NFTs are Giving Community Builders New Ways to Scale Authenticity Online

My biggest takeaway after falling into the NFT rabbit hole is the technology’s long-term potential as a community-building tool.

One of the most challenging parts of any virtual ecosystem is scaling authenticity but NFTs are changing this. These are some of the interesting ways I’ve seen NFTs used in community building, and how they might evolve over time.

One of the clearest benefits of holding an NFT is having early or exclusive access to future releases from your favourite brands and creators. This could be a free NFT airdropped to you from future releases by a brand whose NFT you already hold. Alternatively, some creators give folks who already hold their NFTs early access to future releases. This type of exclusivity is most valued if the demand for the drop is greater than the supply.

A subsequent collection produced by a creator is often a large milestone in the community, generating a lot of engagement and excitement in the lead up to the drop. For brands with a large following, there is generally a monetary value for the second set of NFTs, which provides upside to holders.

A good example of this would be the Robotos project, which had a much anticipated airdrop in October. Robotos is a collection of droid characters designed by artist Pablo Stanley and minted as NFTs. Every single one of the 10,000 robotos are unique and algorithmically generated using more than 170 different hand drawn traits. Their design, coupled with Pablo’s enthusiastic personality, established a vibrant community of NFT holders. It’s an active community, with conversations about the direction of the project being held on Discord and Twitter Spaces with Pablo, the team and the community.

Every current holder of a Roboto is getting a free robopet companion. It is a long awaited milestone in the project and the community has been trying to guess what the robopets look like for weeks. When a sneak peak was finally announced, the artist did not disappoint. Every robopet will inherit 1 trait from the roboto they are based on, that holders already love.

Physical merchandise is also often exclusively distributed to NFT holders. This is particularly effective for brands that have already created a certain level of exclusivity and loyalty, where holders would want to show they are associated with the brand. This is the web3 version of owning a recognisable watch or driving a nice car. For a digital native generation, virtual assets and tribes are just as important. One recent example would be the Mutant Ape Yacht Club’s (MAYC) merchandise store that is only available to their NFT holders.

Different communities are innovating with community participation, where brands are experimenting to see what including token holders in decentralised decision making could look like.

A great example would be the Nouns DAO project which claims that “while projects such as Cryptopunks have attempted to bootstrap digital community and identity, Nouns attempt to bootstrap identity, community, governance and a treasury that can be used by the community.” 

Some of the initiatives that Nouns holders have voted on include creating a Nouns comic, building an iOS and Apple Watch app and donating 5 ETH each to 6 charities. All the funds for these initiatives come from the Nouns treasury, which was built through mints (that’s NFT speak for direct sales) of Nouns NFTs and ongoing royalties from secondary sales.

While Nouns is a radical example, there are many other projects that take feedback from their holders. One example would be the Sneaky Vampire Syndicate that announced a collaboration with a high end sneaker retailer as their first physical-world brand collaboration. This received a very mixed reaction from the community. Many understood this was the first in a pipeline of planned partnerships, but a number of holders were vocal on the fact they did not buy into the project envisioning it would become a sneaker brand. Democracy played out in real time: the team reacted quickly and postponed the partnership, focusing on digital utility in the short run.

Utility tokens are used by projects that are focusing on being usable in the digital world. Often these tokens are distributed to NFT holders at regular intervals, rewarding them for holding on to their NFTs. These tokens can be used for various purchases within the project’s ecosystem. “Burn mechanisms,” which mean a certain number of tokens are removed from circulation on a regular basis, ensure the value of the token does not depreciate over time. However, managing supply and demand is a balancing game that takes a team familiar with tokenomics to pull off well.

A recent new project in the space with tokenomics is Dojicrew by famed street artist, James Ame.

James Ame and team are creating a unique system where each figure is a combination of individual NFTs classified as “traits” which are interchangeable, just like a physical lego figure. Each NFT is assigned a rank at random and is issued a daily amount of “zingots” depending on its rank. These “zingots” are utility tokens that can be used to purchase traits from other players or new traits that are released by the artist. This creates an internal economy that while operating with all the benefits of being digital, mimics the physical collector space in that participants have full ownership of their unique collection.

It is still very early days so it will be interesting to see how community building continues to evolve as NFTs become more pervasive and web3 sees mainstream adoption. I believe NFT communities will evolve into tribes in the metaverse, and increasingly be used as a proxy for social standing.

It will be human nature for communities to form across the web3 universe. You can change between avatars and belong to multiple communities, but everyone will have one avatar that belongs with a community they feel most at home with. I believe profile picture NFTs are the first generation of avatars in the metaverse: different communities are already forming across different NFT projects, mostly existing in siloed discord servers. These NFTs will evolve into 3D avatars for the metaverse and the relationships formed in strong communities will outlast the mediums we used to get there.

In the real world, we often assign credibility to someone based on their social standing, more often subconsciously than intentionally. However, intentional efforts to do this do exist, especially in environments where other preferred data points are difficult to verify. One example would be in the micro-finance space, where a borrower can secure a loan if a group of their peers vouches for their trustworthiness.

In the anonymous online world, it can be hard to find trusted data points. However, individuals can show the NFTs they hold, representing the communities they are in. If you are a holder in a well-regarded community, you will want to avoid being reproached or even removed from that community for misbehaviour. Hence, offering your social standing as collateral is a way to gain some, though not absolute, trust. This first requires the mass market to be onboarded into the value of web3 communities.

I’m looking forward to seeing new community engagement strategies evolve over time. We live in an increasingly interconnected world, yet we have found authentic community building to be difficult to scale. I believe NFTs are the innovation that can change that.

Chris is an emerging market VC at Saison Capital, but opinions are his own. For transparency, he own NFTs from the Doodles, SupDucks, Deadfellaz, Robotos, Uninterested Unicorns and Dojicrew by James Ame projects. He can be contacted at @chris_sirise