How Inclusive and Transparent Are NFTs?
Neither this post nor any other on cryptofal.com should be taken as financial advice. It is not.
Over the past year, NFTs have made huge contributions to mainstreaming cryptocurrency and Web3. Sales on NFTs from 2021 amounted to $17.6 billion, up from $82.5 million in 2020. With such fast-paced growth, there’s bound to be a number of projects that fall flat, while others shine and grow increasingly lucrative.
Like most things, the popularity opens up a new and exciting world to recently onboarded people, but just how inclusive are NFT projects, and do they fulfill the functions they claim to have? Many NFT projects, even a few of the highly popular ones like the Frosties, turn out to be a scam. These types of occurrences harm the community and the reputation of crypto for obvious reasons, but the less obvious harm NFTs can cause is somewhat more subtle.
As there are tons of projects that never experience success, there are those that achieve cult status with impossible floor prices to match. They become unrealistic to obtain for an average buyer onboarding into the space. Bored Apes Yacht Club, World of Women, Crypto Punks, and Veefriends are some of the most popular with the highest floor prices on secondary markets. In a conventional capitalistic setting, this wouldn’t be abnormal–a product is created, becomes successful, and even gives back to its community and resells at high prices which bankroll the predetermined roadmap. The only difference between the NFT community and other companies selling products is the culture of NFTs.
There are strong themes of inclusivity, community, and transparency that NFT groups build on. Presenting a benevolent front and running a business is difficult to walk hand in hand. How inclusive is a project when the initial mint is close to 0.5ETH or the process to access minting passes is scooped up by bots? There are a number of barriers to entry into the NFT world, especially for popular projects. The competition ends up creating less inclusivity, rewarding those with the most resources.
The secondary issue with projects involves transparency. While coding can account for the number of royalties funneled and to which party in the development, there’s a question of what occurs after those royalties reach the fund the company controls. Some build in voting rights with NFT ownership to make the process democratic, but others are controlled by the founding members. Essentially, where the money actually goes in the end and how it’s used are built on a strong amount of trust from the community for the team to fulfill their goals. The more ambitious the roadmap of the NFT, the more crypto needed to support the path.
Not everyone enters into the space based on the culture. Many support projects and buy NFTs based on their utility. They may serve as membership to an exclusive community, admission to events, have a store of value, or offer a variety of experiences down the line, but they could also have no utility aside from the aesthetic of the art. In the end, much of what NFTs promise should be taken at face value and proper research into the roadmap and team is always essential. It’s up to the individual to decide the worth an NFT holds for them.