The History and Power of Non-Fungible Tokens (NFTs) in Social Apps

The History and Power of Non-Fungible Tokens (NFTs) in Social Apps

In the world of blockchain and cryptocurrency, non-fungible tokens (NFTs) have gained significant attention and popularity. NFTs are unique digital assets that can represent ownership or proof of authenticity for a particular item or piece of content. They have revolutionized the way we think about digital ownership and have opened up new possibilities for creators and consumers alike.

The concept of NFTs can be traced back to the launch of CryptoKitties in October 2017. Axiom Zen, a Vancouver-based company, introduced CryptoKitties on the Ethereum blockchain using the ERC721 standard. While ERC20 tokens are commonly used for various functions on Ethereum, they are not suitable for creating unique tokens. ERC721 was specifically designed to address this limitation and enable the creation of non-fungible tokens.

Before the rise of CryptoKitties, there were other early examples of NFTs. Colored Coins, for instance, can be considered the first NFTs to exist. Colored Coins are bitcoins that were part of the "Genesis transaction," making them unique and distinguishable from regular bitcoin transactions. This example highlights the desire for unique digital items and the need for a technical standard like ERC721 to track ownership and movements of individual tokens.

Another notable NFT project is Cryptopunks, created by John Watkinson and Matt Hall. Cryptopunks introduced unique characters generated on the Ethereum blockchain. Interestingly, Cryptopunks do not strictly adhere to the ERC721 standard, as it had not yet been invented. They can be described as a hybrid of ERC721 and ERC20, combining the benefits of both standards.

The success of CryptoKitties and Cryptopunks led to the emergence of Dapper Labs, a company spun out of Axiom Zen. Dapper Labs secured $15 million in funding from top investors, including a16z and Google Ventures. This further validated the potential of NFTs and their ability to create valuable digital assets.

Beyond the realm of blockchain and cryptocurrency, social apps can also benefit from benchmarking their growth. When measuring growth, it is crucial to define your core metric. For most consumer social apps, daily active users (DAUs) are the primary metric of success. The goal is to have people using your product every day. In some cases, weekly active users (WAUs) can be an acceptable starting metric.

To benchmark monthly user growth in seed-stage consumer social companies, the following ranges can be considered:

• OK: 20%
• Good: 35%
• Great: 50%

Organic growth is essential for social apps, as they often cannot monetize until later stages. If a significant portion of users are coming from paid sources, it may indicate a flawed acquisition strategy. It is crucial to ensure that growth is driven by the product itself, not just marketing efforts.

Another important metric to consider is the ratio of daily active users to monthly active users (DAU/MAU). Best-in-class social apps have an L-ness curve that "smiles," indicating that users are making the product a regular part of their life. For a weekly L-ness curve, focusing on L5+ (users in the app five, six, or seven days a week) can indicate near-daily use behavior.

Retention is another critical metric for social apps. N-day retention, or bounded retention, measures what percentage of an original cohort enters the app on specific days (e.g., d1, d7, d30). The benchmarks for n-day retention are as follows:

• OK: d1 50%, d7 35%, d30 20%
• Good: d1 60%, d7 40%, d30 25%
• Great: d1 70%, d7 50%, d30 30%

It is important to note that the slope of the retention curve may flatten after a certain period, indicating a plateau in user retention. For companies transitioning from a tool to a network, weekly retention may be relevant. The benchmark for weekly retention is as follows:

• OK: w1 40%, w4 20%
• Good: w1 55%, w4 30%
• Great: w1 75%, w4 50%

When evaluating social apps, it is crucial to analyze metrics over time and observe trends in cohort performance. A strong social app should exhibit stable or improving metrics cohort by cohort, indicating the presence of network effects.

In conclusion, NFTs have transformed the digital landscape by enabling unique ownership and authenticity verification. The success of projects like CryptoKitties and Cryptopunks has demonstrated the potential of NFTs in creating valuable digital assets. Benchmarking growth in social apps is also essential, with metrics like DAUs, WAUs, DAU/MAU ratio, retention, and cohort analysis playing a crucial role. By understanding these metrics and striving for continuous improvement, social app creators can unlock the power of their platforms and create a thriving community of users.

Actionable Advice:

1. Focus on creating unique and valuable digital assets that users desire. NFTs have shown that people are willing to invest in and trade digital items that are one-of-a-kind.
2. Prioritize organic growth and ensure that your product itself drives user acquisition. A strong product with inherent viral features will naturally attract users and lead to sustainable growth.
3. Continuously analyze and improve key metrics like DAUs, retention, and cohort performance. By understanding user behavior and preferences, you can make informed decisions to enhance user engagement and satisfaction.