Web3 Can Survive Another Crypto Winter
With the carnage in the Crypto market this month, people are saying that web3 is dead. I disagree. The movement of web3 is strong enough to withstand a big price drop in Bitcoin, Ethereum, and other tokens. Even the falling prices of once hot NFT collectibles is not going to squash this evolution of the internet. Here’s why.
While the early headlines of web3 went to the high priced NFT projects like Bored Apes and Beeple, this was just an early application of a portion of the technology. It took art and collectibles from the physical world to the digital one. This was important as it helped people get comfortable that important digital assets could reach the same heights as sports trading cards and memorabilia. The buyers were a mix of Crypto degens and sports fans, but it was concentrated to a limited number of people numbering in the tens of thousands.
When NBA Top Shot burst onto the scene in early 2021, the web3 market expanded into the millions. Sorare did the same thing for European soccer fans. These were a big milestone as some of the most important sports brands in the world embraced web3. The successes the NBA and European Premier League had engaging their fans in collectibles and fantasy sports on chain pushed other leagues to fast follow. The NFL teamed with Dapper Labs on their own collectibles project. MLB is working with Candy Digital on collectibles, and they have just announced a NFT fantasy game with Sorare. Socios launched fan tokens with the big European soccer clubs like FC Barcelona and Man City, and they are coming to the states with NBA and NFL teams next. GreenPark Sports has built a Metaverse sports world with the NBA, La Liga, and the MLS. These are major initiatives, and they are not going away because Bitcoin halved.
Outside of sports, the next big market that has jumped into the deep end of the web3 pool is video gaming. Venture capital firms have poured money into blockchain gaming startups. The first big hit came in Asia with Axie Infinity. It grew like crazy to over $500MM in monthly NFT sales, but it’s been a rocky ride. In April, the company has the victim of a massive $625MM hack, but they continue to operate and are still seeing good player numbers. There really hasn’t been a second big winner yet in the space, but it’s only a matter of time. If you read my Weekly Drop newsletter, you’ll see 1–2 new blockchain gaming startups getting funding each week. Last week, Irreverent Labs got $40MM and Untamed Planets received $24.3MM. Last month Improbable raised $150MM and Community Gaming added $16MM. With this many shots on goal, you can bet someone is going to build a great game and attract millions of players.
The gaming sector has been held back by the top game developers who have been unwilling to participate in blockchain gaming so far. The big gaming companies have floated some trial balloons about integrating NFTs, and they have seen serious pushback from their customers about yet another new revenue model for the industry. Will someone big like Activision Blizzard or EA Sports or Fortnite introduce NFTs in 2022? Probably not given the Crypto market turmoil, but it’s coming eventually. And when one of the big players makes the leap, it will have an even bigger impact that the NBA and EPL. These companies have tens of millions of active players every day. I think they’ll be responsible for the next big adoption wave of web3.
The other sector that has dabbled in web3 but not fully embraced the technology is TV and movie entertainment. Some of the biggest movie studios have followed the NBA and NFL examples and sold digital collectibles to fans. The Matrix movie sold 100,000 digital collectibles at $50 each, and they saw overwhelming demand. Marvel has teamed with VeVo to sell digital comic books and other collectibles. There have been some really cool smaller projects using NFTs to fund projects and gate access to content, but nothing that has pulled in big dollars or large user counts. Stoner Cats, from Mila Kunis and Ashton Kutcher, was the first mainstream project to use NFTs to finance an adult animated series and control access to watch. Mad Realities just raised $6MM for a dating show where fans control the action. The Infinite Machine book about the founding of Ethereum is being made into a movie, and they are financing some of the cost of production with NFT sales. Companies like Disney, Spotify, and others are hiring people to head up their web3 strategy. More innovation in the TV and movie industry is coming for web3 soon, but it will likely be slowed down by the Crypto market cooling.
The music industry has also experimented with web3, but definitely not jumped into the deep end of the pool yet. Snoop Dogg has been one of the most aggressive in this space, with collabs with the Metaverse platform Sandbox and sales of his collectibles from Death Row Records. Other top musicians like The Weeknd, The Chainsmokers, and Kings of Leon have done collectible sales too. EDM DJ 3LAU launched Royal, a new NFT platform that allows musicians to share royalties with fans. Decent just graduated from Y Combinator with a similar royalty monetization strategy. Much more is coming here, eventually.
The genie is out of the bottle with web3, and the recent price drop is not going to stop the advancement of web3. Big players in sports, gaming, media, and music are experimenting with these new tools. Someone is going to have the next big hit soon, and they will onboard the next million plus users. They will likely not be pushing a money-making scheme to customers. I think it will be more like NBA Top Shot where they hit up a large existing fan base to engage with or support content they love. They may not even call the product NFTs or make any reference to Crypto or digital wallets. The hit to the Crypto market may lead some projects to pause or slow down, but the evolution of the web is underway and is not going to be stopped.
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