Market analysis

The NFT projects building a new type of venture capitalism

6 min read

Digital assets are no longer just a type of investment. There is something bigger building in this space that has the potential to revolutionize the business landscape as we know it. Behind the scenes, there is a movement of digital asset communities being built that have a great deal of buying power behind them, and can therefore influence the future of nascent cryptocurrency projects.

Whether building gaming, digital asset infrastructure, or just a high-end exclusive club, projects such as Bored Ape Yacht Club (BAYC), CyberKongz and The Doge Pound are about much more than just digital art or short-term gains. This trend is particularly evident at the intersection of NFTs and gaming. Koin Games Dev Squad and Neo Tokyo stand out as examples of those focused around the idea of building a strong community of like-minded individuals, who are able to share ideas and resources to build something together. 

A new gaming experience

Founder of Koin Games Tim Jooste is building a community of experts and fans to build a play-to-earn blockchain game where players have ownership of everything they have collected, looted or created. But this isn’t all: early joiners have the opportunity to truly influence the development of the game, from design to gameplay. Jooste invites those interested to join “the Koin Games family” – the Koin Games Dev Squad. 

Entry is facilitated through the purchase of an NFT – one of 5,555 custom Avatars, which can be purchased on OpenSea – the main platform where NFTs are traded. The floor price (the lowest price at which an NFT can be bought) is currently 0.54 ETH, or a little over $2,000 at current prices. Owning a Dev Squad NFT gives users a $1,000 allocation into the seed round of the Koin Games’ token as well as special access into its community.

READ: NFTs are bringing the mainstream to crypto in a way Bitcoin cannot

Similarly, Shadowy Super Coder DAO is an NFT project that isn't really about the digital art at all. Set up by GenesysGo, a provider of uber-fast Remote Procedural Call servers (RPCs) to the Solana network, the NFTs are essentially an alternative source of funding for the project itself. Once GenesysGo has its Initial Coin Offering (ICO), holders of each NFT will receive 10,000 tokens. And if some predictions are to be believed, this could be worth upwards of $100,000 once the project is fully developed. 

Bored Ape Yacht Club (BAYC) is another example of an NFT project which adds value through exclusive access to a closed community. BAYC comprises a collection of 10,000 NFTs that act as both an avatar and an entry ticket to an online social club which is quickly becoming a real world brand and status symbol, with meetups and get-togethers already taking place in New York, California, Hong Kong and the UK.

Building a community

The list of projects doing this goes on. But while the cost of entry into Koin Games is quite affordable at this stage, not all projects can be accessed so easily. One that has seen the price of its NFTs soar to prohibitive levels is Neo Tokyo. Set up by two crypto YouTube influences, Alex Becker and Elliotrades, Neo Tokyo has been shrouded in mystery from the start, which is perhaps responsible for its quick popularity. 

Neo Tokyo was in fact initially launched as a free to mint NFT project, but getting one’s hands on a Neo Tokyo “Identity” NFT at launch was no easy task. To be whitelisted, hopefuls had to navigate their way through weeks of clues and hints by Alex Becker. Entire communities formed to try and solve these clues together, hoping for a chance to make the cut.

In just a couple of months, the value of its lowest-price NFT “Identities” has sky-rocketed to 16.55 ETH ($75,913), according to OpenSea, while becoming a full “Citizen” of Neo Tokyo now sits on a floor of 31 ETH ($123,242). Despite this, leaders from across the crypto space are paying for membership in this exclusive club of like-minded people. The aim of the game is to develop “a culture of long-term participation”, according to founder Alex Becker.

As the price of entry into such projects goes up, the communities tend to undergo a natural change. Those who were simply in it for the monetary gains cash out, while those with enough money to spend and great interest in the project replace them as key members of the community. These members are less interested in short-term profits and more dedicated to remaining invested in the project long-term, with all the benefits this entails. 

Decentralized venture capitalism

What does this mean for the status quo? Communities like these mark the beginning of a new type of decentralized venture capitalism, where those that are most passionate about a particular project are in a position to provide the seed capital to help it grow. By holding these NFTs, the community members are the ones awarded seed allocations instead of traditional VC firms. 

In fact, some projects are on the path to becoming established VC players. They can do so by forming a decentralized autonomous organization (DAO) and participating in ICOs. This ensures alignment of interest between the project and its supporters that is far fairer than the terms often offered by large and established corporate VC players. As such, these communities are in a position to wield a lot of power in the digital asset world. 

Too much power?

Naturally, the ability of such communities to sway the fortunes of digital asset start-ups also sparks certain questions. Chief among those is whether this amount of buying power could be abused, for instance by setting up “pump and dump” schemes that support worthless projects for the sake of monetary gains. However, the best of these communities do seem to have a long-term focus on building a reputable brand and creating strong foundations for new projects they want to see succeed.

READ: How and why did NFTs survive the crypto downturn?

As with anything else in the digital asset realm, however, such concerns are not unfounded, and investors should never buy into a project without doing their own research, even if a reputable community does support it. Finding out as much as possible about the community in question and its intention can help.

For new cryptocurrency projects, meanwhile, the growing power behind such communities can be a great asset during the start-up process. It provides those with a truly valuable offering with more choice of partners and could revolutionize the venture capitalism space forever.

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DISCLAIMER: The content of this article does not constitute financial advice and is for informational purposes only. The price of digital assets can go down as well as up, and you may lose all of your capital. Investors should consult a professional advisor before making any investment decisions.


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