The 7 Sins of Companies entering the world of NFTs
Common Mistakes and Pitfalls to Avoid When Exploring Non-Fungible Tokens
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There is a pattern of major mistakes made by brands and creators entering the world of NFTs. These mistakes can end up making the strategy not successful, the collection not selling enough, users losing confidence in the brand or, in extreme cases, technological aspects causing users to end up not being able to participate in the experience or losing money.
There are 7 Sins:
1) Underestimating the Technology
2) Thinking that collections are the only strategy
3) Not educating the audience
4) Not educating the team and partners
5) Not having a clear why
6) Making decisions based on hype
7) Not having clear goals
Let’s explore each one of them.
The 1st Sin: Underestimating the Technology
NFT artist Micah Johnson, a former Major League Baseball player turned artist, presented his much-anticipated Akutars collection on April 22, 2022.
After reviewing the collection's contract, some Twitter users posted and contacted the collection team saying that there were flaws in the contract that could cause problems.
After the mint, Aku’s smart contract code failed to account for numerous NFT mints in the same transaction. The error resulted in the permanent locking of 34 million dollars in the smart contract. Both Aku's founders and the smart contract developers are unable to access the funds. The money is stuck in the contract forever.
Smart Contracts, Wallets and so on are great technologies that are here to change a lot of things, but many businesses do not pay enough attention to their technical aspects, which can do great harm.
Even if your brand outsources the development of the smart contract or other technologies, it is essential to be careful so that neither your brand nor your users can be harmed. In later chapters, we will see what can happen when a team does not take the necessary precautions and care in the technological part.
But, talking about some of these points right now: following all the security protocols of the wallets - whatever wallet and type you are using - is fundamental; avoid clicking on links that users message on networks such as Twitter and Discord channels; in addition, of course, to having an external audit for your company's smart contracts, if it is developing or outsourcing this part.
The 2nd Sin: Thinking that collections are the only possible strategy
This is something quite common when we talk to creators and companies. Seeing the hype that exists around collections, they feel that the only way to expose themselves to this new world is to launch their own collection. As we will see, this is not true and there are many other ways, all depending on your risk appetite and budget.
Maybe it makes sense for your brand to launch a collection. And that can make perfect sense and be quite profitable. But this strategy may not be the best for your current moment or your macro strategy as a company, which is fine.
The 3rd Sin: Not educating the audience
NFTs can be quite confusing, and despite already being a billion-dollar market, we still have major educational barriers. Some companies find that simply adding a FAQ session and having a few Discord moderators is enough to educate the audience about their new initiatives involving NFTs.
These tactics may be enough depending on the audience's awareness level, but they may not be enough if the public still doesn't understand this technology and why your company decided to adopt it.
In July 2022, Chris Brown – 123 MILLION followers on Instagram – launched his NFT collection, called Breezyverse.
10,000 (oh really?) NFTs were available at an approximate price of $440.
In an eventual sold out, the collection would have raised $4,400,000.
That is not what happened.
After a few weeks, only 3% of the collection – 297 items – were minted. Today, the volume is practically 0.
Chris Brown’s millions and millions of followers didn’t seem all that interested in buying the NFTs, although the collection promised great utilities like VIP tickets.
What went wrong?
Of course, nothing is that simple, and there are many variables involved, but we can dare to say that a Go-To-Market strategy was clearly lacking. It lacked:
– Audience education
– Clear communication
– Focus on a specific cohort of users
We’ve seen several celebrities with catastrophic NFT launches, such as Chris Brown, John Wall, and Lana Rhoades.
This lack of Go-To-Market doesn’t just happen with celebrities entering the world of NFTs. It also happens to native Web3 companies as well as established companies that are venturing into Web3. Launching a collection is just one of the possible strategies – and this is something that few companies realize.
Web3 is still a new space and it may take some time to consolidate. Go-To-Market will continue to be a big challenge for a long time and professionals and companies that master this aspect will have a great differential for others.
It’s common for very technical founders to build great products but not have a Go-To-Market strategy. They end up building amazing products… that no one uses.
The 4th Sin: Not educating the team and partners
In 2021, the Stoner Cats project, with voiceovers by people like Mila Kunis, Ashton Kutcher, and Chris Rock, generated a lot of hype in the community.
The project is an adult animated short series where holders of the collection NFTs can access exclusive content and future releases of new series from the same company.
The hype caught the attention of users and thousands of people waited for the day to mint the NFTs from the collection. Because of lack of contract optimizations and Ethereum's network congestion, minting the 10,420 cats cost users $790,000 in failed transactions.
Many users were not happy with the situation and went to the project's Discord to speak with the moderation team. The response of one of them to the situation caught the attention of many people. When asked if the project would take any action, the moderator said that "we are calling Ethereum".
And of course, no one can "call Ethereum", as it is a decentralized platform, without a support team, as in traditional companies. What was missing here was a more focused educational part for the project's support team and moderators. Don't underestimate how important this can be.
A well-prepared and educated team is essential for users to feel more confident in the project, especially in more delicate moments like what happened with Stoner Cats.
The 5th Sin: Not having a clear why
The gigantic growth of NFTs has been attracting the eyes of professionals and companies at a record speed. This gold rush is interesting to increase mass-market adoption and also the attention of relevant players, but it also raises several questions about how brands can enter this world properly.
A lot of celebrities, influencers, and brands have been joining the NFT space in the last few months, almost always launching their own collections.
Although this can be good to attract newcomers, we have seen repeated cases of celebrities who launch collections without the least preparation, without the slightest care to provide a good experience to buyers and, in worse cases, celebrities who abandon their projects just a few weeks later, leaving their community with a dead project.
NBA basketball player John Wall, for example, 1 week after posting that he was "discovering the world of NFTs" decided to launch his own collection, called Baby Ballers.
The description of the collection was: “John Wall loves nothing more in this world than his children. Baby Ballers by John Wall is fully inspired by his desire to show his own children and children everywhere how they can do anything they put their mind to. The goal of these NFTs is to show children that they are the superheroes in their own lives.”
What followed was a freak show. The audience noticed that the Baby Ballers design was practically a copy of the Boss Baby design. Not only that, but the background of the image used in the official release of the project was a direct copy of a basketball court from the game Fortnite.
The project ended up selling much less than expected and ended up dying a short time later.
When we see headlines talking about the millions being spent on NFTs, one would expect brands, celebrities, and influencers to want to enter this world. FOMO is a very strong feeling and you have to act fast so you don't lose the hype, right?
And this is where most of the new entrants fall into traps.
A good part of the projects that go wrong are linked to a simple question that goes unanswered - or is answered wrongly.
Why?
Why does your brand want to launch an NFT collection? In fact, a question before this one, as we'll see in later chapters, is, should my brand launch an NFT collection? Why should my company enter the world of NFTs? What problems are we trying to solve?
You may have heard of Simon Sinek's Start With Why concept. According to the author, leaders and companies are able to inspire their employees and customers if they have a very clear why to share. According to Simon:
“Very few people or companies can clearly articulate WHY they do WHAT they do. By WHY I mean your purpose, cause, or belief - WHY does your company exist? WHY do you get out of bed every morning? And WHY should anyone care?
People don’t buy WHAT you do, they buy WHY you do it.”
This framework is easily usable in the world of NFTs. Many brands and creators have forgotten to answer this simple question before stepping into this space. Without having a very clear why, it is extremely difficult to convey the purpose of your actions to the audience. Or worse, it's easy to lose the team's motivation for the project.
Having a nice roadmap or talking about charity will be like words in the wind if there isn't a very clear why behind it all. A lot of the projects that go wrong, like the Baby Ballers, have great roadmaps and pledges to donate to charity, but the foundation is built wrong.
What's yours why? Why do you want to enter the world of NFTs?
The 6th Sin: Making decisions based on hype
All of us, whether professionals or brands - can get caught up in the hype. Many professionals and brands choose to enter the world of NFTs because of all the hype and huge transaction values we see in the headlines.
Getting in because of the hype isn't so much the problem, as we all want to be part of one of the great revolutions of this decade. However, hype can serve to get you on the market, but not to take you further.
Another important point: Crypto is the absolute FOMO - Fear of Missing Out - industry. A new infrastructure for society and the internet is being built and at times like these there are many opportunities and confusion. There's a lot being built, so we need to be careful not to keep shifting focus and chasing the next shiny object.
So getting in on the hype can happen, but making decisions based on the hype can be quite costly. Getting your feet on the ground and making decisions based on strong principles is important.
The 7th Sin: Not having clear goals
Knowing where you want to go is important to have a clear vision of how to get there. To do this, you need to know what your company's goals are within the world of NFTs. We will talk more about this in later chapters, but we see many brands entering the world of NFTs without first setting a goal for their actions.
Thus, it is very difficult to be accountable for the results and to know which metrics to look at. It doesn't matter if the goal is to have financial ROI or just learn about this new technology. Having a clear vision of goals is very important to make good decisions about which strategies your company will develop.
These are the 7 sins that companies and creators committed when entering the world of NFTs. To recap:
Underestimating the Technology;
Thinking that collections are the only strategy;
Not educating the audience;
Not educating the team and partners;
Not having a clear why;
Making decisions based on hype;
Not having clear goals.
Nassim Taleb, in his book Antifragile, argues that: "Antifragility is beyond resilience or robustness. The resilient resists shocks and stays the same; the antifragile gets better."
We all want our projects, business units and companies to be anti-fragile, that is, that they not only survive, but become stronger from crises and other external events.
One of the first steps in becoming antifragile is to remove fragilities.
See each of these Sins as a fragility that can harm your company's actions within the NFTs universe, whatever your strategy.
Knowing what mistakes to avoid and what not to do, you will already be ahead of the market and can focus on building amazing products and experiences for your users.
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