What: The Economy
Digital artwork is experiencing an explosion in popularity.
What caused this explosion? A new digital economy for digital art & collectibles (read: collectible characters, objects and apparel).
And what caused this new economy? Non-fungible tokens (NFTs) that track all the transactions related to the digital products. The works themselves do not move, staying in the same online public server for all to view (similar to a publicly viewable website). What changes hands are the NFTs that link to the digital artwork. The ownership of these NFTs then confer intellectual property rights, which can be limited or broad in scope, to their holders.
For example, the most popular and valuable NFT collection to date is the Bored Ape Yacht Club (BAYC), a collection of 10,000 unique variations of the now famous digital character. A purchase of a BAYC NFT grants commercial rights to the specific Bored Ape represented by such NFT. Collectors can start clothing lines, beverage lines, comic books, films, music groups. And, they have. The collectors also get exclusive access to official BAYC drops, events & networking. These "utilities," as commonly described amongst NFT collectors, produce a vibrant, expensive economy.
How expensive? Recent BAYC sales range from $105,000 to over $3,000,000.
Why: The Sharing
The biggest innovation in the NFT / Web3 industry this past year had nothing to do with technology. Instead, it was an innovation in the business model of intellectual property (IP). While most companies hold IP close to their chest for brand protection, the trend in Web3 has been to unleash IP rights to fans and collectors; a trend initiated by Hashmasks & propelled by Yuga Labs / BAYC. Previous consumers of products now become collectors of assets imbued with commercial rights.
This effectively becomes an extension of the sharing economy, pioneered by Airbnb, Uber and Doordash. But now, instead of your house and car, you can monetize your digital collectibles and artwork.
Why is this such an innovation? Because it produces an entrepreneurial ecosystem within an overarching collection & visual narrative. This vibrant ecosystem is defined by creative individuals with creative freedom to use creative assets. The different businesses formed by collectors also benefit from the core brand equity of the larger collection. This is the value chain of the blockchain.
As the new derivative projects grow and multiply, coordinated organic marketing unfolds; the proliferation of brand identity benefits the derivatives, the overarching brand and the entire collector community holding similar assets. This amplifies the alignment of interests amongst a brand's stakeholders like never before.
How: The Entrepreneurship
To fully grasp this concept, imagine if Web3 existed when Disney formed. Now imagine if Walt Disney produced 10,000 variations of Mickey Mouse, offering commercial rights to fans. In this scenario, the current collectors would have very valuable intellectual property licenses. They could build their own Mickey Mouse clothing lines, restaurants, or even... theme parks.
Actual successful examples of this new business relationship between brand and fan in Web3 include:
- Jenkins the Valet, a Bored Ape character with his own stories, show and deal with CAA.
- A special edition, Tiffany x CryptoPunks digital and physical jewelry collection.
- Digital Nike sneakers reimagined by some of their first collectors.
In a way, derivative commercial rights empower fans to collaborate with their favorite brand by purchasing products, then building upon these products. Brands x Fans.