The NFT boom of the past couple years appears to be conclusively over for average consumers. For big social networks, though, it appears that the work is just getting started.
The latest platform to embrace non-fungible tokens is Reddit, which on Thursday announced the arrival of “blockchain-backed collectible avatars” — unique profile pictures from artists riffing on Reddit’s “Snoo” alien mascot, giving purchasers the right to use them on and off the site. The avatars can be purchased only with fiat currency; Reddit takes a 5 percent cut of each transaction.
Reddit’s announcement takes pains never to refer to these avatars as NFTs
In a sign of how badly damaged the crypto brand has become, Reddit’s announcement takes pains never to refer to these avatars as NFTs, even though they are stored on the Polygon blockchain. Instead, in the marketing copy they are simply “collectible avatars.”
“We see blockchain as one way to bring more empowerment and independence to communities on Reddit,” the company said in its announcement. “Reddit has always been a model for what decentralization could look like online; our communities are self-built and run, and as part of our mission to better empower our communities, we are exploring tools to help them be even more self-sustaining and self-governed.”
Reddit is only the latest social network to offer users a way to set an NFT as their profile picture. Last week, Facebook began allowing some creators to showcase NFTs that they own on a new “digital collectibles” tab in their profile. The move came a month after Instagram added a way for creators to show off their NFTs. Spotify began letting some artists uses NFTs as their profile pictures in May.
What makes these moves notable is that they came just as demand for NFTs and crypto products generally fell off a cliff. Here’s Dan Milmo, writing on Saturday at the Guardian:
Sales of NFTs totaled just over $1 billion (£830 million) in June, according to the crypto research firm Chainalysis, their worst performance since the same month last year when sales were $648 million. Sales reached a peak of $12.6 billion in January.
The cryptocurrency market, worth about $3 trillion last November, is now worth less than $1 trillion.
Back in January, platforms like Reddit had several good reasons to consider adding NFTs to their products. To enthusiasts, it appeared as if the technology had solved a long-standing problem for digital artists: their work can be reproduced instantly and infinitely online, reducing its value. By encoding art as non-fungible tokens, it appeared that artists might be better able to capture the value of the work they create and share online — and enable tech platforms to capture a healthy percentage of the transaction.
Demand for NFTs rose throughout 2020, eventually conferring upon owners of “blue-chip” collections like CryptoPunks and Bored Ape Yacht Club a measure of social status. In September 2020, Twitter announced it would let subscribers to its premium offering, Blue, authenticate their NFT ownership and highlight their purchases with hexagon-themed profile pictures. That feature arrived in January, just in time for the market to peak.
What once had appeared as chic, suddenly seemed unbearably cringeworthy
You know what happened next: Russia’s invasion of Ukraine, rising inflation, crashing tech stocks, and cryptocurrency valuations plunging along with them. The less crypto was worth, the less of it that people traded. (Except, of course, for some high-profile cases in which too many people tried to get their money out, driving various crypto lenders to seek bankruptcy protection.)
The cultural value of NFT collections appears to have dropped proportionally along with their floor prices on OpenSea. Last month, ArtNet noted that some of the celebrities who had been pushing NFTs the hardest — and who may have been in a position to benefit from those sales financially — had quietly dropped them from their Twitter avatars. Among them: Jimmy Fallon, Serena Williams, Reese Witherspoon, Shonda Rhimes, Lil Durk, Travis Barker, and Meek Mill.
What once had appeared as chic, at least to an extremely online and crypto-zealous subset of Twitter users, suddenly seemed unbearably cringeworthy.
Of course, by then the social platforms had all spun up big teams to figure out how to integrate NFTs into their own products. And a bunch of products that were entering development in January, when any junior product manager could have made a convincing case for them, arrived several months later looking passé.
If social networks ever got the memo about crypto’s decline, they have so far refused to acknowledge it. Whether out of optimism about the future or in recognition of the considerable sunken costs involved, the companies’ NFT product roadmaps appear to be largely intact.
“The more places you can easily use your digital goods, the more you’ll value them.”
I contacted Reddit, Meta, and Twitter today to see if they would talk to me about how their NFT efforts are going; none agreed to talk with me. It’s a measure of their confidence in an eventual comeback for NFTs that they are at least releasing their NFT showcases, however indifferent the user base seems to be to them so far.
Meta in particular has continued to champion the long-term potential of NFTs, even positioning them as a bedrock of the virtual reality metaverse it seeks to build. The fact that NFTs are owned by individuals means in theory that they can be moved from service to service, platform to platform, creating a more interoperable version of the internet than the one we have today.
“Ideally, you should be able to sign into any metaverse experience and everything you’ve bought should be right there,” Mark Zuckerberg said in a June Facebook post. “There’s a long way to get there, but this kind of interoperability will deliver much better experiences for people and larger opportunities for creators. That is, the more places you can easily use your digital goods, the more you’ll value them, which creates a bigger market for creators.”
Stephane Kasriel, Meta’s head of fintech, told the Financial Times this week that the company wouldn’t modify its crypto plans “in any way” due to the current crash. “The opportunity [Meta] sees is for the hundreds of millions or billions of people that are using our apps today to be able to collect digital collectibles, and for the millions of creators out there that could potentially create virtual and digital goods to be able to sell them through our platforms,” he told the paper.
Perhaps that opportunity will materialize eventually. It seem quite possible that platforms have the basic idea here right — that people really do want to own unique digital objects — but the product execution is wrong. Or perhaps they are simply too early.
In the meantime, though, social platforms keep releasing NFT features only to be met with shrugs. As the downturn in tech leads to layoffs across the board, it’s worth asking whether NFTs still deserve such a prominent place on the product roadmap — or whether they belong on the growing list of items these companies can simply no longer afford.