Community – A Key Metric For NFT Investing
Rethinking the concept of communities
I've always thought I understood the definition of a community.
Community, /kəˈmjuːnɪti/ (noun):
a group of people living in the same place or having a particular characteristic in common
the condition of sharing or having certain attitudes and interests in common
A term to define a group of like-minded people, I suppose. Pretty straight forward right? Let's think again.
Communities And NFTs
My first conception of NFT Communities is around Art NFTs. As artists take their works onto NFTs, it's important for them to already have an audience who would be willing to pay dollars for their art. Therein I deduced that successful NFT artists must either:
Have a large audience outside of the NFT space
Managed to cultivate a sizeable community before dropping their work as NFTs
While it is a logical deduction, it's an oversimplification that has failed to capture the nuances of a community.
A Traditional Art Gallery VS An Online Gallery
Consider a traditional art gallery with exhibits from niche artists. The people who show up at the gallery are likely to be: the artists themselves, their friends and families (supporters), or art appreciators. During the exhibition, these participants get to interact with one another and meet fellow like-minded artists or collectors who speak the same language. Therein, a community arises from these organic interactions.
Given that NFT arts are virtual, how would these interactions occur? The answer lies in the typical NFT marketing channels: Twitter, and Discord.
Through Twitter, users are encouraged to Reply, Retweet, and tag one another. They can make use of hashtags like #artistupportartist or #apesupportape to reach out to the like-minded group of people. Through Discord, members can discuss, interact, and give ideas to the artists or even amongst themselves. That is the basis of communities in NFTs.
Communities As A Ground-Up Approach
For NFT projects, they succeed not solely because of their aesthetics or utility. They succeed because of their communities, which is why it's my number one metric. Let me illustrate with several examples.
Case #1: Gal Shir (@thegalshir) – An established artist with a strong fanbase dropping his NFTs
With over 800,000 Followers on Instagram, and an established style that has grown over the years, Gal stepped into the world of NFTs, attempting to sell 1,000 unique slimes at 0.1ETH each. Granted the price of his NFTs aren't the cheapest, but they are pretty well priced to sell for the fanbase he has. Not to mention, he has built in additional utilities with BUB tokens, and have fun activities planned in his Discord.
The reason? Lack of Twitter marketing, and too little Discord members pre-launch. Gal is accomplished in his own rights, and will continue to build with or without NFTs, so I'm sure his NFTs will sell out eventually but it's a very important lesson for us – communities are what makes a project. Even for someone of high credibility and accolades, the lack of a community has cost him, in early sales at least.
Case #2 VeeFriends – You don't need beautiful pictures to do well in NFTs
Gary V's name stands for something. When he launched his NFT project in May 2021, it wasn't immediately snapped up. Most people could not see the value of paying 0.5ETH. Further, Gary's NFTs are frankly just doodles (he's not shy about it) and in terms of aesthetics, they would probably not be what you would expect to cost five figures.
Yet, Gary stuck to his mantra of "continuing to build, and continuing to add value" to token holders. While I didn't understand what he meant when he said these when he launched his NFT, I now appreciate that the value of VeeFriends is not about being able to speak with or hang out with Gary V himself, but rather it binds you to a community of other token holders .
Case Study #3: Loot – A project can be easily replicable, but its community can't, and it's what gives it value
Have you seen the Loot NFTs? A black background, with randomly assigned traits presented in text.
Loot is so simple, anyone can recreate it. And it appears so silly, it's hard to imagine why anyone would pay five-figure sums for it. Some say it epitomises the ridiculous NFT bubble, but I say it illustrates the quintessence of NFTs: Primary token value and secondary derivative value.
By itself, Loot NFTs are worthless. Any project can easily duplicate it and run it. Yet, when you throw in the power of the community, it's what makes the primary token valuable. Loot attracts people who are the imaginative type like Dungeon And Dragons players, and through these plain-looking NFTs, creators have modelled characters out of them and created other derivative projects from it, which is only accessible if you own the original Loot NFTs.
However, a community-driven project is not without its risk. Community members can jump ship to another Loot variation if it's truly better, and if that happens, the value of the Loot tokens will drop.
To use an analogy, Loot is like an empty plot of land that invites the community to build a village on top of it. After a year, members have honed their skills and gained superior technology, and might want to start building taller buildings. But what if there are restrictions like a flat bed of rocks that prevents them from drilling in the foundations?
If there is a more viable plot of land to build skyscrapers, it makes sense for the community members, now developers, to move to the newer project to build out their dreams. Should the community migrate away, the original land would be less valuable, but given that it can still function as a village, would there still be a value to it? I can't say for sure, but it will be interesting to see how projects adapt to the rapidly changing NFT landscape.
Don't Plug NFT Into Just About Anything
NFTs are a good way to start a ground-up project. If you plan to adopt NFTs into your workflow or business, you should also embrace the consequent effects of having a community.
VISA published a whitepaper on NFTs along with their 49.5E Punks purchase. In it, they held a top-down perspective of how businesses can adopt NFTs for commerce and engagement opportunities. While that may be true, VISA lacked the foresight to consider the bottom-up impacts surrounding a community. If companies designed their NFTs solely around their business outcomes, it will likely lead to a disappointing outcome that fail to meet the business ROIs.
Dive Into The Community Before Buying An NFT
You might learn about new NFT projects from your friend or YouTube influencers. As much as there is hype around the concept, remember that these YouTubers are incentivised to shill their own bags and may not be objective in their presentation.
To truly understand what a community entails, join their Discord. Follow them on Twitter. The bare minimum is to lurk and observe, or better yet, ask questions and see how the team and other members respond. These are the people who will define the success of a project and you want to be able to trust them.
Lastly, as much as this whole post is about community, NFT investing is also more than that. Sometimes, founders and community members can have good intentions, but if the NFT landscape changes unexpectedly, they may have to exit the project. Having been through the ICO bubble, I look for projects that will survive through a crypto winter e.g. have funding not based on crypto, or artists who create with or without NFTs.
If you find such a project or team to get behind, congratulations. Join them and participate in the community because that's something that will enrich you beyond the dollars that crypto can get you.