Needless to say, the NFT bubble has burst. Remember those headlines screaming about million-dollar JPEGs? Now, these are more like hushed marketplace closings and sorely missing your Bored Ape NFT. I told you so is very attractive, but to be frank, the schadenfreude is getting old. The real question is: what went wrong, and can Web3 salvage anything from the wreckage?

Artificial Scarcity's Epic Fail

What was the root issue, you ask? Simply put, NFTs aligned themselves with the disastrous myth of artificial scarcity. We were told that owning a unique digital asset – a GIF, a song, a virtual land deed – was the future. Scarcity is an illusion that only holds true when there’s real demand and real value. Creating marks of distinction, on the other hand, slapping a “unique” tag on something doesn’t just make it valuable.

Think of it like this: De Beers convinced the world that diamonds are rare and valuable, fueling an entire industry on perceived scarcity. Diamonds actually aren't that rare. The value is manufactured. NFTs tried to ride that through, but people figured it out so quickly. They knew that they were spending exorbitant amounts on things that could be readily replicated, or worse yet, just plain ineffectual.

The outrage? It's palpable. People feel duped, and rightfully so. What started as a noble promise to democratize art and finance quickly morphed into a speculative hot potato musical chairs. In the collapse, all but a few walked away rich, and the rest were burdened with the useless digital luggage.

Unsustainable Hype Drained the Lifeblood

NFT projects are cash-hungry beasts. In order to survive, they require a nonstop flow of PR glamour shots and glitzy media impressions. Keeping up that excitement takes constant marketing, influencer promotion and community building. Friend transportation advocacy – it’s expensive. All of this comes at a price – a steep price.

Unlike zippered, outsider-funded projects, the vast majority of these projects were dependent on the mint revenue to sustain operations. What then once the first mint is completed? A 2.5% trading royalty was intended to offer another source of consistent revenue. In the blink of an eye as trading volumes crashed, those royalties dried up too—as fast as a puddle in the Sahara.

Communities, while vital, became a liability. Relatedly, people expected continuous giveaways, airdrops, and other bribe mechanics. It turned into a vicious cycle of requiring more and giving less. A dedicated community that fosters a useful product is a huge benefit. A community that is only interested in sucking out value is a recipe for mutual destruction.

It’s the music group analogy of dropping one record and thinking you can just sell t-shirts for the rest of your life. It's not sustainable!

Web3's Redemption Lies Beyond Collectibles

So, is Web3 doomed? Absolutely not. But the underlying technology – blockchain – still has incredible potential. What it takes is simply a change in focus away from speculative collectibles and towards meaningful applications in the physical world.

These are just a few examples. The magic potion is to stop thinking about how to get rich overnight and actually start creating solutions that fix real issues.

  • Decentralized Identity: Imagine a world where you own your digital identity, free from the control of tech giants. Blockchain can make that a reality.
  • Supply Chain Management: Track products from origin to consumer, ensuring transparency and combating counterfeiting.
  • Secure Data Storage: Protect sensitive information from hackers and censorship.
  • Decentralized Finance (DeFi): Create a more inclusive and accessible financial system.

It's time to democratize the music world beyond short-lived fads and manufactured rarity. Rather, we need to channel the promise of blockchain to create a more equitable, transparent, and downright better world. The true promise of Web3 isn’t in JPEGs—it’s in creating an internet that is fairer, open, and decentralized. And that's something worth getting excited about.

The awe can still be there. The wonder. We need it to be grounded in utility and not hype. Let’s step away from the rug pulls and no-shows. Though the climate is changing much of the potential away, there is still tremendous potential to lead a lasting change. Don’t allow the NFT debacle to cause you to lose sight of that reality.

The awe can still be there. The wonder. But it needs to be grounded in utility and not just hype. Let's leave the rug pulls and empty promises behind. The potential is still there to make a lasting impact. Don't let the NFT fiasco blind you to that truth.