August 05, 2022 - 14 min read
Membership-based NFTs and tokengating offer interesting business models powered by Web3, as demonstrated by recent adoption by major brands.
While NFTs have often been seen as digital collectibles or as profile pic NFTs to be used as social media avatars, the true value of NFTs is lesser known, and still being unlocked. With NFT-based memberships, verifiable NFT holders gain access to exclusive events, discounted perks, crypto rewards, or other gated unlockables. There are many different options for this sort of membership model, and things are only just getting started.
With NFT-based memberships, NFTs act as tickets to exclusive groups, events, or gated content. These are analogous to digital Soho House memberships, except that membership tends to be primarily online-first, and the offerings are experimental for the moment. Those offering NFT-based memberships at the moment are the boldest brands simply testing the waters.
In some cases, NFT ownership could permit access to a technical analysis stock trader’s group, a philanthropic DAO, private Discord group, or an IRL event. Increasingly more content creators and key opinion leaders are dipping their toes into Web3 by building NFT communities for their fans. In fact, NFT memberships are poised to complement traditional subscription and ad-based revenue models, as we’ll see below.
Tokengating is a way of adding value to holding NFTs by giving holders exclusive access to a gated content or discounts in addition to resale value of the token itself on secondary markets. Tokengating has already proven to be secure, cost-effective, and builds significant marketing buzz.
Since NFT ownership is verified via blockchains, their ownership has real meaning and the protection of this digital property and all rights pertaining to it are as tangible and enforceable as in real life. This is attractive for token holders since they access an NFT’s perks, or could easily sell them to the highest bidder, meaning the NFT’s perks can not only be enjoyed, but are also highly liquid.
It’s also important to note that NFT-based memberships demonstrate benefits for token holders as well as a project’s team. As far as most users are concerned, the front end of the NFT-gated website is the most cumbersome, and may at first seem to create more trouble than it’s worth. Of course, this is something all projects will need to contend with as they look to onboard people not interested in making the leap to using Web3 wallets, holding private keys, and so on. However, it is feasible with the right skillset and determination.
Public blockchain ledgers maintain and record immutable on-chain transactions, so NFT-based memberships are secure in that NFT ownership can be transparently tracked via on-chain data, and is transferable. Hot wallets like MetaMask sit in the top corner of internet browsers to be used for authentication, making authentication for NFT-gated content relatively user-friendly once the initial wallet setup is completed.
It’s clear that using NFT-based memberships can be a relatively straightforward process, though it is not a completely seamless one as of yet. After all, it requires setting up a wallet, or worse, overcoming peoples’ preconceived notions of past stigmas from having previously consumed crypto FUD. Likewise, NFT-gated websites make it simple for projects to track and authenticate the validity of non-fungible digital collectibles on the blockchain to ensure that only eligible NFT holders access their gated content.
Not only that, but ownership can easily be transferred and therefore maintained with perpetual liquidity over time via public blockchains. As such, it’s a win-win combo for all parties considered. In addition, NFTs and associated memberships are hot marketing tools for brands as we’ll cover below, which alone adds some hype to any project with a reasonable amount of traction with which to begin.
These are just a glimpse of the myriad of examples currently out there, but since the concept is so new, its use cases, applications, and returns on investment are difficult to articulate definitively. That is, incredibly talented and creative people are coming out with new things faster than they can be understood, reported on, and digested by a broader audience. However, it is nevertheless fascinating to witness so many new NFT-based memberships coming to life.
One of the most notable examples of native Web3 NFT-gated content comes in the form of the Bored Ape Yacht Club and their emergent community. Holders of this well-known NFT collection benefit from exclusive NFT drops, access to special merchandise, real-life and virtual events, mobile games, and other community-exclusive content. Bored Ape NFT holders were even able to claim free ApeCoin tokens following the launch.
Another example is Afterparty, who bill themselves as a community of innovators and creators, building a Web3 platform for accessing physical and virtual experiences through NFTs. The community minted NFTs called Afterparty Utopians, and hosted an arts and music festival in Vegas where only those holding Utopian NFTs or NFT-holder guest pass NFTs were able to attend.
Further demonstrations of membership-based NFTs come in the form of Gary Vaynerchuk’s Flyfish Club (FFC), that will only permit diners who already hold FFC Membership NFTs, and can verify it at the door. Put simply, after obtaining a FFC Membership NFT, token holders will be able to make reservations on their website. Non-token holders will not have the ability to make reservations. An example of FFC Membership NFTs can be seen below.
Another project coming from well-known crypto advocate Gary Vaynerchuk is VeeFriends. VeeFriends NFTs also function as three-year admission tickets to VeeCon, an annual “super-conference.” The first VeeCon was held in Minneapolis in May 2022, offering VeeFriends NFT holders access to Gary and his intimate knowledge of and experience with entrepreneurship, deep network, and visionary insights on social trends. VeeFriends holders played a significant part in organizing the event, which witnessed appearances by cultural heavyweights like rapper and actor Snoop Dogg, and digital artist Beeple.
There are also some early examples of NFT-based memberships being used by some familiar names outside of Web3. American hip hop artist Post Malone also dropped an NFT granting access to a virtual game of beer pong with the celeb via a company called Fyooz. Steve Aoki’s A0K1VERSE Passport offers NFT holders concert tickets to attend his virtual or live performances, access to exclusive merchandise, score metaverse and NFT airdrops, and more, depending on their passport’s tier (out of 6).
Grammy-winning band Kings of Leon released three types of non-fungible tokens as part of a series they called ‘NFT Yourself,’ which deserves a brief description. One type of NFT granted token holders lifetime access to front-row concert tickets and VIP treatment in terms of travel and lodging to the event, with perks resetting each concert tour. Another type of NFT gave access to enhanced digital album art, while the final type of NFT included the ability to claim a limited edition vinyl record, and download codes for the digital album. Kings of Leon reportedly raised 766 ETH from the two-week sale.
Exclusivity and even FOMO can be captivating features of effective tokengating strategies. Limited edition items can be made only available to NFT holders, granting them special access. Celebrities can host annual pool parties, offering one lucky NFT holder a VIP experience to the event, or something of this nature. One could envision major airlines testing the waters of Web3 by offering first-class packages or dynamic membership-based NFTs which could track distances traveled and travel rewards earned.
The sneaker community has thus far enthusiastically embraced digital assets and NFTs in particular. GameFi smart phone app Stepn is perhaps the purest Web3 example, as it requires users to purchase sneakers as NFTs with upgradeable features, and incentivizes them to earn GST, their Ethereum token, by getting outdoors and moving about, documented by their phone’s GPS.
Earned tokens can be used to make in-app purchases like buying mystery boxes or gems, or ‘making repairs’ after moving outdoors. Users can also burn GST to level up their sneakers to make them more efficient at earning, increase their sneakers’ total stamina, reduce the cost of repairs, improve the quality of their gem sockets, and more. Likewise, tokens can also be used to mint new sneakers which can be sold on secondary NFT markets or kept in the users collection.
Fashion brands like Nike and Adidas have become active players in blockchain adoption, participating in Web3 trends like profile-picture NFTs, maintaining Discord communities, and offering digital collectibles. Fittingly, these sneaker companies have seemingly been competing to attract youthful communities who are curious about the metaverse and unfazed by the intangibility of cryptography and digital assets.
Nike has an emerging metaverse world within Roblox, a sandbox-style digital world in which users connect their wallets, interact with others, trade digital assets, and even exchange digital real estate. In addition, Nike Cryptokicks marked the brand’s entrance into digital assets integrated with their clothing, and are modeled after the beloved Nike Dunk sneakers.
Once a CryptoKicks NFT is purchased with a registered seller, the buyer receives a corresponding NFT to verify their authenticity and track their ownership. If the NFT were subsequently traded, the sneakers would follow with the NFT. The logistics of such exchanges is likely to be an area of interest for entrepreneurs, where perhaps the demand for insured and authenticated physical-based NFT exchanges could present itself.
More recently, Nike released a co-branded NFT drop with the release of RTFKT’s (a digital design studio pronounced ‘artifact’) MNLTH, a mysterious and futuristic cube NFT. Speculation about what the contents might contain has generated enough buzz that even with 20,000 MNLTH NFTs being minted, the price at the time of publication was still nearly 4 ETH on OpenSea.
Adidas unveiled their own Web3 strategy with an announcement of Into the Metaverse NFTs in collaboration with influencer gmoney and the Bored Ape Yacht Club. Adidas’s phased strategy also indicates ongoing future perks, including access to both digital assets and physical products, as well as access to exclusive events.
Phase 1 gave NFT holders the right to claim exclusive merch. ITM NFT Holders were required to burn the Phase 1 NFT to claim the physical merch, and were responsible for paying Ethereum’s gas fees for doing so. Fortunately, Adidas left the window to claim the merch open for several months, so users had time to make the necessary arrangements and interact with the blockchain while gas fees were relatively affordable.
Claimable by NFT holders, the available merch included the immediately-recognizable adicolor Firebird tracksuit, a graphic hoodie, and Web3 influencer gmoney’s signature orange beanie which is a nod to his CryptoPunk NFT wearing the same. Adidas also revealed an exclusive giveaway of 200 Alpha Passes to its ITM NFT holders. Using the Alpha Pass, users could participate in Alpha season 2 on the metaverse ecosystem The SandBox.
Some retailers are even starting to incorporate NFT minting into their physical store locations. This was recently demonstrated by the luxury Italian shoe brand Salvatore Ferragamo. Once inside the New York SoHo location, they’re immersed with a firsthand view of Web3 as it’s integrated into the experience.
Shoppers design their own sneakers via hologram and can design and engage with Ethereum’s blockchain at the NFT booth. Customers need to acquire an Ethereum wallet to claim their NFTs, but Ferragamo noted that they don’t need to pay gas fees for the minting itself. This is important to note since one of the main disincentives for minting on Ethereum is the high costs associated with its use.
American luxury jeweler Tiffany & Co. recently announced NFTiffs, a collection of custom physical jewelry and corresponding NFTs, which may be minted when purchased by CryptoPunks NFT holders. NFTiffs offer custom designed pendants and corresponding digital artwork resembling the physical jewelry’s design. Depending on which CryptoPunk owners purchase pendants, pendant designs will use at least 30 gemstones or diamonds to create colorful designs with fidelity to the original CryptoPunk NFT.
Only 250 NFTiff passes will be available for mint by retail purchasers. Participants are limited to minting 3 NFTiffs, although with a price tag of 30 ETH for each one, it is difficult to imagine reaching such a limit. At least this cost includes the cost of the NFT, custom jewelry pendant, chain, and shipping fees.
Unfortunately, many outside of Web3 have gotten poor impressions of NFTs due to the media cycle focusing heavily on scams rather than on legitimate projects and use cases. Consequently, the marketing for such an undertaking must be done with this in mind so as to avoid alienating fans or neutral observers by coming across as gimmicky. That is, pursuing NFT-based memberships without clearly communicating the value proposition may be doomed to fail regardless of the traction it may otherwise have.
Moreover, speculative NFT traders could snatch up the NFTs upon release without giving real fans a chance to meaningfully participate. It could also simply price your fans out if speculators have taken particular notice of a project’s release. Offering whitelist spots to early followers or verified-legitimate fans can help mitigate the potential for this to happen, and parameters can be set so that no single wallet can mint more than the desired limit of NFTs for a given drop.
If all goes well, an NFT collection appreciates in value over time. As a result, new followers or those new to crypto could get priced out. Therefore, it would be wise to plan for issuing subsequent NFTs or other incentives to participate at lower prices for fans who weren’t in the space previously, and can’t afford the OG collection at today’s prices.
Perhaps the trickiest of all is that when trademarks are involved and huge sums of money trading hands, there will be disputes. For instance, Nike filed a lawsuit against sneaker resale company StockX, alleging that its NFTs were evidence of trademark infringement since they seemed to portray digital renderings of Nike sneakers. StockX later responded by saying Nike’s actions demonstrated anti-competitive behavior, would stifle secondary NFT markets, and hurt consumers. The suit is ongoing at the time of publication.
Evidently, NFT-based memberships take the concept of NFTs as digital collectibles far beyond what was once thought. In addition to generating buzz and delivering NFT-integrated rewards to tokenholders, creators play key roles in pioneering the next phase in blending real and virtual life. NFT-based memberships seem destined to dominate the future of subscription models as they permit fans to share in the upside of participation within their chosen communities, while giving them a chance to voluntarily support talented creators.
Let us not ignore the psychological and potentially physiological implications that this has for individuals and society at large, given that voluntary interactions breeds a sense of camaraderie, goodwill, and constructive cooperation amongst participants. Of course, everyone hopes for price appreciation as well, but let’s just call that icing on the cake.
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