Airdrops, DAOs, token issuance and public domains are the next frontier for NFTs

Innovation in the NFT space moves about as fast as the prices. Here’s a rundown of the most recent developments.

Volatility continues to be the name of the game for nonfungible tokens (NFTs) amid the rollercoaster valuations and volume surges, but a new trend appears to be emerging in the sector. 

Aesthetic appeal aside, for many investors, buying an NFT is akin to casting a bait-laden hook into an opaque body of water and hoping that a fish bites. Sure, when the Bored Ape Yacht Club listed, some buyers thought “They look cool” and “The community is really strong and dedicated,” but these aren’t really hard valuation metrics that can be backtested and applied across most assets in the NFT market.

Community activism and holder stats are important features to look for when purchasing an NFT, but aside from that, the initial purchase and hope that one will eventually turn a profit is nothing more than speculation.

In the last month or so, a handful of projects have realized that “more” needs to be offered to holders or “agreed” upon via the roadmap or a decentralized autonomous organization (DAO) in order to help with retention, diversify the ranks of holders (rather than just whales owning a majority of the project) and incentivize future buyers. So, a number of projects have rolled out airdrops, metaverse utility, DAOs and token issuance features meant to address these demands.

The Council of Kongz. Source: CyberKongz

One example of a utility-equipped NFT is CyberKongz, a great ape-themed project where the NFTs issue BANANA tokens, which currently trade for $63.70 on SushiSwap and OpenOcean. Each Genesis CyberKong issues 10 BANANA per day for a period of 10 years, and at the current valuation, this means Genesis holders bring in $637 per day.

In addition to selling the token on the available markets, holders of two Genesis CyberKongz can also breed them to create a Baby CyberKongz NFT that can be minted by spending BANANAs.

Other “blue chip” NFT projects that are embracing the “added utility” model are Cool Cats, which plan to issue a “MILK” token, and Winter Bears, which offers staking in a NFTX vault and has a partnership with PieDAO. The Bored Ape Yacht Club also offers real-life perks like exclusive gear from streetwear brand The Hundreds, airdrops to holders and planned utility within the Metaverse.

The most lucrative NFTs for investors. Source: BrokerChooser

As shown in the chart above, data from BrokerChooser shows that six of the 10 most lucrative NFT projects for investors currently offer either a token, airdrops or planned utility in the Metaverse.

Cool Cats NFT all-time high price. Source: OpenSea

Roughly one month ago, Cool Cats were trading for 1.5 to 3 Ether (ETH), but after the project announced plans to conduct airdrops, issue a token and develop Metaverse utility, the NFTs went on to establish a new all-time high average price at 25.75 Ether. Currently, the floor price for Cool Cats is 9.6 Ether, according to data from OpenSea.

Recent prices of Bored Ape Yacht Club NFTs. Source: OpenSea

Similar outcomes are seen in the Bored Ape Yacht Club project, where Sotheby’s auctions, the Mutant Ape Yacht Club-related airdrops and the release of the roadmap have aligned with spikes in the NFTs’ price.

No token, but there are DAOs, CCOs and sanctioned airdrops

There are some concerns about projects issuing tokens looking quite similar to an unregistered securities issuance. And with the United States Securities and Exchange Commission, Senate and White House constantly threatening regulation of the crypto sector, not every project is rushing to add utility tokens to their NFTs.

In fact, in the last week, a few projects have gone so far as to clarify their position that these tokens are to facilitate the project’s “utility” and are not assets that are meant to reflect value and be traded on the open market.

In addition to offering use in the Metaverse and issuing tokens, some of the more recent projects such as CrypToadz have either established DAOs to give the community more interaction with the direction of the project or have presented the project under the Creative Commons “CCO 1.0 Universal” designation, which means it exists in the public domain and the creator has “waived all copyright and related or neighboring rights” to the project.

By doing this, CrypToadz holders and admirers are able to create, mint and sell derivatives of the original project that can be sold on the open market or allocated for sale to CrypToadz NFT holders.

Within the last week, two CrypToadz sold for more than $1 million, and the project quickly hit a 21 Ether floor, which will have priced out many collectors hoping to acquire one of the NFTs. The CCO status of the project allows holders to benefit from exclusive derivative offerings, while also bringing more publicity to the original project. Following the success of CrypToadz, a handful of other projects such as CryptoZilla and Pixelglyphs have embraced the DAO/CCO model.

Like cryptocurrencies, the prices of NFTs are incredibly volatile and driven by various trends, sentiment, paid and unpaid influencers, and a range of other intangible factors. The highly experimental nature of the sector means that projects are constantly testing new methods for bringing in investors, building a community and staying relevant.

The token-bearing NFTs might be a fad that loses its allure once every project on the block embraces the model. The same could happen to the airdrops-to-holders tactic, and there’s really no way of knowing whether the current “Form a DAO and buy up all the rares” approach will work either.

What’s important is that the space is constantly in a state of innovation, and the most successful investors and collectors are the ones who stay abreast of the emerging trends.

Disclaimer: Pump and dumps and unscrupulous shilling are rampant in the NFT space. In the interest of transparency, you should know that the author holds positions in CrypToadz, Winter Bears and Mutant Ape Yacht Club, and previously held positions in Cool Cats.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Every investment and trading move involves risk, you should conduct your own research when making a decision.

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Bitcoin is great, but real crypto innovation has moved elsewhere

Bitcoin will always be the boss, but the real innovative and groundbreaking developments are happening in layer-2 solutions, DAOs, NFTs with utility and the emerging Metaverse.

Something is brewing, and those with finely tuned noses can smell it. As traders have come to expect, Bitcoin (BTC) is doing “Bitcoin things” by bouncing around between the usual “key” support and resistance levels, and to be honest, it’s all starting to feel a bit boomerish.

Bitcoin’s long-awaited “moon” depended on institutional investor buy-in, breaking the previous all-time high at $19,000, and a set of other firmly held beliefs. Well, all that happened, and the run to $64,900 exceeded many investors’ wildest dreams. But despite this, the entire BTC situation just feels predictable and boring if you are of the opinion that the top-ranked cryptocurrency will eventually top out around $100,000 in the current bull market.

So, back to what else is brewing…

Decentralized autonomous organizations (DAOs) are hot, nonfungible tokens (NFTs) are hot, play-to-earn gaming is hot and the Metaverse is hot.

This is where the real heads are right now — speculating, building, pondering, networking and doing shit that actually matters. And what is unique about those who are really putting in work in the trenches of crypto is that this grassroots approach and bottom-up building trend is leading to some of the space’s most groundbreaking projects.

Take Dom Hofmann’s “Loot” project as an example, or the recent Good Bridging and BridgeLoot drops in the Avalanche ecosystem.

Rather than putting on a suit, throwing together some c-suite-friendly presentation and chasing after venture capital dollars, Loot was minted for free by interested participants willing to pay the gas costs, and the community ascribed value to the NFTs via OpenSea sales.

The value of new ideas was agreed upon by a flurry of discussions in Discord, and anyone with an idea was free to launch their own derivative contract where Loot holders could then replicate the minting and listing cycle again.

Will Papper’s airdrop of 10,000 Adventure Gold (AGLD) to Loot NFT holders, soon became worth over $50,000 and catapulted the entire project to stardom and into the history books. It was essentially the “YFI” of NFTs, some would say.

There’s a seismic shift at hand

What’s unique and intriguing about Loot is that it has set the precedent for what is becoming a new drop model in the space. The process involves creating a product (whether it be an NFT or a protocol), mentioning it to an interested community, and allowing them to mint tokens for free within the 7,777 to 10,000 supply range. After that, creators let the community, speculators, believers and OpenSea do the rest.

Hofmann encouraged the entire fam to do what they wanted with the project — he essentially said, “This is yours! Go and build, my children!” The anon genius behind the Good Bridging (GB) token drop also did the same but with even less guidance.

Basically, 16,000 early users of Avalanche’s Ethereum-to-Avalanche bridge got an 895 GB token airdrop, which at its peak price of $2.60 per GB was worth about $2,300. Not too shabby, eh?

To add to this, GB holders who didn’t immediately liquidate the drop were eligible to mint a gasless BridgeLoot NFT as a reward, and a few hours later, the Avalanche-based NFT marketplace Snowflake verified and listed BridgeLoot, where many holders listed their NFTs for 20 to 100 AVAX.

From a markets perspective, money chases after money. Investors chase after liquidity, and that’s part of what drives price action within markets.

We see this happening with all the layer-one incentive launches where hundreds of millions of dollars are shifting from ETH to Fantom, or ETH to Arbitrum, or ETH to AVAX, or ETH to LUNA, or ETH and USDC to Web3-based decentralized exchanges like dYdX and GMX.

The point is that crypto is driven by liquidity and trends. The whole Loot phenomenon let the cat out of the bag and enlightened builders on a feature that has always been present but only recently uncovered.

Bottom-up fundraises, NFTs with utility in the Metaverse, DAOs and the great liquidity suck into layer-2 ecosystem are here to stay.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Every investment and trading move involves risk, you should conduct your own research when making a decision.

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Cryptocurrency and the rise of the user-generated brand

When looking at cryptocurrencies from a marketing perspective, they present a significant paradigm shift in branding.

In the whirl of excitement and debate over where cryptocurrencies are going and whether they are legitimate, sustainable and prudent investments, there is an overshadowed conversation of interest to those in marketing: Are Bitcoin (BTC), Ether (ETH), Cardano’s ADA, Litecoin (LTC), XRP, Dogecoin (DOGE), etc., crypto brands?

And, if so, how are those brands created, and what role do they play in each coin’s adoption? Or, for that matter, how does branding collectively contribute (or detract) from the legitimacy of a cryptocurrency as it seeks increased mainstream acceptance/use?

Related: Decentralization vs. centralization: Where does the future lie? Experts answer

To begin to answer that, consider David Ogilvy’s — a British advertising tycoon, known as the “Father of Advertising” — definition of a brand: “The intangible sum of a product’s attributes.” These often include an identity, voice, empathy, value proposition and consistency in delivering on promises made. Ultimately, attributes like these, among others, circle the nucleus of a product/service like atomic particles to create trust, preference and loyalty (or lack thereof).

Branding finances

One could argue that fiat currencies are brands insomuch that their issuing countries work to create value and confidence in them. However, with little to no competition in their native countries, assigned commodity identities (dollar, pound, euro, yuan, etc.), and no real attempt by the governments (the “brand” owner) or other entities to change how the currency is perceived or even used, it’s difficult to consider them as such.

Looking to other examples in finance, stocks are a way to own the brands that issue them. Mutual funds also assume the halo of the brands that manage them — though there are instances where funds such as Fidelity’s Magellan Fund and Vanguard’s Wellesley Income Fund have become prominent brands. You can also think of funds as baskets of brands.

Moreover, commodities such as gold, silver and copper are, well, commodities. And this brings us to cryptocurrencies.

Consider the following:

  • Bitcoin has many unique attributes for a currency, such as: 1) a hero’s epic narrative in the form of Satoshi Nakamoto’s pseudonymous pursuit of a decentralized currency culminating in the now-famous 2008 white paper; 2) a recognizable and evolving identity, as well as its perception of being the founding father of digital currency; 3) “first-mover” advantages that all other brands (cryptocurrencies) are forced to compare or contrast to.
  • Arguably, there are two dominant players, or established brands — Bitcoin and Ether — and a growing, very long list of “challenger brands” in the form of altcoins.
  • Said challenger brands each have individual selling propositions and — with names like Avalanche, Sushi and Chiliz — a means of helping investors/consumers remember them.
  • The swirl around Dogecoin and other so-called memecoins — which the Crypto Dictionary describes as a “joke that turns into a crypto coin” — illustrates how pop culture (and by extension, marketing) influences markets. Older folks may cringe, but for younger generations of investors in particular, there’s nothing unusual about it at all, positioning Dogecoin and others as a consumer currency.
  • Lastly, and perhaps most importantly, there is a rapidly-growing marketplace for cryptocurrencies in which technologies/platforms compete not only for financial engagement but also social currency — that is, a share of voice on social media within the cryptocurrency community and beyond.

For all these truths, a few intriguing questions remain: First, if decentralization is core to the concept of cryptocurrency, who is controlling and nurturing each of the brands? And if trust is a central tenet of brand health, how does a trustless technology fit in?

Related: Bitcoin’s evolving narratives make it antifragile

Cryptocurrencies are the first true user-generated brands

Unlike user-generated content (UGC) — which is solicited by marketing organizations to provide a voice for the customer, authentic perspectives and active engagement — a user-generated brand’s (UGB’s) content is largely unsolicited and uncontrolled. Like sourdough, get it started and it’ll grow on its own. (That seemed like an apropos analogy given sourdough’s global COVID-19 pandemic popularity.)

Lacking a central owner or the equivalent of a brand manager or chief marketing officer, these brands are created and nurtured by project founders, user communities, investors, miners and more. They’re at Meetups, on forums, chat rooms and subreddits. In fact, brand health can be correlated to just how robust the conversation is on channels like these.

Brands are molded by a vocal and growing community of influencers who include crypto heroes like Andre Cronje and Vitalik Buterin, tech pioneers like Marc Andressen and Elon Musk, finance stars like Cathie Wood and Jamie Dimon, and popular voices like Shark Tank’s Mr. Wonderful (Kevin O’Leary) and The Mooch (Anthony Scaramucci). This all suggests that the trajectory of these UGBs and how they will be consumed by individual investors, institutional investors and the media is largely unpredictable. Or is it?

Related: Experts answer: How does Elon Musk affect crypto space?

Building the crypto brand

Many, if not most, crypto projects have a foundation or decentralized autonomous organization (DAO). Think, the Ethereum Foundation, the Cardano Foundation and other open-source resources of which there are too many others to mention. These foundations release white papers as de facto advertisements and raise capital through crowdfunding using initial coin offerings as their currency. And, yes, advertising agencies are hired and other resources are implemented to mold their brands — though those who actually approve the creative can vary widely, perhaps the community of users itself or those holding governance tokens.

Ultimately, from a traditional brand management standpoint, only so much control exists while these projects seed and shepherd their UGBs. Armed with that active, engaged, highly passionate community, they can:

  • Tap into the herd mentality bias that drives much of the category. This is heuristic and describes an investor’s tendency to want to join the conga line — to follow other investors based more so on emotion (fear of missing out) than on rational consideration, and contributes to much of the space’s rapid growth. Be armed with influencers, and let the races begin.
  • Stoke content momentum. User-generated content is a bit like a street performance: Get a few people to hoot and holler, and more people will look to see what’s going on, thus causing the audience to swell. As such, quality content drives a crowd and bequeaths more quality content. The operative word here is “quality.”
  • Make education entertaining. Let’s face it: Most people don’t want to take the time to decipher how Merkle trees and nonces work. They want to understand what this new asset class is, why they need to consider it and how it will help them meet their personal goals. So, there needs to be a strategic call to arms to make the content easy and enjoyable to consume.

Returning to the second question, the most important task of any foundation, along with its community of followers within a UGB, may be to create trust in the trustless. To put it another way, to distinguish and differentiate the currency based on how its technology/project is vetted, secure, truly independent, and — perhaps most importantly — how it can quickly answer the question: What is it for?

This last point, of course, isn’t unique to cryptocurrencies and their UGBs. The institutions that must communicate their choices to customers, the companies selling exchange-traded products, the exchanges themselves, wallet applications and so forth in this category that is growing blisteringly fast while still being a colossal mystery to all but a few, will ultimately distinguish themselves in the mainstream by doing what other great brands have done: Making it clear, making it simple and delivering on a promise.

In other words, to dispel the misconception among the vast majority of non-crypto nerds that all cryptocurrencies are intended to replicate fiat for the purchase of common-day goods and services, and instead, articulate their very specific purposes.

Where cryptocurrencies will go from here will be fascinating to watch. Ark Invest recently described Bitcoin as “the purest form of money ever created.” In an odd way, it may also become the purest form of marketing ever created.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Rich Feldman currently leads marketing for Finario, an enterprise capital planning SaaS provider. Prior, he was chief marketing officer at PrimaHealth Credit and was an agency owner/partner and chief strategy officer at Doner CX (part of the MDC Partners Network), where he led the CRM, analytics, digital media and other strategic areas of the business. Rich has lectured on strategy at the New York University master’s program in marketing, at Syracuse University and is an adjunct professor at Western Connecticut University — where he is an advisory board member of the Ancell School of Business. He is also author of the book Deconstructing Creative Strategy.
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Alchemix patches ‘Reverse Rug’ exploit, address $6.5 million shortfall

In an unusual twist for the latest DeFi exploit, the users were the ones to walk away in profit.

It’s as miraculous as Aladdin taking off on a magic carpet: in a possible first, some of the users of a decentralized finance protocol were the ones to benefit today from an exploit, turning the concept of a ‘rugpull’ on its head. 

A colloquialism for when liquidity is drained from a project (often an unscrupulous founder or developer draining the funds themselves), depositors and DeFi users are most often the ones holding bad debt and/or worthless tokens — left to hope for compensation plans that can take months or even years to fully vest.

In an exploit today, however, the users are the ones who got to pull at the seams for a change.

This morning, Alchemix announced that the contracts for one of their synthetic assets, alETH, had experienced an “incident.”

In a incident report published later in the day, Alchemix developer “n4n0” said that “an issue with the deployment script of the alETH vault accidentally created additional vaults,” some of which the protocol used to incorrectly calculate outstanding debts, which in turn meant protocol funds were used to “pay off user debts.”

As a result, for a short window of time users were able to withdraw their ETH collateral with their alETH loans still outstanding — a rugpull by the community to the tune of $6.5 million.

Per the incident report, the team paused the mint contract for alETH two and a half hours after the exploit was discovered. The report notes that no users lost funds as a result of the exploit, and that Yearn.Finance — whose yield vaults automatically repay Alchemix’s synthetic loans — suffered no loss as well. Additionally, a “conservative” initial debt ceiling prevented the protocol loss from being more extreme. 

The team, including incident report author n4n0 appear to be taking the loss in stride:

A trio of solutions is being deployed to cover the shortfall, including a temporary increase in protocol fees, a injection of ETH liquidity from Alchemix’s treasury, and a sale of DAI from the treasury for additional ETH. The team says they will be deploying an entirely new vault to address the flaws of the original. 

Further changes may be on the horizon for the alETH asset as well. Alchemix currently has a alETH/ETH pool live on Saddle, a VC-backed fork of Curve Finance, following Curve reportedly turning down creating a pool for the synthetic Ether. However, in the past 48 hours the Curve social media account has been making overtures in an effort to bring Alchemix’s latest synthetic asset back.

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Staking giant Lido looks to bring services to Solana

Infrastructure provider Chorus One believes they can help Lido corner 25% of all staked SOL.

One of the largest ETH 2.0 and Terra staking services is now looking to expand to other proof-of-stake chains, starting with upstart layer 1 Solana. 

In a proposal today on Lido’s governance forums, crypto infrastructure provider Chorus One laid out a plan to build “a liquid staking token (for now: stSOL) that will accrue staking rewards and represent staking positions with Lido validators on Solana,” similar to Lido’s current interest-accruing stETH token.

Development funding to bring Lido’s services to an additional chain would come from the Lido Ecosystem Grants Organization, a program Lido’s governance kicked off in March. Chorus One’s requested a compensation package including 2,000,000 vested LDO tokens and a revenue-sharing model that would entitle Chorus One to 20% of the revenue from protocol fees that would go to the Lido treasury.

The milestones for Chorus One’s vesting unlocks are notably ambitious, including a 1 year cliff to “capture 2.5% of the staked SOL supply,” as well as 1,000,000 tokens scheduled to begin a one year vesting schedule “when Lido for Solana manages to capture 25% of the staked SOL supply.” The proposal notes that Chorus One is currently the largest SOL staker with $600 million in tokens.

A representative for Lido told Cointelegraph that an expansion could be a boon for the protocol’s income.

“For the Lido DAO, an expansion to liquid staking on Solana could bring with it a similar protocol fee set-up as we’re currently seeing with stETH/liquid staking on Ethereum, whereby a 10% fee on staking rewards is collected and split between node operators and the Lido DAO treasury (e.g. to grow an insurance fund),” they said.

They also noted that the door remains open to expanding to other Proof of Stake chains.

“Lido has a very simple mission – keep Ethereum staking simple, secure and decentralised – and we will look to extend this to other networks where possible,” they said.

Per Lido’s website, the services currently accounts for 256,964 ETH staked (worth over $700 billion) across nearly 5000 addresses earning 7.1% APY, and is the third-largest staking pool currently live per Nansen. While estimates vary, once ETH 2.0 launches, the APY rewards are expected to increase significantly.

Lido’s $LDO token has been on a tear as of late, rising 54% on a 24 hour basis to $2.9 and 216% on the week — a run possibly fueled by another governance proposal that would diversify a portion of the treasury to a group of notable venture capital funds, including Delphi Digital, Digital Currency Group, Three Arrows Capital, and Alameda Research.

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