Over $25 billion was spent on nonfungible tokens (NFTs) last year, a few billion more than was spent at the global movie box office for the year. Despite — or because of — that impressive figure, a stigma surrounds NFTs. Most people are either confused by the startling prices NFTs fetch or are convinced they’re an elaborate hoax, a scam waiting to collapse. Critics regard NFT buyers as suckers who spend money on JPEGs they could simply “right-click-save” for free.
That refrain won’t be too accurate for long. In 2022, for good or for ill, NFTs are evolving.
On Tuesday the creators behind the Bored Ape Yacht Club NFT collection, Yuga Labs, announced a new valuation of $4 billion after raising $450 million to create a metaverse. A year ago, that sentence would be incoherent. Now it’s a harbinger of the next phase of NFTs, which are transitioning from art collections to ecosystems unto themselves.
Bored Ape Yacht Club became famous as an NFT collection, a set of 10,000 apes designed to be used as profile pictures. After launching last April for around $200 each, the cheapest Bored Ape currently listed on NFT marketplace OpenSea is $300,000. Collections like BAYC — or CryptoPunks, CyberKongz and World of Women, which all fetch tens of thousands of dollars — have become status symbols. Using a Bored Ape as a profile picture is essentially the crypto equivalent of popping on a Rolex for an important meeting. It’s become an offline brand, too. Fashion partnerships have been forged, magazine covers have been adorned and a book is being written, by Neil Strauss.
Yuga Labs’ biggest recent move has been the launch of Ape Coin, its own cryptocurrency. It was a big moment for Bored Ape Yacht Club owners. In a sign of the insanity of Web3, people who own Bored Ape Yacht Club NFTs received 10,094 free Ape Coin tokens — a donation currently worth about $118,000 per Ape. More importantly for the company’s aspirations, Ape Coin is a cryptocurrency with an $11 billion market cap. That means there’s a lot of money to be spent in the ecosystem Yuga Labs is creating.
Based on its teaser trailer, Otherside will be an MMORPG game where players can use their NFTs as in-game characters or avatars. A leaked pitch deck from Yuga Labs shows the company plans to make $178 million off land sales this year. The particulars aren’t known, but Yuga Labs CEO Nicole Muniz told The Verge that it’s teaming up with several game studios to develop The Otherside’s world. Otherside will be “a metaverse that makes all other metaverses obsolete,” according to the aforementioned pitch deck.
At the center of the evolution from art collection to ecosystem is a concept: Web3. That’s what crypto boosters call the next iteration of the internet. Web1 was the static pages of the ’90s, Web2 the social media revolution that turned users into creators. Web3 is the blockchain-integrated internet, one that takes in Web2 but allows users to properly own the content and data they create.
This is where NFTs come in. Though NFTs have become synonymous with digital art, their core function is to certify ownership of a digital asset. That asset can be anything: a video, a song or an in-game item. Cryptocurrencies then allow you to trade those digital assets for money. Finally, metaverses provide a place for these tools to be put to use. These are large, open worlds frequented by hundreds or thousands of users at a time. They’ve existed for years — think Second Life, or even Fortnite — but are being reimagined by the crypto crowd.
Imagine Second Life, the simulator of real life that had a moment in the ’00s, except you own your avatar’s clothing and items as NFTs. Once you’re done with them, you can sell them to another user to get your money back. Even better: You could craft special items that, if they get some cultural cachet within the community, could be sold for a profit. Services could also be rendered within the metaverse — like architects designing virtual buildings — for which you’d be paid in cryptocurrency. Plots of land can be sold, on which owners can do whatever they please, including erecting billboards and getting paid for slapping advertisements on them.
In essence, it’s the creation of a new economy. Or at least, that’s the hope. There are currently several Web3 metaverses either up and running or in development, like Sandbox and Decentraland, but none has been able to capture the interest of people who aren’t already invested in crypto and NFTs.
Most NFT projects claim to have metaverse aspirations, and create their own tokens to that end. Most such projects are scams, and others aren’t successful enough to make that promise a reality. Yuga Labs is different in that it legitimately has the tools to create a metaverse: a brand that’s somehow managed to transcend NFT culture, a cryptocurrency with a huge market cap and enough money to hire a team of world-class game designers. But now comes the hard part: developing a world that people actually want to spend a lot of time in.
Time is the true currency of metaverses. Like social media, metaverses can be used for advertising. Like gaming, people can spend money on digital items. But advertising is only effective if enough people traverse the space, and digital items are only valuable if the world around them means anything. Creating that world is the unlikely next step for a bunch of ape avatars.
Whether or not Otherside turns into a metaverse of any merit remains to be seen. But one thing is for sure — whatever Bored Ape Yacht Club is at the end of 2022, you won’t be able to right-click-save it.
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