NFTs are dead. Long live NFTs! The last few weeks have brought an enormous amount of drama and gray hair to the space. It’s time to put the degening on pause and go back to the fundamentals.
What are we doing here with these jpegs? Is it art? Is it an access token? Where does the value come from?
All art is about storytelling. This is how humans are wired. Whether you listen to a writer, composer, architect, or chef, they will all talk about moving their audience through a story with a beginning, middle, and end. NFTs are just a new way of telling stories —with tokens. We are witnessing the birth of a new artform – tokenized storytelling.
I got introduced to NFTs in early 2021. As a filmmaker, fairly disillusioned with the entertainment industry, and previously a lawyer disillusioned with the power of law, I couldn’t help but get excited. Both storytelling and self-governance are set to get supercharged by blockchain. In fact, they are going to supercharge each other through blockchain.
A few disclaimers.
First, I will not talk about the speculative aspects (sorry, degens, but it’s for your own good considering current market conditions), even though it is an essential component of the NFT space. Let’s try and focus on storytelling technology innovation.
Second, this breakdown is a bit Bored Ape Yacht Club heavy. This is because since I belong to the club, I follow the news within the ecosystem closer than some other projects, and also because Yuga Labs has to a large extent, been a pioneer in the space, and we get to watch them build what I believe is one of the early massive tokies.
Finally, here comes the traditional reminder that nothing in this article should be considered financial advice, and I do hold some of the tokens mentioned here. Anyway, proceed mindfully.
What’s A Tokie?
Before we dive into what tokenized storytelling is all about, let’s be real.
No one is happy with the term “NFT.” As misleading as they may be, the accusations of environmental harm and fraud have done the job — as a brand, NFTs may be beyond repair for the mainstream. Not only that, the term is too technical and general. There are art, real estate, and domain name NFTs. Books, billboards, and money bills are all printed, but we don’t just call them all “prints.” In the same way, we need different terms to identify the various use cases of NFTs.
We refer to “film”, the king of mediums of the XX century, as “movies”. A term derived from the more formal motion picture. Movies are pictures that magically move on the screen. The “t” in NFT stands for “token.” The token is the core innovation that moves the story for tokenized stories. So, why don’t we call tokenized stories “tokies” then?
Not all art NFT projects are tokies, and they don’t have to be, but tokenized stories are some of the most powerful expressions of the NFT technology applied to art.
Let’s get to it.
It’s no secret that we humans achieve most when we collaborate.
The 20th century was the era of centralized mass collaboration. In storytelling, the movies became the reflection of this era. The Internet has brought the world into a new dimension, globalized and decentralized. Mass storytelling became decentralized, too. When hashtag challenges and memes first came into full force, people dismissed them as “kids playing on the Internet.” That is until the major social movements of a generation like #metoo and #BlackLivesMatter, took the world by storm. Imagine the power that can be galvanized by attaching a liquidity component to such a narrative through a token.
Tokenized storytelling is quickly shaping into an art form that is developing its own language, genres, and canons. It’s growing out of the things that we are familiar with, but it is taking them to a different dimension. It’s as if the concepts of a Hollywood blockbuster, social media virality, and the stock market had a baby. That just sounded horrifying, but here we are — the Age Of Tokies.
Lack of Interactivity
In 1996, Bill Gates published his famous “Content Is King” essay. He pointed to the lack of interactivity of the early online media. “…There isn’t enough depth or interactivity in print content to overcome the drawbacks of the online medium. …They (readers) need an opportunity for personal involvement that goes far beyond that offered through the letters-to-the-editor pages of print magazines.” Since then, we have seen how the demand for personal involvement and interactivity has completely revolutionized the media. All media is social media. Now, tokens offer a new level of involvement.
Tokenized storytelling is the artistic reflection and the cultural engine of the transition to a decentralized world. The author is the community. The authorship is permissionless. And the tokens are the paintbrushes of this Web3 Renaissance (or maybe the canvases, depending on how you look at it).
Ever since the invention of the printing press and copyright, the business of storytelling has relied on limiting access to the intellectual property (IP). But the Internet is making control impossible and copyright obsolete. The whole system is ripe for an overhaul. Tokenization provides a path for the creator (owner) to give up control of the IP to a community of patrons and ultimately give it up altogether while continuing to be rewarded.
It can be hard to imagine how NFTs create real value aside from speculation or believe it’s possible, because these stories haven’t fully played out yet. Truth be told, there still are some technical limitations, but the exciting opportunity here is that we get to come up with all the ways tokies will work and see them grow into the new Star Wars and Game Of Thrones.
Tokenized storytelling is the creation of decentralized content franchises owned by creators and patrons and orchestrated with tokens. (h/t @PackyM).
I’m paraphrasing here the definition of Web3 by Packy McCormick. I will get into the details of this definition at a different time. For now, let me point out the three pillars: decentralization, community (creators and patrons), and tokens — that are essential to how tokies work and how they empower the creators (i.e., make money).
When you think of NFTs, you most likely first think of avatar projects, the so-called PFPs (profile pictures). The 2021 NFT boom was kicked off by the rallies of collectibles (e.g. NBA TopShot), games (e.g. Axie Infinity), and digital art (generative art in particular, e.g. ArtBlocks), but NFT adoption took a whole different pace in the summer when the avatar collections blew up all the charts. I believe that this is a signal of the power that tokenized storytelling holds.
One of the reasons avatars became so popular is that they have a very simple utility. You can use them as a profile picture. Avatars are characters that we associate ourselves with. The key here is the aesthetic because the first utility is about social signaling, expressing status and taste. CryptoPunks’ aesthetic (partially due to the technological limitation of the on-chain image) makes sense for the OGs in the crypto space. It has meaning. It signals “I was here early” (so early, we could only fit a few pixels on-chain).
Trippy Apes, cute Doodles, strong women WoWs – have certain vibes around these communities, and holders find a sense of belonging with these avatar tribes. The feeling that so many people miss in the modern world. This is the second utility. Holders become personally involved in the community and also get emotionally attached to their profile pictures.
It is hard to explain or even believe until you jump in and try it, but this sense of belonging is powerful. It would have been cultish, except there is no leader, and no unified ideology, just a bunch of anons vibing. In October 2021, Richerd Chan, the founder of Manifold.xyz, turned down a whopping $9.5 million offer for his CryptoPunk avatar because of how connected it is to his personal brand and identity.
Suddenly, you are a Punk, or an Ape, or a Doodle. By default you are the protagonist even though you don’t know what the story is. Some holders (traders mostly) manage to stay emotionally detached, still they do become invested in the story of their tribe. It is this new kind of ownership that feels more like belonging.
Lifecycle of a Tokie
There will be various models of tokenized stories. But what unites all of them is that these new stories behave less like static creations and more like living systems. Ali Yahaya proposed the Network Flywheel model for blockchain protocols. I will go through the lifecycle of a tokenized story using his model.
Applying Ali’s formula for the protocol to a tokie, a well-designed tokenized story has a built-in incentive structure that creates a multi-sided market with strong network effects. Its defensibility doesn’t come just from the story itself; it comes from the network that the story creates.
Phase One: Initial IP
“In the beginning was the Word.” Phase one of a tokenized story creation: the founding team produces the initial IP, the kernel of a story, a world. The team then starts building the core community around it. A community for a tokie is not just an audience, not a fanbase, but a party to creation, and so, community building should be a casting task, a selection.
But in these early days of the tokies, we’ve been seeing less of a selection and more of a hype build-up. And while there is absolutely nothing wrong with flipping jpegs and aiming for gains, this motivation doesn’t make for a solid creative community. As the space matures, projects will have to come up with ways to balance the two.
While Discord grinding, Twitter “tag three friends” giveaways, and paid influencer pumps are still quite prominent in the space, there are projects that employ more sustainable and creative community-building tactics.
Jenkins The Valet is one of the earliest derivative projects of BAYC. It’s also one of the most successful and most true to its decentralized promise. The project was started by two friends who are known to the community as Jenkins and Safa, who had a vision that a new generation of household name characters can grow out of blockchain. They set out to build an “NFT avatar into a character.”. They bought the Bored Ape #1798 in May of 2021 and started creating a story around him. From the get-go, the idea was to build a decentralized creative writing process. According to Jenkins, they “are building an infrastructure, brand, and character where our community are also creators and participators in a content company.”
Jenkins introduced himself as the valet at the BAYC, who’s been around the club for a while and is known to be a confidant to many. He then invited the community to submit the stories of their apes, who have run into him at the club — and people did. Over the summer of 2021, Jenkins continued building out the lore of his world as well as a vibrant community of writers around it. It’s curious that the version of the bored ape yacht club that Jenkins lives in is very different from the one that is being built out by Yuga Labs. Yuga’s apes live in the swamps with no actual yachts to be seen, only gators. Jenkins’ yachts are fancy. Even aesthetically, the imagery is very different. Yet, the two parallel worlds seem to coexist peacefully.
Three months after the birth of Jenkins’ Twitter persona, in August 2021, Jenkins The Valet launched its genesis NFT drop — The Writer’s Room. The collection raised 481 ETH for the team from the initial sale alone. The floor price has since then gone up 20x. The project unites 3000 NFT holders. It is represented by the CAA, and the first book is being written by ten-time New York Times best-selling author Neil Strauss in collaboration with the community. And just a year after the launch of the project, in May 2022, Tally Labs, the company behind Jenkins The Valet, raised $12 million from some major web3 and entertainment investors in a round led by Chris Dixon of A16Z.
There is no one right way of building a community for a tokie. More than that — the trends and tools change rapidly in web3, but the key remains — you want a community that came to build with you, not just flip your token.
Phase Two: The Drop
This brings us to phase two —“The Drop.” The team produces the genesis token collection. This is the birth of a tokie — the story becomes tokenized.
There are two important things that happen in phase two of a tokie creation. The core team gets the funding necessary to develop the IP and move along the roadmap of the project towards the announced goal — the genesis project (game, animated series, movie, fashion brand, book, etc.), and in return, it gives up part of the control of the IP to the community by giving some rights.
There are various approaches with regard to the scope of IP rights that are granted to token holders depending on the philosophies of the teams and the goals of the projects. All the way on the radical innovation side are the projects that put the IP in the public domain (CC0). Not only do the creators not reserve any rights to themselves, but the token holders, too, by definition, hold no rights to the IP. Anyone can use this art — like Shakespeare or Mona Lisa. The value of the token can be derived from the access that it gives, other utility (financial, code-related, or other), and of course, the value of the clout that accompanies the ownership.
There are a few projects in the space that are experimenting with CC0. Most notable is probably the Loot ecosystem, which has birthed a whole family of projects since the mysterious and sudden drop in September 2021. There are also Nouns, Cryptoadz, MFers, and many others. The CC0 model resonates with crypto values. It’s open-source for IP. I have a soft spot for this model as it’s the most innovative. It’s cool. It also makes the most sense in the Internet future that I hope for.
The genesis Loot NFT looked nothing like most projects — there were no quirky animals or fancy 3D art, just a list of words, white text on a black background. I’m sure that this look was very much intentional and part of the project aesthetic that communicated to its potential holders what it needed to. The builders saw building blocks, and they rushed to build. There are now Realms, multiple projects that visualize loot and characters, and other projects that grow the world and lore.
Probably the most ambitious project that started as a Loot derivative is Treasure DAO, which has now turned into its own ecosystem with multiple games and tokens. Treasure DAO has a unique take on web3 building. According to John Patten, “Metaverse is an economic layer more so than a visual one.” Unlike other projects that are building from visuals and stories to monetization, Treasure DAO is building from economic mechanics to narratives.
While CC0 enthusiasts are building the fort on the digital frontier, most of us haven’t arrived there quite yet. The majority of projects create some kind of a system that marries the decentralized community and copyrighted IP. For example, the Bored Ape Yacht Club (BAYC) grants its holders full rights, including commercial use. Doodles and CloneX give limited licenses to the holders (commercial use with a cap on the volume). On the complete opposite side of the spectrum used to be the CryptoPunks pre-Yuga acquisition that gave none of the commercial rights to the holders, which somewhat contradicted the freedom-loving ethos of crypto and punk. Not everybody is happy with the intention of Yuga Labs to grant the commercial rights to the holders of CryptoPunks and Meebits, but many were unhappy with how LarvaLabs was managing the IP too. It is an evolving experiment, and it’s fascinating to observe and participate in.
By purchasing the token, community members get the opportunity to become team members. They become co-authors of the tokenized story. Promoting the IP and growing brand awareness through user-generated content is the community’s primary job. Phase three is when the project’s culture is shaped.
Being a holder-author of a tokenized story means creating the lore, memes, rituals, and derivative projects. This is when the quality of the community becomes truly crucial. The forms and complexity of these cultures evolve.
In May 2021, BAYC holders connected over crashing Clubhouse rooms with monkey sounds and writing on the digital bathroom wall one pixel at a time, it was the lighthearted prank vibe that people connected over early on. Other communities came up with their own tribal calls, games, book clubs, trivia nights, and meditation circles. It might seem insignificant and even silly but that’s how people connect and find like-minded people. We play, we party, we share some alpha, we trade stories of our lost ETH gas wars and rug pulls, and then we go and create a derivative drop or an NFT-branded business, – and this is how the ecosystem grows. People play together and build together.
Naturally, not everybody wants to be an active contributor. Still, even the simple act of sharing one’s jpeg on social media or using it as an avatar is growing awareness around the brand. Projects find ways to encourage and incentivize the most active community members. Many projects have done second, and even third NFT drops expanding their communities. Many have issued fungible tokens for their ecosystems, $MILK (CyberKongs), $PAPER (Acrocalypse), $MAGIC (TreasureDAO) and most recently, $APE by Yuga Labs. We’ll see a lot of creative tokenomic solutions involving additional fungible and non-fungible tokens that projects deploy to incentivize the community’s output and create markets around the IPs.
The next logical step that many projects take is creating DAOs or DAO-like structures and engaging their communities in making decisions regarding initiatives that can generate additional value for the community.
Most of the time, the DAOs are limited to the circle of the project’s NFT holders. Yuga Labs took a somewhat controversial step of opening access to the ApeDAO to anyone who holds the $APE token. This invites a much broader community to create and campaign for proposals, participate in governing the treasury and shape the BAYC as a brand and a business.
At the same time, Yuga Labs maintains control over the IP of the collection as a whole. They produce events, create partnerships, develop merch, and most importantly, according to the leaked pitch deck, they are building a metaverse independently from the community or parallel to it. The idea is that Yuga Labs and ApeDAO will cooperate and support each other.
Phase Four: Genesis Project
In phase four of the tokenized story cycle, the core team delivers the genesis project. Community brings brand awareness and clout that provides a launching pad for the project, and naturally, token holders get priority access. The genesis token might also have utility within the genesis project – it could be an avatar or an object in the game or an access pass for a conference (VeeFriends) or the ApeFest (BAYC), which makes the genesis token even more valuable.
And at the same time, other projects, businesses, products, and derivative IPs mushroom within the franchise – from coffee shops, breweries, and fashion collections, to toys, podcasts, and books. (I can’t wait for the BAYC broadway musical or theme park and a CryptoCoven line of jewelry. But those only exist in my imagination thus far.) These businesses enjoy the network effects of the community as the token holders happily become the early adopters. First, the “tribal discipline” calls to support your own. It also makes sense financially – if the businesses based on your tokie thrive, your token grows in value.
Another project out of the BAYC system that has gained a lot of attention are The Boring Ape Chronicles by TimpersHD that started in July 2021 as a pixelart storytelling project that featured some of the prominent BAYC members in a sci-fi/fantasy story of a journey of the apes. Now, the project is about to mint its second collection, Chimpers NFT.
Chimpers are not a derivative of the BAYC but it has grown out of the ecosystem and capitalized on the community and fandom of the BAYC to jumpstart the project and is now contributing to the expansion of the brand to a broader audience. Again, notice how The Boring Ape Chronicles world differs from the original BAYC world both artistically and in terms of a story. It’s pixel art and the swamp isn’t mentioned once in the Chronicles. Yet, it’s a garnered respect and appreciation of the community as an expansion of the ecosystem.
CC0 can be confusing because it goes against the standard practice of limiting access to the IP. “How do you make money if anyone can use it?” – but it works similarly, except it relies on the network effects and the brand even more.
Bud Light is the first major brand that is venturing into the exciting world of CC0 branding with Nouns NFT. The Nouns glasses were featured in the SuperBowl ad earlier this year, and now they are on the Bud Light beer can.
The main challenge of the CC0 business model is that developing fandom and brand recognizability is an expensive and time-consuming endeavor, and it didn’t make much sense in the pre-web3 world. Few artists would intentionally put their creations in public domain and so such free use mostly applied to the works that were created a long time ago and have run out of monetization steam. And so, the CC0 business model lacks case studies of major success. Except there is a CC0 IP that has a very strong global following and has been thoroughly monetized.
One may say, The IP. The Bible. It’s a tricky one. Bear with me.
It doesn’t matter if you personally believe that the Bible was given to people by God or it was written by people. “Religion annually contributes about $1.2 trillion dollars of socio-economic value to the United States economy, according to a 2016 study by the Religious Freedom & Business Foundation. That is equivalent to being the world’s 15th-largest national economy, outpacing nearly 180 other countries and territories.”
Jesus is not only the king of kings. He’s also the king of CC0 business.
The Christian film industry is its own multi-million dollar enterprise. The Passion of The Christ alone grossed $622 million globally in 2004. Churches, merchandise, events, art, books, music, YouTube channels, radio stations, billions of followers all over the world — and the main underlying IP is in the public domain.
I hope you don’t think I’m being facetious. I’m not religious, and so I view religion as a social construct. Looking at the history of religion, we can see what happens to a CC0 IP when it gets forked. In fact, Christianity itself is a “fork” of Judaism, and so is Islam. There was no copyright at the time and so the thinkers iterated the ideas and storytellers iterated the narratives freely. Consequently, each of the branches got forked again and again shaping a whole tree of Judeo-Christian and Muslim religious cousin-IPs and communities. Clearly, the IP didn’t suffer from being forked, in fact, every time, it got more adoption, more recognizability, and thus more power. And the “competition” between the factions only led to deeper indoctrination of the members of each group.
Of course, most IPs will not (and frankly should not) reach the level of impact of the religious texts. But the level of fandom that Tolkien fans or ComicCon crowds exhibit can only be compared to religious dedication. Now, translate that energy into tokens.
Well, I hope you’re still here because we’re almost there.
Phase Five: The Network Flywheel
The “Network Flywheel” brings us back to phase five/one. The core team that keeps generating profits from the secondary sales, as well as the launched genesis project, maintains and grows the franchise, not entirely unlike a successful media franchise would by creating sequels, prequels, spin-offs, and derivative projects – with one main difference. The community now gets to be part of the process.
We haven’t seen a tokenized story project complete the circle yet. Of the most visible projects, BAYC has probably moved furthest along the flywheel path. They’ve delivered the star-studded Ape fest, the Apes vs. Mutants game, the $APE coin, and the DAO infrastructure, and all of that within a year.
The Otherdeeds drop was bumpy, to say the least, and caused a good deal of controversy. Yuga Labs’ silence in the days since has been uncomfortable. From the point of view of building the tokenized story – such a lag in communication can do damage. The story needs to keep flowing because the token holders are eager to participate.
Now, instead of participating in a positive way, the entire space is watching, waiting, whispering about the dangers of centralization, and even blaming the end of the bull run on the BAYC.
Yuga Labs are building ambitiously, but big projects take time and the NFT market is very impatient. The metaverse is likely at least a few years away. And as we’re entering rocky bearish days, a lot remains to be seen. I dare to say, that the stronger the story, the more token holders focus on it, the less they think about the price action, and the stronger are their hands holding the tokens.
There are so many other projects racing along, from Obits to Akutars, from the Society of the Hourglass to Cool Cats and Gutter Gang, and many-many more. We will have to be patient and observe how the tokenized stories grow over a significant period of time. Being a filmmaker is actually helping me personally because I know how long it takes to make a movie, a TV show, or a game. The pace of web3 and the pace of the creative process don’t match and this will be one of the big challenges for projects to navigate, as they will be steering the narrative.
Over a long period of time though, tokies have a massive competitive advantage. Franchises constantly need fresh creative blood, and it is not easy to keep them alive. It is also vital for them to maintain cohesion. That requires both careful strategic planning and orchestration as well as extreme flexibility in adapting to new mediums, technology, and aesthetics.
‘The Mandalorian’ is a sprout of a 50-year-old franchise, but it looks neither dated nor off-brand. That is an extraordinary achievement, yet Star Wars is a closed garden. There is, of course, fan art, but only imagine how fascinating, deep, and diverse these worlds could be if the community had the freedom to produce commercial work. That day will arrive. Star Wars will become public domain, and a thousand flowers shall bloom on this soil so diligently nourished by the generations of creators and fans. Maybe it even becomes a tokie, but new worlds will take over by then.
There are, of course, a lot of challenges that have to do with the state of the space in general – such as the dominance of the speculative buyers who don’t necessarily look to build with the project. There are challenges in navigating and managing the copyright in a decentralized project, brand management, and protecting the IP from being diluted. There is a lack of regulatory clarity when it comes to digital assets and the looming shadow of the SEC. But despite those challenges and, in a way, due to them, every project tries to push further, and aim higher.
New technical tools and economic mechanics are being developed and tested every week, mistakes are being made public, and the entire space learns and iterates based on them. The hive mind is buzzing. Every project tries to out-innovate the last. And while the term “tokie” may or may not catch on, tokenized storytelling is here to stay. The Disney of the XXI century will be born on a blockchain.
Watch out, Mickey, we are early, and we are moving fast.