A recent CNBC article outlines how NFT trading volume has exceeded $10 billion in Q3 of 2021. The article also implies that a key driver of NFT growth is their role as ‘social capital’. Here’s an example to unpack what that term means:
A $10,000 Rolex has less utility value than a $10 Timex. Yet people will buy a Rolex anyways, mainly because it communicates something about them to others. The value of social capital here lies within the $9,990 price differential between the two watches.
Crypto leader Coinbase is close to releasing a new NFT platform. This move seems like a natural value add to the client base they have for their wallet and exchange products. Will it be sticky enough to earn share and grow the NFT market overall? And how will the Coinbase offering and NFT marketplaces like OpenSea and Rarible perform versus new decentralized alternatives?
Gaga For Decentralized Social (DeSO)
A relatively small group of crypto enthusiasts and content creators have become increasingly enthusiastic about a new blockchain protocol called DeSo. It functions as a base layer for a new crop of decentralized social apps (e.g. BitClout and Diamond).
DeSo aims to provide a more transparent, flexible, and reliable alternative to monopolistic social media incumbents like Facebook. Growth has been steady since the March 2021 launch. Now there is reason for optimism that the expansion of NFTs will accelerate the adoption of decentralized social as well.
The DeSo network is secured by proof-of-stake which enables transactions to be instant and virtually free. This is a competitive advantage over leading NFT network, Ethereum, where a single transaction can often cost over $10 USD.
Since DeSo software is open source with robust NFT features out-of-the-box, it represents a way forward to a more efficient NFT market with a big cost savings passed on to creators and collectors.
Mass Market Adoption
DeSo’s potential may be obvious to community members who are actively participating and digging into the technology. However, there are headwinds when it comes to messaging effectively to the mass market. There’s just so much to cover in terms of the features, use cases, and the broader vision.
Sometimes it feels like to want to be a DeSo early adopter, someone must be very curious about crypto (but not a Bitcoin or Ethereum maximalist!), be super stoked to create or consume a bunch of social content, network with people (many of whom are pseudonymous) on a fringy platform, entertain the idea that corporate centralized social media needs to be replaced, and be big on NFTs?! How do you pitch that ? ?
It’s not a stretch to imagine DeSo being disruptive to many industries now dominated by centralized services, like:
- Social (Facebook)
- NFT marketplaces (OpenSea)
- Crypto Wallets (Coinbase)
- Crowdfunding (Kickstarter)
- Publishing (Substack)
- Venture (AngelList)
A risk today is that DeSo is perceived as an unfocused mish-mash of perhaps well-intentioned and even highly innovative features that simply cannot be reconciled into something marketable.
Despite the DeSo story appearing a bit convoluted at times there are strong reasons to be optimistic. Since the entire software stack is open source, and the foundation has $50 million in funding secured for the community to start building on it, there will no doubt be many new apps emerging for all kinds of use cases.
We should soon see many DeSo-based alternatives to the apps in centralized ecosystems in a variety of niches already familiar to the mainstream. It’ll be much easier to market these apps independently to targeted audiences, and their proliferation will of course hasten adoption of the core protocol.
The foundation has also promised significant funding to social content creators, the NFT space being an explicit focus. The potential also gathers for DeSo to enable new and unforeseen ideas…
Telling The Story
Social media is a place for us to share our personal journeys and ideas. DeSo, with features like NFTs and Creator Coins, adds a financial dynamic to the experience. For some (DeSo has a few thousand daily active users), the potential for totally new types of interactions and relationships makes the social experience richer. But DeSo also has critics. Mark Cuban, claimed the financial dynamics make it, “a social network that isn’t social at all”. In my view, the financial transparency should be welcome.
On DeSo apps, not only can we buy and sell crypto assets like NFTs, but we can express clearly why we believe digital items, or entities or stories have value. And when we investigate network activity, eg. who backed who, who bought what, who moved funds into said project, etc. We’re doing all of this on DeSo apps like Pulse and ProsperClout, immediately adjacent the venue where our social activity actually takes place. This close proximity along with the underlying circumstance that people have something real at stake will help raise the level of our conversations and make them more impactful. In other words, people will bring their A-game to social media because they finally have skin in the game on a platform they believe in.
Context Is The Differentiator
As the NFT space progresses, context will matter more and more. Platforms suited for mainstream use will be the ones that allow people to express themselves freely, creatively, financially, and technologically.
We can’t buy and sell crypto assets through Linkedin, or share ideas and links with friends on OpenSea, or fundraise on Twitter. Why not? Where there is friction, there is opportunity. It’s time to leverage DeSo to temper the incongruities of our digital landscape.
Bitcoin Curveball
As discussed above, Ethereum in its current form may not be a good candidate blockchain for NFTs. But Bitcoin is planning an update in November 2021 called Taproot which should allow for improvements to the Lightning Network. This could lead directly to radically cheaper transactions on the Bitcoin network perhaps propelling Bitcoin-native NFT initiatives (e.g. Raretoshi). Innovation is slow with Bitcoin as compared to crypto projects like DeSo. However, Bitcoin has such scale that when improvements happen, they can be very consequential. Keep smiling.