The NFT Holder Complex
Although I don’t write much about NFTs this is mostly because all of the ones I bought in 2021 are about 90% down LOL
I like to follow the developments of key communities and as such I feel compelled to share a couple of comments and reflections on the recent Azuki Drop.
There are very different dynamics in crypto and NFTs.
One could go as far as to argue that they cater to a different niche: even though less with time, crypto people are still somewhat aligned with the greater ethos of the sector: decentralization, self-custody, fuck third parties;
NFTs people, on the other hand, are much less involved ideologically!
They don’t really have full ideological alignment with the sector and their main motivation is arguably mere profit.
The rise of NFTs has in fact attracted a whole different niche to crypto: artists, art collectors, and scammers were all working extra hard to either create their own projects or collect the best ones.
NFTs by themselves are the most trust-intensive primitive in crypto and are counter-intuitive with respect to the pillars of the crypto ideology.
In fact, most NFTs rely on the execution of a centralized team.
The recent Azuki fiasco raises some questions about how holders react to these situations, highlighting an interior conflict between pumping their own bags and being pissed at the team.
This short piece provides an introduction to the NFT holder complex
(which I completely made up)
To Complain or not to Complain?
For the purpose of this article, I’ll take the examples of the Azukis and the BAYC.
I would say I am pretty unbiased on this, although I own NFTs from other communities and never had an Azuki, I still consider them up there and honestly wish I had bought an Azuki as they have performed quite well in this market…. Until recently.
Companies have these make-it or break-it moments and I feel that what happened with the Azuki Elemental drop is one of those.
If you are not familiar, here’s a quick recap.
Elementals are a secondary collection of Azuki, After Azuki, the main collection, and Beanz.
They are what Mutant Apes are for Bored Apes, the secondary collection, typically used by established NFTs with a high floor to open the community for new entrants at a lower price point.
The cost for an Elemental was 2 ETH, and the current Azuki holders had priority over the public - 10 minutes precisely.
Of course, the collection sold out, as there was a lot of hype and excitement about it, especially after the recent Azuki event which was honestly fire.
If you are wondering, that’s a nice $38m for the Azuki team.
Everyone seemed to be happy then:
Holders had minted a new collection from one of the biggest brands
The team has sold out and got for runaway
That is, until the reveal.
I would certainly put this as one of the most embarrassing moments in NFT history.
https://twitter.com/sibeleth/status/1673771809727021061
It turns out that the Elementals look EXACTLY like the Azuki.
This sparked controversy and discussions in the community.
Many expressed their disappointment, but eventually ended up “trusting the team to make this right for everyone”.
We have an expression here that tells people they have “ham over their eyes”, and as such can’t see reality. That’s what the NFT Holder Complex feels like.
Here are some symptoms:
You can’t conceptualize the team does moves in bad faith
You feel disappointed but at the same time you don’t want to FUD your bags
Yes the Azuki art looks similar, BUT I trust the team
The Apes are the future, they will never go down
Yes the last Yuga game is very elitist but this is the future of gaming
The NFT market has also different dynamics between demand and supply, such as the absence of an order book, and trait-based trading — making NFTs much more illiquid than traditional cryptocurrencies.
You can’t just sell your coins on a CEX: because of the limited collection size the impact of selling NFTs is much bigger than coins. and it carries a much bigger weight.
Here’s some engagement farming showing that someone from the Azuki team sold one of his Azukis. This is no different than employees selling stock options - but is it really? NFTs motherfuckers will not forgive you for such things.
And that’s why the NFT Holder complex has time to infect people and take control of them.
It completely messes up the incentives for team execution: you don’t want to believe that the team is behaving in their self-interest, and you don’t want to denounce them or sell your NFTs simply because you are not gonna FUD your own bags to that extent. And no matter how far-fetched, you will believe that the team will solve this.
Sure, you can get a lil bit annoyed if the team just sold a secondary collection that looks exactly like the first one, with no art update and the lack of pragmatism that should have made them realize in the first place that this was a shitshow, BUT you are never going to go fully against them right? Because doing so would mean fumbling your bags even more.
As such, NFT holders have a perverted system of incentives which makes them masochists, a sort of Stockholm Syndrome as they like to be hurt by their captives but can’t really separate from them.
Nonetheless, most NFTs teams have taken advantage of holders and stretched the boundaries of what was deemed to be possible. In crypto there are more audits, holders held companies accountable and are acting themselves as investigators. NFT people, on the other hand, will put up to all sorts of BS, telling themselves whatever excuse they can, before realizing that the team was perhaps acting in bad faith.
This is especially true since the end of the last cycle and is reflected in the failing floor prices. How many teams have kept building? How many teams have really done so for their holders?
Even BAYC has failed here IMHO, with their games:
Do you really expect everyone to hire a pro gamer?
Do you want me really to spend 24/7 playing your game?
Clearly, they are as removed from everyday crypto users as you can be.
Still, no one is really complaining and holders are more scared than ever to sell their previous NFTs.
We need more accountability in the NFT sector, and we need to ripe off the bad weeds that are contagious.
We need brave holders who have the courage to go head-to-head with the team and held them accountable for their roadmap and execution.
One possible governance solution is to give away the governance of the project to a DAO.
This is similar to what Azuki holders are doing this day, they have established a “non-official” DAO, that wishes to redistribute the funds gathered from the Elemental mint back to holders.
Apes have tried to do so too, but the DAO doesn’t really seem to be acting in the best interest of holders, and the governance process is still cumbersome and has degrees of separation to the places where key decision making are taken.
the NFT holder complex is a complex that manifest itself as being unable to hold the team totally accountable for their mistakes, because we fear that by doing so our bags will go down.
It is however true as well that there’s no blueprint for how to scale an NFT collection. These companies are already doing incredible work to establish themselves beyond their JPEGs.
These are just a disconnected train of thoughts I had recently!
Azuki and Apes Brothers please don’t hate me.
I am a big fan of both communities and really hope that the team can be supported and be as enlightened as possible to ensure a bright future where NFTs can expand way beyond what’s imaginable and onboard 1, 10, 100 million new degens.
Let’s conclude with a lighthearted solution to the issue of the Elementals:
