NFTs will transform the creator economy
If you’re reading this article, you have probably seen or read recent headlines about creators making hundreds of thousands of dollars creating and selling NFTs, such as:
- Logan Paul Raises $3.5 Million in One Day from NFT Sales
- DJ Deadmau5 Launches $100,000 Worth of NFT Collectibles
- Mark Cuban Mints First Ethereum NFT on Rarible, Buyer Spends $81,000
- How Did A Lebron James Video Highlight Sell for $71,455? A Look At A Burgeoning Product Called NBA Top Shot
- Remastered ‘nyan cat’ art sells for the equivalent of $605k
In this article, I’m going to explain what NFTs are, how creators are experimenting with them now, and why they will provide critical digital infrastructure for the creator economy.
Defining NFTs
(If you’re already familiar with what NFTs are and how they work, go ahead and skip this section)
NFT stands for Non-fungible Token. It represents a unique distinguishable digital collectable that exists and is tracked on a blockchain platform, such as Ethereum or Polkadot.
The fundamental difference between an NFT and traditional cryptocurrencies like Bitcoin or Ethereum is the property of fungibility. Cryptocurrencies like Bitcoin are fungible, meaning 1 Bitcoin is interchangeable with another, and therefore of equal value. NFTs are not, hence the name Non-Fungible Token.
To simplify with an example, imagine there is a collection of digital tokens called “PhotoCoins” and each token contains the URL to an image. Let’s also assume that whoever owns the token has the rights to the image. It’s clear that PhotoCoins are not equivalent in value, because a photo of Beyonce (and the associated rights) would be worth much more than a photo of me opening Christmas presents. Transitively, the token representing Beyonce photo would be worth more to the market than the token representing my photo because as the owner, you could license that photo to media outlets and earn royalties.
There are some other properties of NFTs that make them amazing for many use cases
- They can be created, bought, sold, and traded directly, without middlemen
- It’s easy for anyone to verify whether or not someone is the owner of an NFT
- Each NFT is uniquely identifiable and authentic. Users know that there is only one of each NFT in existence, so they cannot be duplicated and there’s no chance you’ll end up with a fraudulent item. The transparency of blockchain technology also means that it’s possible to verify and prove authenticity
Why decentralization is important for creators
NFTs are not new and have existed in the blockchain/crypto industry in various shapes and forms for many years. There are initiatives to use NFTs for various purposes such as in gaming — representing unique in-game virtual objects, and in the public sector — replacing important documents like deeds to properties and patents.
These use cases have been slower for markets to adapt as they require taking existing centralized systems and bureaucratic processes and making them work with decentralized NFT infrastructure.
NFTs exist on decentralized infrastructure meaning that there are no middlemen between you and and the prospective buyer or seller of the digital collectable. This means, less money lost to commissions, faster & safer transfer of ownership, and more overall transparency. The removal of barriers between creators and their fans will lead to a power shift within the industry from centralized platforms to creators.
The decentralized nature of NFTs is the key driving force behind how they will provide critical digital infrastructure for the creator economy.
NFT for creators
Creators come in all shapes, sizes, and backgrounds, from musicians, bloggers, digital artists, TikTok dancing sensations, to Youtubers and so on. They all share one thing in common. That being, that they provide themselves or their works as a resource to their community that, in turn derives value from it. Many creators are able to sustain full-time careers doing so, through direct sales, donations, brand sponsorships, or through subscription fees.
Events like Logan Paul’s and Nyan Cat creator’s successful NFT launches provides insight on how the creator economy may adopt NFTs moving forward.
Creators may sell their works directly to patrons using NFTs. Like in the physical collectable world, owning an NFT as a patron will let you enjoy the benefits of ownership, from bragging rights, to the right to sell it later at a potential profit.
Influencers can turn popular clips of themselves into NFTs and sell the rights/ownership to those. (Imagine being the owner of the famous keyboard cat video clip).
It’s worth mentioning that an unlimited quantities of NFTs can be created. How many are created depends on the individual creator’s use case.
One copy
If a creator wants to sell a piece of digital art and the associated ownership rights to it, they would only create one copy of the NFT. This is exactly what happened when the creator of Nyan Cat, sold the iconic gif for ~$600,000 a few days ago.
If there was more than one copy in this case, then the ownership of the piece of art would be split proportionally or be in question.
One or more copies
An NFT creator also has the ability to create unlimited quantities of it.
A creator may create a piece of digital art but make multiple “editions” of it. In this case, multiple buyers would own separate unique copies of the same digital object.
This is similar to how in trading cards collections, there may be multiple copies of the same card. Rare cards that have a lower quantity in circulation have a higher value due to their scarcity as compared to common cards. The same economics apply to NFTs.
Where will we see NFTs grow within the creator economy?
There are several areas in the creator economy where I think we can expect the adoption of NFTs to grow significantly.
Selling original content
Like I discussed earlier in the article, the most obvious area of growth which has already exploded is in the sale of original content. Things like digital art, memes, audiovisual clips, images, gifs, the list goes on and on. Some argue that since digital content is easy to copy and replicate, it doesn’t hold any lasting value. However, since NFTs are built on blockchain technology, the creator’s identity can be directly tied to the digital collectable, permanently marking it as authentic.
NFTs can also be configured so that if they are resold at a later date, a portion of the sale proceeds go to the original creator. This provides significant value for creators, who previously only could benefit from direct one time sales. Now they can get a piece every time it exchanges hands.
Creating Dynamic, Ownership-driven Content
An area of growth that I’m personally excited about is ownership driven creative narratives, i.e. experiences that are dynamically affected by what NFTs a user holds.
A video creator could create a visual narrative where the main character’s avatar changes based on what NFT the viewer owns. A gaming influencer could create NFTs that allows fans to wear their exclusive skins in a popular video game.
These examples only scratch the surface of what content experiences are possible for creators to offer in the future through NFTs.
Memberships
Offering memberships and subscriptions to fans has been a way for creators to monetize through offering exclusive content or experiences for a reoccurring fee. Traditionally, these are managed directly through a content platform e.g. Twitch (which takes between 25–50% of the subscription revenue) or indirectly through a membership platform like Patreon.
In both of those platform examples, the creator does not actually “own” their audience memberships. If Patreon or Twitch were to dissolve or ban them tomorrow, the creator would lose all of those connections. If the creator wanted to switch from Twitch to Youtube, they would have to convince all of their Twitch subscribers to now purchase Youtube memberships. The problem here is that content platforms are currently the true owners of a creator’s audience. Today, savvy creators who want more direct ownership of their audience may opt to record the emails and phone numbers of their fans, but those alone can’t directly represent a subscription.
With NFTs, a creator could create a token to represent membership statuses. Owning this token could automatically provide the user enhanced experiences i.e. “subscriber status” across platforms that the creator has published content in the future. It could also be encoded so that the NFT holder is obligated to pay the creator a monthly membership fee. Now a creator truly owns their relationship with the fan.
Imagine that a musician creates 100 copies of an NFT that represents VIP fan status. This gives the NFT holder the ability to get backstage access at any show, as well as rights to preview their new music releases on supported music streaming platforms. When the musician is smaller, these NFTs may initially sell for a low price, but if the musician eventually builds a huge following, the NFTs will skyrocket in value as demand increases. This also allows a creator’s early supporters to be able to share in the benefits later on.
Charity Fundraising
One thing creators are great at doing is raising funds for charity.
Dr. Lupo, a popular Twitch streamer, raised 2 million dollars over a weekend live stream in 2020. Banksy recently donated several paintings worth over £1.2m to raise money for a hospital.
With NFTs, creator’s digital works are quickly and easily tokenized to sell for charity proceeds. Owning the NFT will not only provide the buyer with the collectable, but will also help snapshot and memorialize the philanthropic moment.
Licensing / Revenue sharing
Creators could license use of their works using NFTs. For example, a musician may sell an NFT that grants the owner 25% of royalties for a song. Not only does this provide a new income stream for the musician, but it also provides a new way to engage fans.
GUY J, an Israeli born musician, recently sold 50% of the royalties of his latest song through an NFT for ~$26,000.
Since NFTs are directly integrated with blockchain technology, they can also govern the structure of the licensing agreement. This can help add a layer of transparency to historically opaque and complex agreements, like record deals, talent contracts, publishing deals, etc.
This is just a small glimpse into the areas where NFTs will impact the creator economy, and how decentralization will create a power shift away from centralized content platforms to creators. However, there are many challenges that NFTs will face in gaining mass industry adoption, such as simplifying ease of use for the non-technical, and integration with content platforms. There is still a long way to go, but if recent events prove anything, it’s that creators are willing to experiment to move the needle of the industry forward.
Where can I buy or create my own NFT?
You can easily create NFTs today without need to write code thanks to platforms like Rarible and Mintable that wrap the complex logic of setting up a smart contract, creating, and deploying NFTs into a nice web UI. Creating NFTs on your own gets extremely technical, extremely fast, I recommend it only for advanced users.
There are plenty of marketplaces where you can buy NFTs including OpenSea Foundation, and Bondly. How to do so is out of the scope of this article.
I created my own NFT on Rarible before writing this article using a GIF I had made with my designer friend. It took less than 5 minutes, 0 lines of code, and cost $50 in deployment fees (Ethereum gas fees) to get the NFT minted and listed for auction. You can view the listing here.
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I previously helped AWS launch Amazon Managed Blockchain, their first blockchain product. Currently Co-founder at Sprise, a creator economy based product studio.
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