NFTs Will Eat the World | Bankless Consulting
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Have you ever asked yourself how many revolutions you can take in one lifetime? It was barely a decade ago when Marc Andreessen, founder of the early internet browser Netscape and later the technology-focused venture capital firm Andreessen Horowitz, commonly known as a16z, wrote an op-ed piece in the Wall Street Journal arguing that software was going to eat the world. While grandiose at the time, Andreessen saw the value software brought to most organizations and industries was too great for it not to affect every business on earth. His insight is worth reading in full, but here’s an excerpt:
“My own theory is that we are in the middle of a dramatic and broad technological and economic shift in which software companies are poised to take over large swathes of the economy. More and more major businesses and industries are being run on software and delivered as online services—from movies to agriculture to national defense… Over the next 10 years, I expect many more industries to be disrupted by software.”
Ten years later, of course, Andreessen has been proven correct.
Yet in those ten years, another technology, one that combines software with cryptographically secure databases known as blockchains, is set to again revolutionize business just as software has done early in this milenia. If you go back and reread the Andreessen quote and substitute “blockchain” for “software”, you’ll begin to understand the scope of blockchain technology’s inevitable impact.
In particular, non-fungible tokens, or NFTs, will be one of the foundations of this next economic revolution. While NFTs get all the attention for their disruption of the traditional art market, their real power is revealed when you understand they are a toolkit for maintaining secure records for any asset, digital or tangible, on earth. Right now NFTs may be cute JPEGs, but they will evolve to track supply chains, serve as deeds to real property, and contain the building blocks of your identity.
NFTs are just getting started, and their appetite for disruption may make software's feast seem like only the first course.
NFTs Will Eat the World
In 2011, Marc Andreessen famously wrote a prescient claim that “software is eating the world.” Andreessen observed that software companies were disrupting practically every traditional industry and that “if they perform to my and others' expectations, they are going to be highly valuable cornerstone companies in the global economy, eating markets far larger than the technology industry has historically been able to pursue.”
Without question, Andreessen has been proven right about software. So it’s of particular interest to note that his investment firm, Andreessen Horowitz, also known as a16z, is also one of the world’s leading investors in blockchain technology. If Andreessen correctly foresaw software’s potential for large-scale change, what does a16z’s bet on crypto say about blockchain and its own endless appetite for disruption?
In 2008, Satoshi Nakamoto’s Bitcoin Whitepaper introduced the world to scalable blockchain technology and a “peer-to-peer electronic cash system.” Seven years later, the Ethereum blockchain went live, ushering in a whole new way of using blockchain technology. Powered by smart contracts and the Ethereum Virtual Machine, Ethereum enabled people to use a blockchain like a computer. In fact, Ethereum has been dubbed the World’s Computer.
Although there are pre-Ethereum Bitcoin-related NFT projects, NFTs really got their start on Ethereum thanks to the innovations that came along with smart-contract functionality. NFT is an acronym for non-fungible token, meaning that each token is unique, enabling an NFT to authenticate and signify ownership of assets.
Because of these properties, NFTs enable safe, secure digital representation of any asset - a piece of art, a real estate contract, an event ticket. As global society moves more online each day, and the adoption of blockchain technology grows, NFTs will be a cornerstone of digital and real-world property rights, permeating every aspect of our lives.
Every existing industry will be disrupted by NFTs – real estate, banking, healthcare, industrial manufacturing, retail, entertainment, education. If it relies on a paper record and is of nominal importance, it will be an NFT, an unchangeable entry in a secure ledger. Blockchain innovations will lead to use cases for NFTs that have yet to be imagined.
Simply put, NFTs will eat the world.
The Dawn of NFTs
Early iterations of NFTs were not very functional, but essentially a social flex or display of club membership. That’s not downplaying their value. In a short time, NFTs have revolutionized the international art market and creators have done some amazing things with generative technology. Chromie Squiggles, Fidenzas, and Beeple exemplify the early NFT art boom.
Starting in 2021, the first phase of widespread NFT creation and sales set the stage for a raging bull market. Much of it was based on speculation, but many quality projects and communities were born. And yet art is just the tip of the NFT iceberg. NFTs are being used to build next-generation video games, engage more deeply with consumers, supercharge loyalty programs, enhance the fan experience, and bring regular transactions, like real estate purchases and sales, on chain.
A New Type of Gaming
If you play a traditional web2 game like Fortnite, you can collect custom skins, backgrounds, or graphics, but you don’t really own those assets. You have access to your character and those items in the game, but you can’t use them anywhere besides Fortnite, and Microsoft can block your access or reclaim them at any time.
NFTs enable owner custody and portability of gaming assets. Gaming companies are looking to deploy decentralized systems of ownership and management to enhance the ways players live the in-game experience and to open markets for in-game items.
Games are being developed that allow characters from multiple collections to participate across ecosystems. The Sandbox and Decentraland are open metaverses where NFTs of all kinds are able to coexist, while Galaxy Fight Club touts themselves as “the first cross-IP Player-v-Player game for the NFT universe.” The game is not accessible to all collections yet, but they have partnerships with prominent communities - ByoPills, Illuvium, CyberKongz, CryptoRaiders and DeadHeads. NFT fighters battle for $GCOIN on Polygon.
Imagine taking your Byopills Apostle into the Galaxy Fight Club arena for a winner-take-all death match with a DeadHeads Skull Trooper…
Want to play, but can’t afford an eligible NFT? You can rent an Apostle or Skull Trooper from the owner through ReNFT, a platform for NFT rentals via smart contract. Owners share in the winnings according to the contractual agreement.
Many existing gaming communities have been reluctant to participate in web3, fearing the unknown. But that is starting to change, with some of the biggest names in gaming heavily investing in web3, and it’s only a matter of time before most gaming platforms will be powered by NFTs and managed through smart contracts. Gamers will experience a fully enhanced gaming experience where they can bring their characters and in-game items with them, wherever they play.
NFTs are not all art and games. These novel forms of digital ownership can also be used to engage a community for value alignment and participation. Take the world’s largest coffee chain. Starbucks vision for NFT adoption is “to create a place where our digital community can come together over coffee, engage in immersive experiences, and celebrate the heritage and future of Starbucks.” This functions to educate and reinforce the Starbucks community of consumers, employees, and vendors on the cultural history and values of the company.
One objective of any NFT program is to align with the core values of the organization. Besides being a convenient spot in your neighborhood for your favorite coffee beverage, Starbucks values its culture and its commitment to sustainability. Have you ever considered how a coffee bean gets from a farm in Costa Rica to your local shop? Did you know that Starbucks has a Chief Sustainability Officer?
Starbucks chose to build their NFT project on Polygon to align with their core value of sustainability. Now their rewards program will live on the proof-of-stake, energy-efficient Polygon blockchain. The program can also reward environmentally conscious choices and act as an instrument to rally its community around sustainability causes worldwide.
Starbucks has multiple initiatives to improve the planet. Their coffee is verified 99% ethically sourced. They recognize that “each store is a part of a community.” They expect 100% of their stores worldwide to participate in community service. That’s quite a challenge for a coffee shop, its management and staff, but the right incentives can make it happen. If you want to encourage people to participate in your community, you need to offer them something in return.
What’s in it for me and why do we need NFTs for this? Participation in Starbucks community service will be recorded on the blockchain. Your Starbucks NFT will be your own personal “notebook” that records your participation in community initiatives as a customer or employee. Your participation will be rewarded in the form of a promotion, Starbucks tokens, or gift cards.
I used to coach a youth soccer team and one of the dads worked for Verizon doing infrastructure inspections. Part of his pay was tied to him just showing up at certain equipment facilities, saying “all good”, and getting someone to sign off on his attendance. Not too much to ask, but he was lazy and didn’t always show up. Instead, he occasionally would ask the other fathers to sign his sheets. Needless to say, I never played along, but some of the other dads did.
NFTs prevent this type of gaming. When contributions are made in the form of attendance, governance participation, or content creation, it is recorded on the blockchain and tied to a wallet represented by a specific NFT. Imagine my Verizon guy having his VerizonID NFT in an Ethereum wallet on his phone. When he scans a QR code, it links the NFT and the facility, giving him credit for showing up and saying “all good.”
Even cooler is that rewards can be instantaneous. For Starbucks, it will be tokens or store credits. For the Verizon employee, it could be ETH or USDC sent straight to his wallet with every QR code he scans. How’s that for incentives?
Skincare brand Clinique is using NFTs to enhance their existing loyalty program. Members can complete quests including:
Chat with an Online Consultant
Utilize the Clinique online Foundation Finder
Complete an online Skin Analysis
Write a review on FB, IG, Twitter
As members accumulate points from each quest, participants qualify for higher levels of the Clinique loyalty program, entitling them to more exclusive NFTs and associated rewards like discounts, gifts, and invites to launch parties.
This type of program builds brand engagement, buzz, and creates a tradable economy around a brand and the rewards program. There’s also the flex of flashing your Platinum member PFP on social media, your mobile device, and when you meet Clinique spokesperson Emilia Clarke at the next red carpet event.
This example is in the skincare/cosmetics industry, not one typically catering to technologically advanced consumers. Clinique recognizes the value of this tech and others will follow and improve upon this approach. By engaging customers and rewarding them for their brand loyalty, companies can develop an army of brand evangelists who embrace the culture and share it with others who benefit from doing the same.
Enhanced Fan Experience
At Bankless Consulting, we’re currently working on a project with a group that’s purchasing a European soccer team and then forming a decentralized autonomous organization to act as a membership club for the team’s fans.
The DAO will not be entitled to name the starting eleven or sack the manager, but they will control decisions related to the fan experience such as the types of concessions at home matches, half-time entertainment, and fundraising partnerships.
The DAO will primarily consist of season ticket owners who hold team-related NFTs. One elegant feature of NFT ticket ownership is that trading can occur without the need for scalpers. A small fee can go to the DAO, but a broker doesn’t need to be involved if the team hosts their own marketplace - a fairly simple website add-on or app.
Most importantly, as discussed in Why We Need NFT Ticketing, this technology “offers complete veracity of the tickets authenticity.” NFT ticketing would eliminate the sale of scam tickets, which comprises roughly 12% of the current event ticket market. For added value at the venue, teams could attach vouchers for parking, merchandise, and concessions to an NFT ticket. After an event, especially an epic show or game, stubs can be traded as collectibles amongst loyal fans.
Much like the sharing of gaming NFTs, season ticket holders can loan or rent their ownership NFT to someone else for a single game. Once the game is over, the NFT transfers back to their wallet according to the contract.
What I find most exciting about this endeavor is the creation of an entire virtual ecosystem on top of real-life ownership and experience. At Bankless Consulting, the organization we are advising will have its own utility tokens that can be used to purchase tickets and any other item at the stadium. In addition, we plan to create a year-round soccer entertainment universe including youth and adult soccer camps, fan experience packages, a spa/resort experience, and ticket upgrades.
All of this will be owned and governed by the NFT owners. Anyone who’s ever wanted to be Mark Cuban or Walt Disney can relate.
NFTs and Real World Assets
Over the past year I’ve had dozens of conversations with founders who have very big ideas for optimizing their businesses with NFTs. Many of these founders are focusing on real estate. The current system of deeds, promissory notes, recording offices, escrow, and closing is just archaic. Even now, in the information age, proof of ownership is basically a paper document in a safe, at best. And errors happen all the time.
As the world rapidly goes more fully digital, homeowners will hold their ownership in the form of an NFT. A home’s deed will be secured as a non-fungible token residing on the blockchain, protected by a secure wallet. It’s going to take a while to get there, and we still need better tech, but it’s inevitable because the form of record keeping is just so good.
Another project I spoke with is offering homeowners the ability to hold an NFT of their home that holds all the relevant documentation about the home. The boiler, wiring, refrigerator, home improvements, and more are all stored within the metadata of the home’s NFT. Think service calls, permits, inspections. This is convenient for the owner for tracking purposes, and when the owner is selling, refinancing, or obtaining insurance, this immutable data is accurate and up-to-date.
On-chain real estate has the potential to eliminate several steps in any transaction. Real estate documents can be hundreds of pages long. Several lawyers, inspectors, and auditors often have to review each transaction before it can be executed. Smart contracts facilitate that process, as NFTs are the assets being bought and sold in those transactions. It’s only a matter of time before real estate NFT applications mature and become widely adopted.
Building Businesses Powered by NFTs
Most people have been introduced to NFTs as “overpriced jpegs.” Whether you’re interested in that market or not, there is no denying that NFTs have already changed our culture. In the coming years NFTs will be a dominant public force and crucial infrastructure backbone of entertainment, retail, real estate, fashion, and almost every other industry.
As digital ownership and identity become increasingly prevalent and more of our life moves online, NFTs will not only be a cornerstone of our asset portfolios, they will become deeply embedded into the way we live, to the point where we forget they were recently novel and controversial. Like Marc Andreessen said about software over a decade ago, NFTs are poised to eat the world.
DSide is the COO at Bankless Consulting, specializing in operations, governance, and NFTs. He was a private practice owner and enterprise healthcare exec for 20 years before leading nationwide innovations in telehealth. As a licensed physical therapist, he has intimate knowledge of community healthcare and the dynamics of the third-party payer system. You can follow him on Twitter and LinkedIn.
Web3 Business Developments
Curated News on Recent Blockchain Adoption and Innovation
Tokenization: The Fabric of our Financial Future
Author: Colin Butler
Tokenization is the process of digitizing an asset and representing it as a token on a blockchain. This can be applied to various types of assets, including financial instruments, physical goods, and even real estate.
Tokenizing assets creates more capital efficient markets by opening up access to a global marketplace, creating liquidity for previously illiquid assets, and increasing the transparency and speed in which assets can be exchanged. The broader goal of digitizing assets is to democratize financial opportunity by enabling a nearly infinite number of new investments for people around the world. It will also increase trust in financial transactions through the use of trustless blockchain technology.
When you see the world's largest banks, like J.P. Morgan and the Monetary Authority of Singapore, performing cross-currency swaps between tokenized Japanese Yen and Singapore dollars on Polygon, don’t write it off as institutional experimentation…The fabric of our financial future is being woven right now, and it’s closer than you think. — Colin Butler
BMW Taps Coinweb and BNB Chain for Blockchain Loyalty Program
Author: Prashant Jha
BMW has been a long-time user of blockchain technology to track products in their supply chain. Now the leading German car manufacturer plans to integrate blockchain tech into its daily operations and use it to create a customer loyalty program.
The integration of decentralized tech will be in two phases. First, they will be automating manual processes and streamlining their financial services to improve efficiency and transparency. Second, they will be developing a customized web3 application for a customer loyalty program that uses blockchain-based rewards to incentivize BMW customers. The loyalty program will determine a customer’s tier and status based on rewards they have acquired, and allow owners to use their rewards to purchase goods and services from BMW and their future partners in the ecosystem.
Visa Proposes Automatic Payments Using Ethereum Layer 2 System StarkNet
Author: Shaurya Malwa
Visa has recently proposed automated, programmable payments built on Ethereum Layer 2 network StarkNet. The system involves creating a smart contract that acts as an intermediary between a user account and a contract account, allowing for the creation of a self-custodial wallet that can make automatic recurring payments without requiring the active participation of the user. The system would allow recurring payments to be conducted on chain, a functionality that doesn’t currently exist.
Final Fantasy Parent Square Enix Is Bullish on Blockchain Gaming in 2023
Author: Rosie Perper
Japan’s Prime Minister Fumido Kishida is actively working to jumpstart the country’s economy by promoting investments in digital technology. The Japanese government has expressed its support of the “social implementation of digital technology” and is promoting the use of web3 services, including those that utilize NFTs and the metaverse. Japan’s financial regulator has also proposed easing tax rules for corporate and individual cryptocurrency investors, and its digital ministry is exploring the creation of a DAO in order to better understand the technology.
One of the companies poised to benefit from this support is Square Enix, the holding company behind the Final Fantasy video games, which is headquartered in Japan. Square Enix has been investing in blockchain gaming since 2018 and the company’s president stated in his New Year’s letter, "In terms of new business domains, we named three focus investment fields under our medium-term business plan. Among those, we are most focused on blockchain entertainment, to which we have devoted aggressive investment and business development efforts.” With favorable conditions for growth in Japan, Square Enix is ready to launch the next generation of games built on the blockchain.
How Web3 Helps People Take Control of Their Digital Identity
Author: Sandy Carter
Safeguarding our information and digital identity are becoming increasingly important as our lives become more and more digital. Blockchain technology offers digital identity solutions, specifically those leveraging zero-knowledge proofs.
Using web3 technology, digital identity can act as a wallet address, reputation tool, and can be used to attest to something without providing personally identifying information. It can also enable efficient completion of know-your-customer requirements without requiring the sharing of sensitive documentation.
Web3 digital identity is gaining traction in the market and has the potential to make many aspects of life easier and more secure, such as sending and receiving digital payments, maintaining private and secure personal messaging, and securely linking sensitive information like medical records. In commercial applications, people may be able to receive rewards for sharing their data and companies can offer perks and bonuses directly to their users based on assets or actions recorded within their digital profiles.
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DSide, siddhearta, HiroKennelly