With this being the case we need to thing for ourselves and investigate more fully and think like the founders.

The following is a non exhaustive set of considerations one can assess themselves in attempting to understand a project, their motivations, longevity and overall health. These will be in addition to standard market analysis.

As with all articles on this blog this is a work of opinion, hopefully well constructed out opinion but opinion nevertheless.

None of the following statements or questions should be directly put to a project via an AMA or really via any other method. You won’t get an answer and will probably be removed from the stage. If you do get an answer it will unlikely be fully candid.

If I shouldn’t ask them then what is the point?

The following could be a process to internally yourself consider how some of these things may be being considered by a project. The following is essentially like a new perspective to perform your own research.

Additionally the following is meant for collections that have perceived longevity and delivery. A single art collection does not need such a rigorous analysis.

Team/Project Considerations

1. Has the project performed a market analysis on its existing customers, their motivations and future markets, their motivations and how the project may grow and serve both groups? If done, have they enacted these findings?
2. Is the current profitability of the project or their external funding enough to service the effort required to deliver on the core roadmap items? Some basic calculations can be made on the income of the project exclusive of any external funding.
3. If the collection didn’t mint out does their roadmap seem realistic for the number of holders/minted amount?
4. Is the ongoing revenue generation tailored towards new customers or extracting additional revenue out of existing holders? If it is a focused towards existing holders there may be lowered prices over time due to a finite amount of liquidity from holders.
5. What marketing activities are undertaken by the project and are these tailored properly to new customer acquisition and not just motivating existing holders?
6. Does the project make moves on their own market? This is rare but does occur. For example, do they sweep floors?
7. What is the makeup of the team? How much is their focus on selling versus development. Possibly larger development teams may show a focus on longevity over time. Is the team large enough to deliver the roadmap items in the timeframe listed? Think a back of the envelope burndown rate.
8. What are the track records of the main project leaders? Have they cycled through many projects and have they been successful in delivery in the past? Have they had negative projects or essentially rugged projects? What were the outcomes for these previous holders?

Collections

1. Is the release of additional NFTs beneficial to the health of the project and its current owners? For example, do additional collections benefit the community? i.e. beyond providing the project with liquidity.
2. How seriously does the project take blockchain records? Is their metadata complete?
3. Do holders have their keys/non custodial access to their NFTs?
4. What options are holders provided with for selling in different places (chains or marketplaces)?
5. Do holders have any Intellectual Property rights to the NFTs? If so, would these allow holders to continue to build something on their own if the project rugged?

Stability

1. Does the Project have any missed dates or undelivered key milestones?
2. Is there any significant controversy with existing team members that may affect holder actions such as participating in drops?
3. Have definitive statements or details about collections/project changed over time?
4. Have their been mistakes made that haven’t been adequately rectified?
5. Is there a clear and certain path for delivery?
6. If the project has previous delivery, is there sufficient benefit for new holders? i.e can they catch up to existing holders or is it a bridge too far?

Holders/Community

1. What is the ratio of whales to regular holders? Is there a perceivable upcoming event where whales may sell on the market?
2. What are the motivations of holders? Is there a strong connection with community, are they motivated by a floor price? Essentially is there a reason they hold beyond the price increase?
3. Can the current holder base sustain the project, based on the plans?
4. How active is the community? Is the sentiment positive or negative?

Overall many of the above questions will not have adequate answers forthcoming. Primarily as an NFT holder you not a shareholder and don’t have a stake in the company nor rights to this information. The process of answering the questions may just be based on the available information.

See the answers you glean as being Red or Green flags in your overall decision making. Other questions of your own should also be researched.

In the world of stock trading there is a term called ‘Material Non-Public Information’. The Gilmartin Group defines Material as “any information that could reasonably be expected to affect the stock price is material, including positive and negative information.”

According to the Gilmartin Group “to be considered available to the public, information must be broadly released to the marketplace (such as by a press release or an SEC filing), and the investing public has had time to absorb the information fully. Both criteria must be met before information can be considered public knowledge.”

Material Non-Public Information is important and should be considered if NFT and Crypto as an industry is to have long-term credibility.

In relation to NFT and Crypto projects, this gives us a dilemma. Alpha is seen as important information that may be material in nature. I am not equating stocks to NFTs and crypto tokens but in the future regulatory bodies may come closer to this conclusion dependent on their success. For example if a particular NFT or token provides an ongoing financial benefit to owners and the NFT has a high value in itself, regulatory bodies may think differently.

The idea of material to the following discussion is any information that may affect the market of a project. Long Term/Short Term, Bullish or Bearish. This may not be a legally equated material definition but for the purposes of this discussion this is what I am using.

Current state of play

With the following list, some of these on a project may occur.

Project team or Social media account Direct Messages

A project Team member may be asked a direct message through the likes of Telegram or Twitter and this project team member may provide an honest answer that they may not consider material but is in fact market affecting.

The same goes for a Social Media accounts where the responder may not be identified. They may provide non publically understood information that may be seen as material.

Official AMAs/ Unrecorded Meetings

Ask me Anything spaces known more commonly as AMAs are a staple of the industry. The potential issue here is if these spaces are not available to all or are not recorded. We are a global buyers and should be able to review after the fact.

Project Team Impromptu AMAs

This is where a Project Team member enters, say an unrecorded twitter spaces and drops potentially material information. Those that were present gain the benefit.

Token Gated Discord channels or similar.

Token Gated Discord Channels are commonplace for holders of an NFT project or in some cases, further locked to a certain rare trait type or holding level. The same situation can exist for tokens. Information in these channels may be material in nature.

Blockchain Explorers

Blockchain explorers provide in most cases good and potentially market affecting information. Those with the access and technical skill to navigate this information may gain an advantage. Is this non public? Not technically but it may be deemed as such later.

Unnavigable Blockchain or market Information

In some cases, access to information is hidden unless either you are provided access by the project or pay a fee to an approved provider (in the case of APIs). This information may be market sales or similar. Those with access to this information may have an advantage.

Old Roadmaps that are updated through different channels

In quite a few contexts I have seen Roadmaps or plans are generally understood but completely different to the current published Roadmap. This is particularly problematic if a potential buyer was new and entered a project all without understanding that plans had changed and published via a new channel such as a recorded AMA 6 months back.

Future Possibilities/Advice

Provide Public and Searchable Responses to ‘Material’ questions.

This encompasses a range of aspects above such as DM responses, Impromptu AMAs and Locked channel responses. This could be done through an up to date Frequently Asked Questions (FAQ) that allows one to subscribe to updates.

Provide training to all team members on what may be deemed material.

All team members should understand that their words matter and what they say may be interpreted as ‘material’. As such, industry training should be applied so that team members understand the impacts of their words.

Record any live and potentially material interactions and make these available via a central source.

If a public searchable response page is not updated at a minimum record official spaces so that the community gains a fair understanding that isn’t non-public.

Update Roadmaps!

I wrote another article on the importance of updated roadmaps but it seems as though in the industry as a whole there is a reluctance to update information beyond the first initial snag to get buyers to enter. It is quite frustrating. A collective memory should not be needed to understand the current state of play.

Make publically navigable any ‘material’ blockchain or market information.

If the information exists to some of the public it should be available to all of the public via an easily navigable explorer. This would avoid any perception of hidden information.

A final caveat.

1. I am using the term material to a different context and may not apply in a legal sense. For example if some information is market moving, i.e. prices on some NFTs change, that may not be seen as material now or in the future.
2. Some of the existing current state of play may be seen as public in a legal sense. Regardless of whether it is in reality widely accessible to all, new or old to a project. For example it may be acceptable to require payment for some information. I’m not sure.

As will all articles on this account, this article is one of opinion. Hopefully well formed opinion but opinion nevertheless.

The following factors need to be considered if scarcity is a major factor in why an NFT or collection may be a good decision.

Scarcity Considerations

Comparison to other like collections

Thinking: This collection is just half the number of the previous collection that was very successful, so this one should be successful.

Reality: The factors, timing, sentiment and purchasers that made the previous collection successful may or may not be still present. Also, are the original purchasers of that collection the same buyers that are being relied upon to make this collection a success? One group of people only has a so much liquidity and that liquidity may be allocated already to the original collection.

Lesser comparative assets

These are NFTs that are comparable to a collection and may prove an alternative to some people. For example a different colour of the OG collection.

Will alternative lesser and comparable NFTs be released that will effectively extend the supply or dilute the available funds for the original collection? Comparative assets such as a new color variant, second release.

Reissues

This is a very niche situation, however, there is a case that can be made for re-releases of the same NFTs. I know of digital assets currently that reissue new stock of the identical items after each sell out and a set period. This allows markets to form, presumably sell and then it starts again. The only difference in the NFT is the designation 2nd release or similar.

Hyped micro releases

Some collections release small amounts of a collection with additional benefit and achieve initial hype. Recur did this with their Rugrats collection for example. They released 10 NFTs with additional benefit that had a greater utility than the rest of the collection. While these micro releases are hyped for a time they may be diluted by the impending releases.

Circulating supply

We often think about circulating supply in a coin or token sense but it also applies to NFTs. Some collections will stage the release of there collections over weeks or months and in some bearish cases years. The collections some times try to manage their communities but buyers need to understand each situation.

Additionally, To gauge the scarcity or drive to buy, often potential collectors will simply look at floor prices in their decision making, but they must also consider the recent sales amounts and volume. If a collection is large but there is a small number of listings this doesn’t necessarily mean a bullish exclusive situation. It may just mean that holders don’t see market conditions worth listing into.

Whale holdings

If 1 or a few holders own a large amount of an NFT collection and dont have them listed this could correlate to a seemingly risen floor when in reality these whales could effectively flood a market if they so wish. They are market makers and breakers at the end of the day.

Too small a collection

If a collection is in its entirety under say 50 items, there is a good chance that this collection won’t have enough marketing and hype to make it and sustain high floor prices, regardless of utility. Niche NFTs can do well but they must be coupled with a larger collection.

The benefits

Exclusive Communities

Many NFT collections have strong communities that, to take part, you must be a holder. These communities can be made up of very rich or talented individuals who will enrich the lives of the holder through their affiliation.

Prestige

As in the physical world, there is a benefit to having a small batch anything. This translates well to the world of NFTs as long as the overall collection for this fandom isn’t too small. A 1:1 in a collection of 1 is worth less than a 1:1 in a broader collection of 100 of the same item.

High cost of entry

The potentially higher cost of entry into these more exclusive collections may lend themselves to a more exclusive club.

An important consideration

There is a deminishing return when it comes to collection size.

A collection size of ten does not afford community and could actually hurt the exclusivity of a collection.

I remember this when collecting physicals. You may want a one of one but for it to be truly collectible, there must be several the same or like items potentially available. Closely aligned 1:1s could overcome this in the wilderness problem if you were considering running a unique unrelated collection.

For Licensed NFTs, Mints aren’t what you think they are.

This article like all others on this blog is a work of opinion. Hopefully well thought out opinion but opinion nevertheless

In virtually every Licensed NFT platform I have researched, the edition/mint number shown on the platform isn’t the number connected to the order in which the asset was created.

I use the term edition/mint as most platforms use the term edition in most cases and let slip the word mint in different verbal contexts. They are wrong and should be corrected. Edition number is correct. Mint number is not.

A mint number is the number assigned to designate the order of the minting process. This is (in 99% of cases) not what is being represented on the site of any major licensed NFT platform. They, in most cases call the number an edition or in some cases a mint number.

Many platforms use edition as a differentiator to avoid having to engage with the original meaning of mint numbers in the sale of many of the same collectible.

Some possible reasons why editions and not true mint numbers are used:

It is easier to maintain

It is just metadata, metadata is simply data that is applied whenever minting is done. Projects don’t see the importance of the concept of a reliable mint number that relates to it’s definition.

Minting effort

Minting in order and having this represented in the metadata would take greater effort. In my opinion future collectors may look back favourably were this to occur.

Randomisation claim

If randomisation of allocation is preferred by the project to entice users gambling triggers, pre-minting of collectibles would also be needed. Projects don’t want to perform this because of the effort or another reason.

Genuine technical limitations exist

While this seems unlikely, genuine limitations may exist, such as the random batching of transactions. If this were the case then they could slow a minting process to ensure accuracy.

Methodical pre-minting required

Pre-minting would possibly need to be performed more slowly (such as different blocks) to show orders more clearly. With some minting there could potential argument of multiple firsts if applied in the same block.

Editions scratch the itch of collectors

Why bother adding additional technical effort when collectors will settle for a made up edition number.

We are moving chains again or allowing people to cross mint so why go to the effort?

This is probably the only valid reason in my opinion to not to at least attempt to provide accurate edition/mint numbers.

Team limitations or understanding

If technical staff understand the issue and cannot convince certain members of the team that mint numbers are different from editions and could be important they can’t implement a solution. Why I think this may be a possibility is when leadership of some projects state they will be burning unsold NFTs when they were never minted in the first place. They clearly have a limitation in their understanding of blockchain.

Why mints may matter:

In the future with all the flurry around being first on the blockchain collectors may actually care about the real first and not some number that is shown in the metadata. We may look back on this time as an abberation, where projects didn’t use blockchain to its full extent. Certain collectors collect mint order regardless of what a platform may push as their collecting narrative. The issue is when blockchain jumping is allowed or is done for collectors. This will disrupt the pure mint collectors. Their data can be for all intents and purposes lost in the passage of time. Probably still existing but not particularly discoverable.

Why editions do matter:

Projects make them matter.

They provide more points for having lower edition number. They do this primarily as markets generally also provide higher value for these numbers. They talk about them constantly. They document what they are, some times completely incorrectly.

It is shown on screen

For 95% of users, edition is the only number that matters, and for many users the edition doesn’t matter anyway. Collectors just want a differentiator for mass produced collectibles and if they are presented with any number to do that, it scratches that itch for status and exclusivity.

For collectors that do care about the number I would contend that a majority don’t really understand how that number is derived.

Why do you even care?

I care because many users are not well informed as to the facts. If you were to ask the average user what the number of the NFT they own means or represents I would think they would most likely tell you that it means the order in which the asset was created. The distinction needs to be fully understood by all collectors. Unlike with physical assets, the ability to manage these and have them be the same exists, yet not one project has chosen to do so. This is a gap, and in the future, I feel that collectors may look back on this time as an aberration where blockchain was capable of delivering a consistent and meaningful number and projects chose not to bother.

In the fullness of time with user chosen re-minting and a complete apathy for the minting order of NFTs in large duplicated collections, this discussion will fall on deaf ears.

In the end, if we allow most collectors to re-mint their NFTs cross chain at their discretion, anyone collecting based on mint order alone will be rekt.

It would be like if you collect music. There is classic music but there is a subset of music that was very popular in your generation that probably doesn’t translate well to a more modern audience. Not because it wouldn’t have an audience but because it hasn’t been maintained/marketed for current formats. Another example could be comic strips where the fandom is not maintained for a modern audience.

As with all articles on this blog, this is a work of opinion and is in no way financial advice. It is simply a stream of consciousness.

If an NFT collection is released for a largely dead franchise, it may capture a subset the audience it once had, but in the long term there is a risk that the popularity will fade if not relevant exposure is not maintained for a new audience.

These dead on arrival NFT collections of once popular franchises are quite rare, but do exist. There is probably a good chance that over time they won’t improve.

One positive note is that generally licensors are incentivised to continue with the renewal of there assets for copyright reasons. If an asset isn’t renewed and changed, the licensed good could ultimately enter the public domain. This (I understand) is one reason why licensors release new variants or slightly change their most popular characters.

So what? Much of collecting, is about connecting with the fandoms of youth. TV shows, Comics, Video Games, and entertainment. Generally we don’t care if it is a currently popular franchise. For an economic reasons we possibly should if the costs are great enough.

How do you identify a well maintained fandom

Re-issued physical pieces

Think 25th anniversary pieces or similar re-releases of toys or any collectible that made the franchise popular. These can find a new audience and a satisfy the original audience.

Remakes in the format that made the franchise popular

Live action movies, video games, anything that engages the original audience and a new audience.

Additions to the franchise

New TV shows, new characters, and variations on a theme. These additions will probably disappoint the original collectors of the franchise but they needed to engage new fans and keep the popularity going. Ultimately these new additions might get new collectors to look to the original releases and their related NFTs.

New pop culture references

It is amazing how seemingly unrelated items can enter and exit the social zeitgeist. Think the game Fortnight and memes. Both of these have examples where fandoms get exposure to a new audience.

New formats

Many toys became popular because of their TV shows (sometimes made after the toys were produced). New audiences could be gained by rethinking of how the fandom is best provided to the new audience. One popular method is high quality animation. For example Mr Bean.

Ask a young person whether they know about X fandom

If they don’t, then there is a chance that coupled with the above that you have a badly maintained franchise.

How to spot a Fading Fandom

Research whether any of the above elements exist and ask the below questions.

When was the last year that a significant contribution was made to this fandom? If it is more than 10 years, it could be in trouble.

Are products with the fandom on them still available for purchase?

Can books still be purchased or are the original tv shows found on streaming services? Essentially how hard would it be for a new audience to get into the fandom?

Does this fandom have an audience with Web3 or Web2.5 Collectors? If the answer is no, maybe this license having NFTs is not an appropriate long term fit.

Examples

Garfield. Garfield was a once popular Cat and comic strip. There was books, a short lived TV show and lots of merchandise. The people who owned Garfield probably realized that without renewal there was a high probability that the fandom could fade into oblivion. Then came the high quality family movie starring Bill Murray. Paddington Bear is another example where the owners saw the need to renew and they did.

ALF. Alf was a very popular TV show in the 80s. Alf ate cats (or at least claimed he did). This franchise is largely dead. There has been no renewal of merchandise or media in this franchise and over time it will probably fade into oblivion.

Garfield and Alf were both a product of the 80s but whereas one had renewal it has a chance to continue to have fans into the future. Not to the same level as it once did, but with the right set of actions it may have.

Overall the tenet of ‘collect what you like’ should withstand any analysis above. It is however, important to consider how this fandom will fare in the long term, if you have a perception of maintained popularity or value.

There are several types of these that have been recently playing out.

Types of Web2+ tasters

Standalone Web2 Purchases

This is where the project releases a comparable experience to the web3 experience without the ability to trade the assets and with a lower cost of ownership.

An example of this is the feesh project. You can buy Web2 or Web3 feesh for the same fishtank based experience. The difference being that the Web3 counterparts are tradable and are provided with airdrops of accessories. For the web2 experience you can buy accessory bundles at a possibly cheaper rate than buying from a web3 accessory market.

Demo games with generic characters

Quite a few web3 character based projects have released either gameplay or demo experiences using generic characters from their collection. This could entice a new group of buyers if they deem the offering to be of value moving forward. A customer should not have to invest in a potentially costly web3 asset all to be able to experience a basic demo of a game. If a potential customer likes the demo they can then choose the specific character from the web3 collection that best represents them.

Behind the scenes looks/ cut down membership

This type has been around a long time but is still relevant to the conversation. Nearly all projects have a discord or online community and these communities usually have holder only areas. These communities allow for a much larger reach than its actual owning membership. Again a try before you buy situation. Potential buyers can see sentiment, activity and see delivery and any issues over time.

Small scale experiences

This is where a project will provide essentially a demo or cut down experience for the potential customer. The DC Batcowl did this with one of their challenges. You could choose to be either the Hero or villain and experience a cut down version of the challenges that full holders experience.

POAPs

A POAP is essentially a badge of attendance. It is an acronym for Proof of Attendance Protocol. While these may be considered a web3 asset they work differently to most NFTs. Projects may issue these to all attendees of some event. They are like a taster NFT for attendees. They hook a potential buyer with a digital asset linking them with a project.

Phygitals and redemption codes

These are where a collection will release physical items that may or may not come with a digital counterpart. You may buy an asset in a physical store that is representative of a small subset of the collection. These items may be limited and may just be a physical item to create hype for both the existing web3 holders and exposure to a new audience unfamiliar with web3.

Benefits of these strategies

Try before you buy

There is an issue at present where many projects have great claims and don’t necessarily deliver. The ability of an interested customer to try out their experience such as a game, may then motivate them to buy the web3 asset. I liken this to the short demo versions of video games once attached to games magazines.

Lower barriers to entry

If the process is easy to onboard into a paid or free web2 version of the project this may entice many more customers that are not yet ready for a full web3 experience. Common payment methods and account management can be used. Web3 can be dangerous if customers aren’t careful with their assets, with little to no recourse. If centralised in a web2 setting these situations may be reversible.

Diversify your customer base

A web3 project has a maximum number of customers that are willing to negotiate and place funds in a web3 space. Offering web2 alternatives means that those not yet or ever ready for a web3 experience can still take part and generate revenue. While initially this may seem concerning to web3 holders, it is actually a positive aspect as long as the web2 products cannot be actively traded. Essentially if a customer wants to potentially profit from holding items in a project they must engage with the web3 collection.

Consumer data funnels

All of the above strategies lend themselves to the ability for a project to collect information on potential web3 customers. They could gather emails or survey them to gain a greater understanding as to what concerns they may have in using web3.

How can Web2 projects also use these strategies?

They could attempt to pivot from their web2 only offerings into NFTs for customers that wish to do this. For example the Topps digital trader app provides customers with a Web2 only card collecting experience. They may be able to pivot and allow customers to mint and burn NFTs to build a collection in the web3 space. This allows the project to cross pollinate communities and overcome the limitation of Web2 only markets. If NFTs become more mainstream in the licensed collecting space, I contend that more web2 companies will offer a minting option.

The Web2 collecting app Quidd has done this with some of their IP. They allow minting to Ethereum of some of their assets and this could promote their product in web3 markets as well as provide Web2 customers with a pathway to greater ownership.

What the hell is a grey NFT? Well they exist but haven’t been defined until now.

They are any NFT where a primary IP holder isn’t in support of an NFTs release, but isn’t at the stage of legally stopping their release. Think grey imports for NFTs.

Disclaimer: This is an opinion piece. I am no Lawyer and don’t represent any legal knowledge, I am simply describing situations that I have seen emerge in the space so far.

The differentiation between a Grey import and a Grey NFT is that usually Grey imports are licensed by the primary licensor in one jurisdiction and sold in another, whereas Grey NFTs can be a broader set of potentially contested arrangements. To be clear, I am not saying that any type below is illegal but could be potentially contested at some point.

So what are the different type of Grey NFTs so far?

Types of Grey NFTs

Full Tokenized physicals:

The NFT is a representation of a licensed physical where a licensed physical either does or did exist. There are a few different examples of these where a widely collectible asset is tokenized and vaulted so that it may be traded without the need to send the item back and forth every time. Generally these items are graded and have a generally understood and verified value. In some rare art cases, the original is destroyed in order to make it digital only. The more common example is the retention and vaulting of an asset for digital safekeeping up until a point that an owner wishes to be sent the item. In all active cases I have seen the licensor has nothing to do with this mechanism.

Fractionally Tokenized Physicals:

This is where a very rare collectible physical asset is digitally released as fractions or parts of the original asset. This was claimed as being a way to collect the very rare items and win from its potential increase in value without needing to outlay the total amount. As with the above, the item is vaulted however the fractional owner cannot withdraw the physical item as they would unlikely own all the fractions. This type would hold significant risk as the owner of the physicals holds all the ‘keys’ to this situation, to the vault and the platform.

Complex arrangements:

Some license owners are only warranted certain assets that made up a larger IP. This could be the ability to make physical goods or artistic arrangements. Essentially their legal ownership over IP has certain boundaries and the release of an NFT could be problematic. The main example of this is a certain costume collection from a space based franchise. The collection was never released in the end.

Jurisdictionally restricted:

Some collections have been released where the NFT can only be initially sold to residents of certain jurisdictions. The issuing body then may allow the aftermarket to expand the amount of jurisdictions that take part. This example is similar to crypto IPO restrictions where the initial coin offering (IPO) was limited to certain countries but residents of other countries could freely buy the currency post the initial release.

Magazine covers or photography of famous people

This is where an iconic magazine cover or photo featuring a famous person is released as an NFT. They may or may not have the rights to the likeness of the individual but they probably have rights to the photo. The predominant trend in the photo space has been the issuing of digital slides. In some cases the slide is encased in a recreation of very similar artwork to that produced by the artwork produced by the famous individual.

Iconic comic art styles and derivative works

This type is very prevalent and many say isn’t an issue. Possibly not, but it is certainly worth discussing. These NFTs are where the art style of the collection is distinct to that of an understood animation series or set of characters. The characters themselves may be quite different but the art style is clearly a strong homage.

For example, if this were instead a rival animation series, there could be some issues. As such, if these licensors enter the Web3 space they may challenge existing projects where they feel there may at a minimum, ‘confusion’ with their IP. Historically legal owners are the most agitated when they wish to take advantage of a new jurisdiction, and they deem they already have competition.

Artists who work primarily in derivative works, may find the safeguards that protect their work in a physical space may not apply to mass produced digital works.

Artificial Intelligence created art using iconic art styles also applies to this category and would be largely untested as yet with it being so new.

Public Domain works

Many collections exist where the NFT issuer is relying on public domain provisions to release the art as an NFT. This may be perfectly legal however does the buyer have full knowledge of the arrangement the issuer is using to release it?

Ok, So what?

Well, this is one of those times where there is a chance that the NFT buyer doesn’t understand what they are buying, more so than normal, which is saying something. Most collections are very secretive but when you need to question the legal standing of the NFT you own, this may be an issue that is potentially unknown to the buyer.

In many respects you are buying a lesser asset than if the the understood licensor was releasing the collection.

Limitations in owning these NFTs

Limited or non existent utility

As there isn’t the traditional Licensor behind the asset there is a smaller chance that meaningful utility from that fandom will be made available. They may have a tenuous legal standing to start with without adding more utility related to this arrangement.

Potential for IP challenges.

The original legal safeguards that the minting party is relying on in the use of the IP may not translate well to a digital form, nor an owned NFT. Could this lead to a court mandated rug in some cases? Maybe.

Better collections being released by the Primary Licensor

This is a threat to any collection but more so when the collection has clear limitations as to what they can and can’t do. The licensor doesn’t have those same restrictions and can in most cases competently expand the project in many different ways if they wish.

Read the NFT fine print

Often the NFT types above have a clear disclaimer that they don’t hold the rights to the trademarks or icons they are representing in an NFT form.

This is again a situation where one must, Do your own research (DYOR).

I feel within 10 or so years, many of these NFT types will be challenged legally and the digitization of understood legal boundaries will be re-written.

By an NFT Partner Platform, I am referring to the primary mechanism in which customers interact with the Licensor’s IP in digital web3 format. Essentially the Licensor’s chosen Web3 Partner.

Post the announcements of a platforms ceasing to trade, there have been efforts to move these assets and have them live on (which is great) but largely there has been an absence of information as to how of if these assets will continue to be developed. They enter a uncertain stasis.

Issues if the Licensors do nothing or place responsibility elsewhere:

Lowered perceived value of their IP in a web3 setting.

If an asset of a widely popular IP and they have a failed implementation of any size, there could be a perception that the IP and their audience isn’t suited for web3. There have been many experimental NFT collections dropped and dependent on the level of involvement from the licensor they may be able to just put it down to a speculative project. The issue may increase if they have invested heavily or promoted a project using their own platforms, essentially exposing the web3 product to a non web3 audience.

Decreased trust in the ability of that IP to have successful implementations irrespective of who is at fault.

If the Licensor through their channels has stated some deliverable within their marketing they may be perceived to not be able to deliver. Regardless of where the actual issue lay (i.e. between the web3 partne or licensor).

As above there are many new web3 buyers that enter the web3/nft space because of the IP and nothing else. I think if there were analysis on who are buying Licensed NFTs they would be predominantly non web3 buyers. Web3 natives are more anti-establishment and would be as a whole less likely to by from a licensor particularly when some licensors will not allow for non custodial or perpetual ownership outside their web3 partner/ launch Platform.

If they do not provide for a pathway for non custodial and perpetual to the assets images, continued trading ability and the like.

Consumers will feel taken advantage of if they don’t have perpetual access to an asset they may have paid an original premium for. This access can be more limited but it must be present, some hidden fine print in terms and conditions won’t overcome public sentiment.

What Licensors could do for NFT Holders:

Provide a pathway for non custodial and perpetual ownership of these assets.

This has been done in most if not all cases so far, which is great. The asset doesn’t die it is just diminished until someone reinvigorates it. The licensor is incentivised through royalties to have these assets to continue to exist (i.e. holders being able to trade and the images being online).

Publish a statis document essentially outlining what the summation of the assets will be ongoing, such as utility, development etc.

This will allow for holders to effectively market their assets ongoing and exit if they wish. The licensor gains perpetual royalties this would aid additional revenue. This option is probably unlikely to be used as it would potentially focus discontent back on the Licensor or precipitate legal action between the Web3 Partner and the Licensor, i.e. a blame game.

Publish a Roadmap if the assets will continue to be developed upon.

If the licensor chooses a new Web3 Partner and wishes to kick off a rejuvenation of the assets (which in the authors opinion would be preferred), a roadmap could do this and provide a future revenue stream and enhanced goodwill.

Provide owners with real world value slightly exceeding the original purchase price.

This is where owners could choose to burn their owned NFTs for real world value such as digital subscriptions, or even physical goods from existing product offerings. This option essentially gives the owner the opportunity to be made whole and would work for situations where the asset is valued at the same or below the mint price. Hyper inflated NFT prices would unlikely be appropriate or used option by these owners.

Consolidate the affected NFTs into a different collection

Holders that wish to can burn their NFTs and be rewarded with a like offering on a new or existing platform.

If the Licensor sees a future in web3 for their IP either they will have existing other assets or be looking at pivoting their assets away from the current platform. A new platform (even on a different blockchain) could achieve this.

This would involve offering to swap or essentially burn and re-mint assets to a new asset.

This would also potentially onboard existing holders onto a new platform and community merge essentially. This is particularly relevant when Licensors have sharded their IP (see other article on this blog RE IP Sharding). At some point if a licensor is operating with enough web3 partners one or more will fail and it would be good to have a strategy to do right by the holders.

Drop a few bonus NFTs

One trick to raise goodwill has been to drop additional NFTs to holders. This however has to have meaning and purpose. A subsequent PFP project of a different character could work in smoothing discontent. A generic participation video is unlikely to.

Overall, licensors need to take cessation seriously as they can’t afford to burn their most loyal buyers if they see a future in web3.

The ideal is a trackable record in perpetuity. Most blockchains have an explorer where you can track back much of the required information without much technical understanding.

In essence, blockchain jumping is when an NFT (one or many) jumps from one blockchain to another.

As with all the articles on this blog this is an article of opinion. Hopefully well thought out opinion but opinion nevertheless.

With the maturation of the NFT space means the potential consolidation of Blockchains. This can then lead to a difficulty and loss of data for each NFT.

We have yet to seen entire popular NFT chains consolidate but I expect to see this in the next few years.

What we have seen so far is that projects have re-minted their NFTs on new chains with or without the consent of the owners.

Blockchain jumping is done because of the following reasons:

Choice of Blockchain or movement by the consumer

Platforms may allows the customers to choose the chain they wish to mint onto either now or in the future. That is, they provide a bridge to move their NFTs from their original minted chain to another chain.

Movement of whole collections by a project

A few major projects have re-minted their collections onto different chains with or without the consent of owners. They may claim this is to do with more efficiency such as the use of polygon and cheaper gas fees but scratch the surface and you may find the real reason is to bake in royalty fees.

Consolidation/shutdown of entire chains

In the future whole chains will most likely merge. This will probably happen in the next few years. Most likely in the layer 2 ethereum space. This will mean that all NFTs need to bridged in a planned way.

Ok, so what is the big deal in moving chains you may ask. I still have my NFT.

The potential issue with blockchain jumping is:

The potential for loss of data, dates and the order of minting

If whomever is doing the movement of the NFTs is not careful there is a good chance in the loss of data or mint order integrity. A re-mint will take planning and additional metadata to be retained.

Reliance on metadata that can be changed by the project (potentially)

If a project is not careful or just rely on the original NFT metadata detail is lost.

Harder or possibly impossible tracking of history if older chains are shutdown

The beauty of blockchain is that all the records are visible. Over time this consolidation will mess with this immutability or verification. If a blockchain is shutdown post a merge there will be no way to track whether the metadata is accurate to say, when the original mint happened. Examples have already emerged where the original date in project provided metadata has been disputed.

A worked example:

An NFT is minted on Blockchain X.

The project moves their NFTs to Blockchain Y

You are reliant on the project to:

• Minting in the same order
• Retaining pertinent information in metadata in addition to whatever the project stores, such as minting time, original owners.
• Not changing any further details in the metadata or altering smart contracts in negative ways.

Now you may be thinking that a bridge may handle all the retention of this information and that would be taken out of the hands of a project.

While this may be the case, often projects need to re-mint collectibles so you are the whim of the project and the time they wish to allocate to this level of accuracy.

In an upcoming article, minting order, token ids and editions all being accurate isn’t on the agenda of near anyone in the licensed NFT space.

So where does that leave us:

Metadata and not the blockchain record itself will become the most important factor to provide full life immutability to our NFTs.

In the long term you are at the whim of the metadata. There is little to be gained from being first in a collection if your metadata does not retain that information when moved.

Ask whomever is moving collections to make sure they mint in the same order in which they were minted originally. It may have not been considered.

Push for the retention of all the pertinent chain metadata as new fields in the new chain retaining the original mint information. Most important will be the original date and time of original mint.

With the cessation of major platforms and issues for most platforms in the licensed NFT space we have a potentially systemic problem that needs to be addressed.

“The streets of hell are paved with good intentions”

Johann Jacob Rambach circa 1700s.

What is Web 2.5 you may ask? Well in my head Web 2.5 is Web 2s attempt at Web3. Essentially a traditional business’ foray into web3. Some are quite good implementations, some not so much. Nearly all instill some level of angst into their holders, due to technology, longevity and security.

As with all articles on this blog, this is a work of opinion. Hopefully well thought out opinion but opinion nevertheless.

There are many examples of web2.5 the licensed space. A web2 company wishes to capture a web3 audience or at least experiment with web3 technologies to show that they are receptive to a changing market.

They perform an experiment large or small, in selling NFTs. They sellout their mint or they don’t. They learn lessons as to the subset of their customers willing to participate early. They grow the offering or they don’t.

In the physical world, these experiments are quite straightforward. A company can release a product, say a toy and if it sells well, great. If it doesn’t, they learned information. The issue with NFTs, is that collectors expect more. They expect utility, longevity and managed communities. If they don’t get all 3 of these aspects they are generally unhappy. They feel slighted, they feel ripped off. I don’t make the rules, this is just the web3 expectation.

The expectations of web2/2.5 participants are diverse, they expect safety, engagement, fun and to learn.

The issue

Licensed NFT Platforms are shutting down, moving their assets into stasis and generally succumbing to a bear market that some were born into.

For consumers this is an ultimate disappointment. They collected their favorite IP in a fun community and now have ownership of a jpeg in a community that they must make themselves. They were early but they trusted that the licensor would do them right. After all, why would a real world licensor, risk their reputation with their most passionate fans.

Well this is the situation in which we find ourselves. It has happened already and will most likely happen again.

Where to from here. What do all parties involved need to do to have this play out well for everyone? To be ready for a mass market, to upskill the world into web3.

We all have our role to play to right this ship.

The role of licensors

In e-commerce, a common idea is that a business should not get into what it doesn’t understand and that is no more true in web3. A licensor needs to fully understand what they are getting into and what will be fulfilled, what they expect and what their customers will expect of them.

Licensors need to work out who are they attempting to sell to. Web3 people or Web2. These are quite different customer bases with different needs. Understand what your customer expectations will be, before you begin.

Good technology is not enough. It is just one part of an ongoing, successful and happy collecting community. As I have said a few times previously, we need better communication of what the NFT is, and what it isn’t. It would be like if a games company released a console but did not provide any details as to the games that might be released. Customers in the long term would be reluctant to participate. The manufacturer may sell many initial units but if the development and management of the product is not ongoing, customers will be upset and new customers will not be forthcoming.

Have a strategy for a situation if you are let down by your platform or things go awry. How will you make this right with your consumers. After all, the consumer doesn’t care whether a platform did or didn’t deliver, they are most likely only participating because of your IP. Consider rebooting collections on a new platform or releasing more rights for these static NFTs.

The role of platforms

Understand your role as a steward for web3. We get one shot at a good first impression. Both to your real customer (the licensor) and their customer (the consumer). Platforms must deliver in ways that under promise and over deliver. This is the only way to ever win over the masses, both licensors and consumers. There are many detractors of web3, don’t give them more ammunition. Communicate better. Generally customers will understand. If they don’t, the market conditions might change. If a market changes you are still earning royalties.

In essence, set clear expectations and deliver on them for the long term. All parties are relying on you to make this work and thrive.

The role of consumers

This is the toughest one to discuss. At present, consumers of web2.5 or web3 ip, need to be gamblers, they are taking risks of trust with every new purchase. It is somehow, like the perils of web3 are being taken by web2.5 as acceptable rules of engagement. Which in my opinion is wrong. They need to protect their customers more, as the licensor has more to lose, i.e. real world credibility.

Consumers essentially should not participate in anything they aren’t willing to lose. We are early, we are the financial fodder, we are the focus group. Collect what you like, monitor your holdings, don’t see licensed NFTs as investment vehicles because they aren’t (not financial advice, I’m just some internet typist).

Consumers also need to act with their dollar. They should refuse to participate in vagueness. This has been an allure up until now, but it is time to expect more.

Mass Adoption

Unfortunately at the present time, I am glad the masses aren’t here as it would be more of an issue for more people having their first or second disappointment in web3. We need to mature, be more robust understand what an NFT actually is and set deliverable longterm expectations.

While ever disappointment is a right of passage for a participant in web3, mass adoption should not take place.