The Future of Commerce: Blending Physical & Digital Experiences
It's no longer about the physical world versus the digital world, it's about how we can artfully combine the two.
The rise in digital NBA collectibles and a JPG artwork file that sold for a whopping $69 million—while most alternative assets haven’t cracked mainstream consciousness quite yet, these are just two indicators that we’re on the cusp of something big.
For a long time, it was easy to classify these digital or “alternative assets” as something specialty consumers bought with cryptocurrency. Now, the advent of non-fungible tokens (NFTs), social tokens, and the like have unlocked a new world of limited edition, digital products and experiences. Suddenly, there’s a growing interest in products that don't physically exist.
How did this happen and, more importantly, why should an entrepreneur or creator care?
In a nutshell, it's because the future of commerce, community, entrepreneurship, and technology are intertwined. To stay competitive and build the best possible business, it's important to understand these trends and how you can use them to your advantage.
That’s why we've previously written about:
Consider this article an informal primer on another element of that puzzle: ownership.
The new web: under construction
Web 2.0 was a term first coined by Tim O'Reilly to represent the shift towards mobile, social, and cloud technologies.
But Tim Berners-Lee, creator of the World Wide Web, maintained a bigger vision for the platform. Part of his vision may be possible in the next evolution of the internet, Web 3.0 (also known as the semantic web).
There are several transformations that need to take place in order to achieve this evolution to Web 3.0. Some of them are in their early days: technologies that enable decentralized protocols and new verification mechanisms, alongside interesting new tools like cryptocurrencies, blockchain, and more.
Once here, Web 3.0 will enable us to create some pretty incredible, and perhaps still unimaginable, outcomes. In the short term, it's already empowering a shift towards more entrepreneurs, creators, and aspirational brands.
Another way to phrase the evolution of the web:
A snapshot of the current landscape
Investors are driven by a number of motivators, and “financial return” is the most common one that comes to mind.
However, technology is rapidly evolving, and this is democratizing access to the tools and skills needed to create (sometimes even replacing them altogether). More and more people can now invest in a business or product with just a few taps, for reasons like status, identity, entertainment, passion, and more (here’s an excellent post that dives deeper into this topic).
These new ways to invest are known as "alternative assets." Let's quickly break down some of the biggest categories of these assets, as well as the tools powering them:
These capabilities have only recently been unlocked thanks to some of the technologies that are ushering in Web 3.0.
The Ownership Economy
The previous section hints at what's been possible thanks to very early Web 3.0 technologies.
It all makes sense, right?
But what about that digital artwork that sold for $69 million? Digital art has been sold before, so why was this piece special? What's next?
Simply put, it's all connected to ownership.
Web 3.0 allows for shared ownership and direct monetization models for creators and their audiences (compared to Web 2.0 platforms that took a cut and served as middlemen—a topic explored int his excellent post).
Non-fungible tokens versus social tokens:
Digital assets and collectibles sold on marketplaces like OpenSea, Nifty Gateway, Rarible, SuperRare, Foundation, RTFKT and TopShot are based on blockchain technology called non-fungible tokens (NFTs).
Here's a quick explanation of NFTs from Peter Yang's guide:
"An NFT (non-fungible token) is a record of ownership of a unique digital asset. Like a record stating that you own a painting or a puppy, each NFT is ‘non-fungible’ (unique)in that you cannot easily swap one for another or divide it into fractional pieces."
In addition to the exciting adoption of NFTs, there is another technology that could prove pretty popular in the months ahead: social tokens (also known as social currencies).
Again, from Peter's guide:
"Social tokens are fungible (mutually interchangeable). Like the US dollar and bitcoin, social tokens can be swapped with each other and divided into fractional shares."
Essentially, social tokens have been created to represent community ownership. Those who hold the tokens benefit, be it financially, socially (by being able to dole out special access to other members, and more.
$WHALE is one example of a social token. It is both a token and investment collective for those who can’t afford to buy any one NFT item individually (these group are actually called DAOs, but that's a story for another time).
By buying a fraction of a $Whale social token, a buyer gets:
The bottom line is that for creators and their fans, the benefit of NFTs and social tokens is that they enable new forms of direct monetization and ownership that other, more traditional methods don't offer.
The rise of the speculative collectors?
A recent post highlighted Li Jin's update to her 100 True Fans model. It talked about the introduction of Cult Fans, as well as Speculators/Investors.
In this ownership-driven model of the Creator Economy, it is not yet possible to differentiate between the true fans and collectors who want to see creators succeed and the investors and speculators who are motivated by other objectives.
While there is lots of potential for things to go badly in these new Creator Economy business models, there is also huge upside potential.
"The move to independent, direct fan/audience relationship is naturally going to evolve to one that is more financial in nature, where you're not just backing a creator just simply to get access, but also for potential upside. And that may sound initially a little bit off, because profit maximization is not the sole reason you want to support a creator... But I think what will come to be understood about this model is that when you do have exposure to the upside, it can be a very powerful catalyst for new kinds of engagement. Where your fans are not just passive consumers or a passive audience, but actively involved int he creation process in some way. And for some creators, that may be unwelcome.But for those who lean into it, it's a pretty powerful new tool for building community, building audience, and ultimately monetizing. A simpler way of saying it: it's sort of the new fan club, where instead of just being a member, you're exposed to the upside as well."
We've only just begun to blur these lines and lay the foundational tools that creators and entrepreneurs will need to grow and maintain these new fan clubs.
NFTs and social tokens enable so many more individuals beyond *just* the creator to benefit financially from the established community. As an outcome, these investors/members could be further incentivized to not only recruit others into the community, but to build their own businesses, too.
But there's a huge gap when it comes to the actual tools that these individuals (creator/entrepreneur <-> fan<-> other fans) will need to facilitate and shape that co-creation—whether for digital or physical products and experiences.
It’s an exciting new world, and Creative Layer is building for it.