The 2021-2023 NFT Retrospective - Chapter 3: Mausoleum for a Burned Ape
Chapter 3/4 in a deep analysis of the '21-'23 NFT cycle and the brutal reality of what was bought
Do you remember PXN? What about FLUF World? What about Raid Party? Or Ragnarok? Impostors? Valhalla? NFTiff? DefiApes? Seekers? Meebits? HyperBears?
We spent well over $7B on minting NFTs and with secondary sales. Many of these had no future, and we should have known better, but there is a silver lining somewhere in this pain… I swear.
This is the chapter that will make you feel angry, sad, and confused about why we minted so much garbage. Prepare yourself.
Preface
I started this work almost 8 months ago to analyze and come to terms with the rollercoaster of ‘21-’23 for NFTs. I published two longform Twitter threads that covered some of the analysis in this document.
I had assumed that a large number of projects would start to lose steam and being able to assess what narratives had failed as well as what the future might entail would be timely alongside that. Well, after 8 months of waiting, we have finally gotten through the slow decline of ‘21 era NFTs.
The decline in confidence in BAYC (standard bearer for the ‘21 cycle) together with other recent news has led me to dust off this work.
The goal here is twofold:
To learn from the good, bad, and ugly of ‘21
To point towards the potential of NFTs in ‘24 and beyond
There will be a total of four chapters that I will release over this week. This post covers chapter 3, chapter 1 should be read first which you can find below:
Users & Scale: ~650K users spent $6.5B on NFT mints
Trapped in a Casino: The majority of users & funds never leave crypto
Mausoleum for a Burned Ape: IP narratives dominated with glimmers of hope for Art
Against the Mainstream: A new path for “NFTs” in ‘24 and beyond
Chapter 3: Mausoleum for a Burned Ape
The IP and metaverse narratives are beyond dead — it’s time to wake up
The 2021 to 2023 NFT cycle was insane. We all know it. We all have war stories. You couldn’t buy and sell projects fast enough. You had some inkling that things were not going to continue to go up forever, but you just had to keep up with the market.
It wasn’t just nihilism. A lot of the projects people were buying, they legitimately believed in. Some of it was new, some of it seemed excited, and some of it contained promises that couldn’t be delivered. I think it’s important to declare that all of the foolishness was not just nihilism. There was a real belief in some of these objects.
One way of looking at it is the “Green Candle” effect — a concept I developed in thinking about market narratives in 2024 — to describe the way that exuberance towards a certain product in crypto produces a real feeling of belief in a narrative.
Another way to look at it is that crypto recruits people to suspend their disbelief. This isn’t merely a cult-like behavior, instead it is a kind of superpower. Could you believe that people could value a digital object that represents your identity in the metaverse? Yes I can believe that. And I don’t think people fundamentally are wrong for thinking this way, but it was the first time many were encountering it and signal vs noise was difficult to see through.
And then of course, there was nihilistic trading too. All of this is a slow wind up, but I want to take away some of the gut reaction to simply say the ‘21-’23 cycle was stupid.
The fact that the cycle was possible reveals the power of crypto even if we may now reflect and, hopefully, learn from some of the stupidity.
Now, let’s look at the cold hard facts.
The Narratives: IP, Metaverse, Art, Utility
As I looked through the 4,269 projects that generated over 100 ETH in mint fees and royalties, I was surprised by how neatly most projects fit into one of these four categories: IP, Metaverse, Art, or Utility.
This should be somewhat intuitive if you experienced this market first hand. Let’s take a look at the list of top projects just to give some context.
A few things stand out here as you start to look at the top 25 who collected roughly $2B:
Art platforms had a surprisingly strong presence in the top slots
IP and PFP was a key narrative but was disproportionately dominant in the below top 50 category
Metaverse was disproportionately pushed by larger organizations
Pixelmon, the most iconic rug of the cycle, is the only true “gaming” project on the chart (perhaps Otherside could be this as well)
So, the IP narrative that dominated… Was it authentic? Was it arbitrary?
Yuga represents the hype and mega financialization of the entire 2021 narrative as well as an attempt to become All Narratives.
The PFP and IP narrative was “easy” and flexible. PFPs had been established as the key form for NFTs with Punks. The added “spin” was IP rights and savvy Web2 style Twitter marketing. And when it worked… you had a storm of narratives, primarily grounded in “mainstream adoption.”
We all know this intuitively. And it’s easy to pick on Yuga Labs.
What’s interesting, however, is that over time these narratives warped. Yuga Labs needed to rise to the massive valuation, and that means selling more stuff. What do you sell? You sell against all of the narratives.
So what do we get?
Paid airdrop model to generate outsized ETH, expand reach, extend dominance of liquidity amongst holders
Acquire competitors that have legacy, genre defining, historic credentials
Take on tertiary markets / segments (metaverse, gaming) as a hypothetical organic “business model”
The path of Yuga Labs mirrors the shift of the entire space towards a money printer for holders, executives, VCs, and anyone who will give it time of day. When expectations for return are high, what do you do? You work to sell more and more to the 600K degens with the $7B to spend.
The 2021 values of open permissionless digital collectibles turned into 2022’s mint maxing, metaverse, airdrop, profit maxing. The four categories stated earlier are made less and less relevant. By the end of the cycle, everything is everything.
Consider CryptoDads which came out in 2021 with the somewhat laughable concept of “Bob’s Burger rip off for dads in crypto.” This is them now:
So, something happened where all of the categories blurred… I’m picking on Yuga, but recall that this happened with Larva Labs and Meebits. Why do Meebits exist? Why are the Meebits dancing? Why do they look so ugly? No one knows, but there’s a metaverse and that sounds like a good thing to sell.
I often find myself getting caught in the trap of trying to “refute” these narratives… Could you really ever create a sustainable business selling IP based toys or generating $STEAK yield? Maybe, maybe not, but this is largely a trick. The metanarrative has collapsed and is anything or everything — “if you’re in Metaverse, pivot to IP.”
Now that we have established that the “categories” may not be important. Let’s focus on looking at the long tail because this is the interesting part.
Good, Bad, and Ugly: It’s Actually Permissionless
Normally when there’s a giant monopoly with infinite money and all of the attention… it becomes really really hard for any of the little guys to compete.
Here’s the beauty and terror of permissionless systems:
Despite a small pool of participants, a large number of projects were able to get traction as we all know. There’s good, bad, and total scams. Let’s take a quick look at some random projects from our list.
Looking at the various projects on the list should elicit some memories — good or bad. I think one of the interesting parts of the cycle is the ability for ANYTHING to receive interest and attention. There was a recipe for sure and a lot of that recipe was gate kept by an influencer class. But there were still break outs that feel good to see… And some weird experiments that might be funny enough to feel okay.
It’s easy to obsess over the frustrating ones (Pixelmon, Raid Party, CPG Pop), but consider that there are interesting experiments that got enough money to have a small team live on for a year or two. This is a secret power of crypto.
So, where’s the big reveal? Where’s the witch hunt?
It’s not here, but there is something that is important… It’s time to put the Ape to Rest.
Towards a Future… Prelude to Chapter 4
If NFTs have a future, they require progress. They require development. They need a culture. They need a form of progression. Crypto is all encompassing, it’s a world. We stay in crypto for a reason. That reason is beyond “just money.”
If this is going to be a World of its own, it needs to carry seeds of long term futures.
NFT projects need resistance to the narrative collapse function where it all becomes shitcoins with seventy levels of utility and narrative.
There are signs of true long term thinking, visions and culture being landed on chain in all kinds of places…
Consider Cryptoadz anti-financial ethos, Terraform’s systems proto-futurism, Art Blocks or Super Rare’s cleaving of massive funding, Goblintown’s performance, the experimental young artist minting new work on Manifold, Larva Labs landing CryptoPunks, Parallel developing a quality TCG against all odds in this industry, emergent SWAG on Solana, Autonomous Worlds onchain, and of course dear to my heart, WAGDIE burning everything down.
There are infinite areas of experimentation and cultures that can resist the hype and churn. They may or may not accrue value, but we are here to live — not just create financial returns.
What if a larger fraction of this money went to people creating sustaining and meaningful work here? Can we have 30% spent on interesting, thoughtful, reasonable work? 40%? 50%? 60%?
The best part is that we control our own destiny. There is no invisible hand of the market. There are 600K people who live here. Let’s build something meaningful, and there may even be room for the old narratives as well as new ones.
We don’t need to dwell on 2021. It’s time to place the Burned Ape into the Mausoleum. It’s a place of respect and reverence for those whose time has passed.
ApeSquad Laser Eyes Golden Volume Rainbow Class of ‘23, Out.