Crypto exchange platform Coinbase’s new second-layer blockchain technology, Base, could revamp the non-fungible token marketplace for brands and consumers alike by boosting the efficiency of transactions.
But there’s a big problem — many people consider NFTs to be at the end of their hype cycle, and Base may not do enough to address those concerns.
In the simplest terms, Base, which launched in early August, sits on top of a blockchain such as Ethereum and shares some of the load, reducing the time and money it takes all parties involved to complete a transaction such as an NFT purchase.
While the promise of an all-around more efficient blockchain may sound appealing to those who already have a wallet, it does little for outsiders who barely understand what an NFT is, says Rob Davis, chief digital innovation officer at MSL.
“NFT is still such a dirty word,” he says. “It’s still difficult to get over that hurdle of ‘that NFT and metaverse stuff is done; that came and went during the pandemic when everyone was home.’”
NFTs, and thus Coinbase, still suffer from relying on tech that’s difficult to explain and a compendium of jargon that means little to laymen. Paired with lawsuits surrounding regulation and the collapse of FTX, and the promise of optimized tech that reduces fees for high energy usage is easy to ignore.
Brands haven’t totally given up on NFTs, though. As part of Coinbase’s minting festival, Onchain Summer, celebrating the launch of Base, brands including Atari, Showtime and, most notably, Coca-Cola, dropped NFT collections.
Marketing execs were critical of Coca-Cola’s drop, which transformed artwork from its AI-generated ad Masterpiece in NFTs, stating that the brand had turned its art into “just another unremarkable .jpeg.”
Coca-Cola reported that its “Masterpiece” NFT collection sold $543,660 across more than 80,000 minted copies.
But given the insular nature of the NFT community, marketing execs find it difficult to imagine that Coca-Cola and Coinbase aren’t just preaching to the choir by pushing more digital artwork with no function into the market.
“The fundamental problem with NFTs is it’s such a small, insular and hard-to-penetrate audience,” says Max Lenderman, chief experience officer at GMR Marketing. “The frothiness of that marketplace for the past two years was ultimately kind of ponzi-esque because it’s such a small amount of people for such a large amount of money.”
Between 2021 and 2023, around 650,000 people with a total 2.1 million wallets coughed up the $8.1 billion that was spent on NFTs, according to an analysis from Overpriced JPEGs.
“Fundamentally, the problem is still in that ecosystem,” Lenderman says. “We haven’t cleared the pathways from a user experience and user interface perspective for easier adoption.”
Reaching consumers on the outs with crypto means using blockchain tech in a way that’s obviously useful, Davis said. He pointed to Starbucks Odyssey, a rewards program that uses NFT stamps to collect points and earn rewards such as virtual classes and rewards, as the gold standard.
Starbucks dropped its Green Apron Stamp at the beginning of the month. However, even Starbucks may be struggling to peddle NFTs to nonbelivers, as there are a bit over 2,000 unique owners of the stamp, priced at $110, according to Nifty Gateway.
Base may be the best chance yet for shattering the crypto echo chamber, or at least to convince skeptical clients that there’s value in the new tech. Coinbase isn’t the only layer-two provider, but it is one of the largest with about 100 million users in 2022. With brands as big as Coca-Cola taking advantage of the new tech, eyes are back on NFTs, at least for now, making consumer engagement a potential pitching point.
“It shows the power of Coinbase,” says Funs Jacobs, senior director of innovation at Media.Monks. “Such a big company doing this is helping the whole industry forward.”
However, Base also struggles from being buried under an avalanche of investments in artificial intelligence, and the only way it might find its way out is by discovering points of intersection with the headline-grabbing tech, Davis says.
“It’s going to be an uphill battle,” he says. “The negativity around it is real, and AI has sucked all of the oxygen out of other conversations. The answer is where do they converge? Where do brands start seeing NFTs, AI and other tech that’s been on the shelf for the past few years coming together in ways that make them more exciting for the consumer?”