very early; we have a long way to go.”
Mythical Announcements at NFT.NYC were (un)Rivaled
We were able to bring together an amazing group of 22 builders and investors during NFT.NYC for lunch. John Linden, CEO of Mythical Games, was our featured guest and he shared his truly unique insight into how blockchain technology is transforming the future of gaming.
We came into NFT.NYC on the heels of Mythical’s announcement of their partnership with the NFL (NFL Rivals coming in 2023), and the team definitely took their mindshare to a higher level during the conference. Not only did the team throw an incredible party for NFT.NYC, with performances from the Chainsmokers and Questlove, it also announced that its flagship game, Blankos, will debut on the Epic Games Store, and that two new play-and-own games, Epic Spell Wars: Magic Fight and Nitro Nation, are coming soon. Mythical is moving beyond its proof of concept, Blankos, and demonstrating that the team, whose founders have experience working on popular games like Call of Duty, Club Penguin, World of Warcraft, and many others, can help studios and traditional developers find product-market fit in the blockchain gaming space.
While CEO John Linden discussed these exciting developments at lunch, the conversation centered on a few key topics, such as how licensing deals and copyright laws are different in Web2 and Web3. Thanks to blockchain technology, artists and creators can transfer verifiable, digital ownership of their work to their fans. Important question: when an artist (or game developer) publishes a song or an item as an NFT and sells it, does the purchaser own rights to the underlying work, and for how long?
Digital Ownership Challenges in the Metaverse
We believe Inder Phull, CEO of Pixelynx, when he says music will be consumed by gaming. To us, this makes sense because we also believe that gaming is the trojan horse of the metaverse. He also points out challenges as mentioned above - while JPEGs have simple royalty assignments, it is often the case that the complexity of a song makes royalty pathways difficult to manage in a marketplace.
When analyzing the evolution of digital ownership in the music industry, it is hard to overlook the actions of famed musician David Bowie. In a 2002 article in the New York Times, Bowie claimed,
“The absolute transformation of everything that we ever thought about music will take place within 10 years, and nothing is going to be able to stop it. I see absolutely no point in pretending that it’s not going to happen. I’m fully confident that copyright, for instance, will no longer exist in 10 years, and authorship and intellectual property is in for such a bashing.”
Bowie securitized and sold the future royalties from his expansive book of work in order to capitalize on his present popularity in a time when he thought his personal share of revenue would otherwise dwindle. Bowie broke ground here because he saw something other artists didn’t: streaming would forever alter how artists and musicians earned a living. This was a Web2 transfer of rights that gave fans and investors a way to align themselves directly with a creator. Web3 is on a path to make something like this easier for creators and fans alike.
AsyncArt’s new product, Music Blueprints, attempts to solve for the IP challenges of NFTs and Music by algorithmically generating something new out of a music artist’s collection (with their permission) -
When a collector mints an Edition, they choose to bring that Music Blueprint NFT into existence out of thousands of possible combinations the artist has uploaded. Insofar as the artist enables the feature, each one of these individual components – the bass, synth, drums, vocals, etc. – can be downloaded and used by the fan for their own creative endeavors. Each Edition is unique, belongs to a limited collection, and represents a personalized musical experience – something that the music industry has yet to achieve on a large scale.
For those that have fallen down the NFT rabbit hole, it is likely that you’ve seen Creative Commons 0, or CC0. Projects like MFers, Nouns, Blitmaps, and Cryptoadz have all embraced this standard as a means of granting the purchasers of the NFTs full access to the IP of whatever they purchase.
As we’ve written about in previous Bits of Signum, Yuga Labs acquired the IP of Larva Labs, CryptoPunks, and Meebits, becoming the self-appointed shepherd of some of the most iconic digital identities. When Yuga Labs acquired this IP, they dissolved their ownership, giving holders exclusive rights to their digital assets. If Yuga Labs spent X million dollars on Larva Labs’ most valuable collections and then gave all the rights away to the NFT holders, what did they buy, and how have they become the biggest brand in NFTs?
What does this mean for the gaming industry? In order to create a world in which items can be repurposed in applications or even in other games, we need interoperable metaverse standards.
Enter the Metaverse Standard Forum: companies including Meta, Microsoft, Epic Games, Nvidia, Adobe, and more have joined an organization dedicated to developing industry standards for Web3. Roblox, Niantic, and Apple are not among the list of participants. Industry consortiums are typically doomed to fail given the challenge of coordination among competitors. However, given the collaborative nature of Web3, we will be watching closely as there will likely be many attempts to solve for Web2’s “TCP-IP moment” in search of interoperability and safe transactions in the metaverse. Standards are appearing in several ways: open-source, integrable contracts such as ERC-721 tokens, OpenSea’s Seaport protocol, and at the protocol level with blockchains like Polkadot.