🐱🚀👨👩👧👦NFTs Will Introduce Crypto To The Mainstream
When I speak with my mother about Bitcoin I can physically see her brain switch off. Her eyes glaze over with a 1,000-yard stare as soon as I start chatting away about the wonders of a hard-capped supply of digital assets governed by no central authority. And yes, maybe it’s because I’m terrible at presenting these ideas to her in a compelling manner, but I think it’s likely because I am speaking to her about money.
Money is not exactly an exciting topic. Most people do not understand the intricacies and history of money, and why should they? Growing up we are not taught about how our financial system works. We aren't even taught how to file our taxes! So, I don't blame her or anyone else that does not “get” Bitcoin or other cryptocurrencies. The truth is crypto is rather difficult to understand without dedicating the time to do quite a bit of research. It is for this general reason (the obscure nature of money) that I believe it’s so hard for the wider populace to take crypto seriously and see it as a true contender to our current financial system. I believe the best way for crypto to become widely adopted in both a monetary and infrastructure sense is through nonfungible tokens (NFTs).
Understanding Video Games > Understanding Money
Video games are now mainstream, despite years of people blaming them for increased violence, lower test scores, and even ADHD. There are roughly 2.6 billion gamers worldwide playing games on computers, consoles, and smartphones, and the number is steadily growing.
Gamers are not only the cliche image of young boys with headsets screaming at their computers, but they also include soccer moms playing games on their smartphone. Gaming has expanded from a relative niche to the mainstream, and there are now hundreds of thousands of games that appeal to different types of players. A young boy might be interested in playing a first-person shooter game while a soccer mom enjoys a puzzle game, like Candy Crush. But all types of video games rely on a similar core idea: the concept of working towards obtaining something, whether it's a new camouflage pattern for a gun or a rare puzzle power-up.
It would be easy to explain the power of NFTs to both children and moms alike by explaining that they can truly own their game assets and even earn money selling them. They might understand that today the items they acquire while gaming is not really theirs and are actually “owned” by the game developers. They generally have no ability to sell their items, even though they likely spent real money buying them. Allowing strong property rights and integrating open commerce into games levels the playing field between the user and game developer. For these reasons, the appeal of NFTs is instant to many demographics and is a much easier concept to understand compared to financial philosophies.
Exposing People To Crypto When Buying NFTs
(Note that when I use “crypto” I’m referring to cryptocurrencies in general.)
Cryptocurrencies like Bitcoin and Ethereum can be described as “in-game” currency for NFT games. People all around the world have spent “real” money (their local fiat currency) on in-game items. For example, users can purchase 100 game “digital coins” with $5 USD. Those digital coins are then used to purchase assets within the game, like a new camouflage pattern for a gun. The digital coins have zero value outside of the game ecosystem, they can not be converted back into fiat currency, and their supply is completely controlled by the game developers. Obviously, these characteristics can cause a number of issues.
In the NFT ecosystem, all NFTs are purchased with cryptocurrencies. Cryptocurrencies, like Bitcoin and Ethereum, are redeemable for fiat in numerous countries and have no centralized entity that controls them. This is a massive benefit to video gamers because now they can enter and exit various game “financial systems” freely. Because mainstream people can easily understand cryptocurrencies as “in-game” money, they’ll likely first get introduced to buying cryptocurrencies through purchasing video game assets. This process will expose more people to cryptocurrencies and inevitably lead some to view them as valuable assets instead of just video game money.
Converting The “Mainstream” Users
I used to be incredibly bullish that decentralized finance (DeFi) will be the use case that converts the masses to crypto, but I have become less bullish as 2020 progresses. Although there is still definitely risk involved with DeFi protocols, they generally work well. My issue is that as we enter a possible recession or depression in the traditional financial system, it is becoming increasingly apparent that many people are not financially literate. This is not the fault of people, but mainly the result of our education system not teaching us about the financial system properly. So, while I find DeFi’s pitch to invest digital dollars and earn 6% APR very appealing, it probably does not resonate with the majority of people. On the other hand, the appeal to play a new video game and use crypto to buy NFTs is much more attractive to the masses. Video games are obviously more fun and intuitive than our financial system.
Better User-Experience Through Games
Perhaps the most important development that is taking place within the NFT ecosystem that will help enable mainstream crypto adoption is the focus on creating better user-experiences. A striking 95.5% of mobile gamers stop playing games within 28 days after the initial download. Game developers have to work exceedingly hard to create a compelling experience for their users or the users will simply leave and play another game. NFT games are currently struggling with two facets of user-experience: user onboarding and game infrastructure.
Onboarding
The NFT onboarding process is incredibly painful. For example, below is the tedious step-by-step process to buy an NFT.
User wants to play an NFT game.
User makes a username and password for the game.
User has to download a web3 wallet, like Metamask.
User has to keep the MetaMask seed phrase somewhere incredibly safe and never lose it, or else they could lose all their assets.
User has to put ETH into their wallet so they can make transactions.
User signs up to a crypto exchange, like Coinbase. This process can take a few days to a few weeks.
User buys ETH on an exchange.
User transfers ETH to their MetaMask.
User buys a digital item with their ETH.
Now, let's examine how users can easily buy digital assets in non-NFT games.
User wants to buy a digital item from a game.
User makes a username and password for the game.
User inputs credit card information.
User buys a digital item with their credit card.
As we can clearly see, the steps that NFT buyers must go through is burdensome. Of course, the major downside to buying non-NFT items is that the user does not own the item and will probably lose their investment. At least once an NFT buyer jumps through all of the necessary hoops they will actually own their item and may break even or make money on their purchase.
Infrastructure
Infrastructure is another major user-experience issue for NFT games. When the NFT game CryptoKitties became popular in late 2017, it brought the entire Ethereum blockchain to a halt. Due to an overload of activity on the network, users could not play CryptoKitties or even use the underlying blockchain for a period of time. This is akin to an entire internet server infrastructure having major issues. Regular games can shut down because their servers become overloaded, but getting back on track is as simple as spinning up more servers from Amazon. That type of scalable infrastructure has not yet been created for NFT games. That's why most NFT games today are hosted on regular servers and the asset ownership is on a blockchain. This hybrid on-chain off-chain setup allows these games to function effectively without shutting down Ethereum. But even if there was a massively viral NFT game that used this hybrid structure, it's still possible Ethereum could shut down if millions of people started trading NFTs at the same time. We have quite a ways to go before the NFT gaming user-experience is on par with the regular gaming experience people enjoy today.
NFT Developers Will Create The Best Crypto User-Experience
Crypto developers have to compete with banks, Venmo, and other fintech-focused applications for the best user experience. While there are numerous fintech apps out there, the bar is set comparatively low by having to compete with a handful of banks. On the other hand, NFT developers must compete with the user-experience of gaming companies which there are thousands of. Also, the user-experience for gaming is generally significantly better than the user-experience for banking. This higher level of competition is why NFT developers will be forced to create the easiest, most seamless experience to bring people into the NFT ecosystem. If they do not accomplish this, then their game will go nowhere. Once the tech is built for an amazing NFT user-experience then it can easily be ported to the crypto ecosystem to help bring on more users.
Looking Forward
NFTs will introduce crypto to the mainstream because gaming is more enjoyable and easier to understand than money. Through gaming, people will be exposed to cryptocurrencies and gamers will likely become crypto users. Despite all of today's clear issues with user-experience, I am confident that there is enough interest and monetary incentive for NFT game developers to solve these issues and thus draw users toward the wider crypto community.
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Great job, Andrew. Relating crypto to in-game money is very effective. The huge amount of friction in the onboarding process is a killer. I managed to get through it, somehow, but if I had had to jump through even one more hoop, I'd have given up. And I'm a pretty persistent guy. 99% of the people who collect my physical paintings--some of whom might well love to collect my #cryptoart too--will never survive the current onboarding process. This is not good for me, or for them, or for the world of NFTs and #cryptoart.
Since about 2000, brick-and-mortar galleries have been closing right and left. And those that survived are now closed until further notice because of the pandemic. Many of them will never recover, and we'll likely see the original art market taken over by the equivalent of big box stores. The #cryptoart world is largely immune from the pressures that have closed so many galleries, and I'd be devoting all my creative time and energy there if it didn't mean having to abandon the thousands of my collectors I have cultivated over a many decades-long career. Many of these collectors still want my paintings but are reluctant to buy online: they want to experience the reality and physical impact of the original work. I think it is increasingly obvious that attempts to market physical artwork by providing "See how it might look in your own home" gimmicks and in "virtual galleries" will fail until the bulk of buyers they see have grown up with VR in their blood. But I'll be dead by then, so it is of little consequence to me.