NFT is a buzzy world and pretty new technology that people are trying to apply EVERYWHERE. The most common application of NFTs — is scum. 99% of NFT projects have nothing except big world, good marketing and a community of people interested in project success. This tendency made people think that all NFTs are scum, but it is a wrong assumption. NFT can’t be a scam, cause it is just a technology. What really matters is how we use it. So in this article, I will try to show you a NOT SCAM usage of NFT that perhaps will change your mind.
Imagine you are a startup founder. You just finished college and you have genius ideas about transforming the dating industry. You wanna create an app that will be matching people based on NFTs they are holding in wallets. Your friend developer estimated the development cost as $50 000. Unaffordable amount of money for college graduates with education debt. However, will it stop you? NOPE. You spend a couple of months analysing competitors, interviewing people, building prototypes, designing pitch decks and finally, you found an investor who can sponsor your product.
He proposes you a $100 000 investment for 20% of a company. Lucky you, think everyone around, but is it so? From now on venture capitalists own 20% of your company and from now on they will have a vote for your company future. After 2–3 more investment rounds 40% of your company will be under investors. Of course, you still own golden 51% BUT, what if you had a co-founder? In this case you already own less than VCs and you are not more the boss here.
Let’s now touch on the problem of social inequalities. Who are VCs? Usually, it is already rich people who want to become even more reach by investing early in startups. By building your product you are making rich yourself, that is fine, cause you are a founder and work really hard to make it BUT you also make rich people even richer. 10 years ago this model was the only solution how you can build a startup. Of course, you could take a loan or bootstrap everything, but it was taught and too risky.
Everything changed when crowdfunding appeared. Startups started to create a crowdfunding campaign to raise funds for building an initial product. As a reward, they proposed access for the first version of the product and premium features. This model was life-changing, especially for artists and games creators that didn’t have much support from VCs. The problem with crowdfunding is that you believe in someone, you invest in him, but you get a few rewards in return. It is more like a donation than an investment.
Everything changed again when NFTs appeared. The concept of NFT is pretty simple. Imagine that college you have finished instead of giving you paper document gave you an NFT. Now you can store this NFT in your crypto wallet and everyone in this world now know that you have finished this college, and they can verify it by just visiting your wallet transaction history. You and only you own this document, if someone else will want to copy it, he will fail, cause in the crypto wallet it is visible who sent you that document. And if it was not an official representative of the college — it is not a real document.
Very common use case of NFTs — online communities. NFT is kinda your ticket to this online community, their closed events and support. You can go to OpenSea, a marketplace for NFTs, by the membership for $500, and now you are a member of the community. Sounds cool, right? It becomes even cooler when the community grow and so demand on membership. NFT you bought 1 week ago for $500 today may cost $10 000, just because some popular person promoted it.
With this in mind, what if instead of finding investors, the startup founders create an NFT collection with 10 000 NFTs? When someone buys NFT, he got eligible for company dividends, board voting and premium features. Now, instead of 1 person owning 20% of your company, 10 000 different people are co-founders of your project. Now, these 10 000 people are really interested in your success, it is not only money-wise but also generate a lot of buzz around your startup. 10 000 people start telling their friends, they tell their friends and so on. Now instead of spending thousands of dollars on marketing, you use the power of word of mouth! Now instead of money-driven investors, users decide what feature they would like to see in the next release. Now instead of making rich people richer, you make your users richer.
So let’s summarise the pros and cons of using NFT for funding your next venture.
Pros:
Free word of mouth marketing
An additional income stream from NFT royalties
Democratising your product
Decreasing social inequalities
Cons
Require strong internet presence
