How to Cold Start Network Effects for Your NFT Project in 5 Steps
NFT projects face a hurdle when it comes to cold starting a community building exercise.
The challenge is compounded as few people understand NFTs to the level where they feel comfortable spending time and money on them. FUD is high in crypto and NFT space and a barrier that must be overcome. Community building efforts are also challenged by adverse news events around rug pulls, people losing NFTs to phishing, social engineering, bad actors exploiting loopholes at centralised platforms and more. While every industry has its set of bad actors, news around digital token hacks tend to get a lot of attention. As a project owner, one must operate within the industry construct. Thus, building trust, forms the corner stone to building a great community.
Network effect refers to any situation where a user derives utility when a large number of other users, buyers, sellers or compatible products, services join the network. Apple ecosystem creates value for its users when more app developers join the ecosystem. Phones have value when a large community has them. As these externalities increase, so does the value to the individual user and the community at large. However cold starting one is no mean task.
Avoid pseudonymous founding teams
BAYC founders were anonymous until they were doxed by Buzzfeed in February 2022. BAYC was already a runaway success with Apes trading for millions of dollars. Blockchain, the technology that underpins cryptocurrencies and NFTs is a public ledger that holds all transactions. This is one of the reasons cited by founders to keep their IRL identities separate. Argument is not without merit.
On the flip side, a pseudonymous identity is an invitation for bad actors to carry out rug pulls once the funds are in. An alternative is to form a DAO (decentralised autonomous organisation) and yet a DAO is not an end in itself. Linking IRL identities to DAOs remains a challenge. There is no easy answer, and it is up to the team to take a final decision. There is an increasing expectation from the community that the team behind the project be known. Start with trust.
Build a minimum viable community (MVC)
Unless you are a brand, influencer, artist, athlete with a large fan following, you need to build a minimum viable community that believes in your vision and your capability to execute.
In the NFT space, MVC is your MVP
On-board an influencer who believes in what you are doing. This indirect network effect can put the much-needed wind beneath your wings in the initial stages. Quite a few projects use give-aways. whitelists, reserve lists as tools to get attention and social media following. Incentive based approach is great for visibility, but it also attracts those who are in it to flip and exit on mint day. Focus on quality. If you are struggling with MVC then the project may need a re-think.
Once a critical mass is reached, the bandwagon effect will take over and positive reinforcements will fuel onward growth. So, focus on building a strong MVC at start.
Its early days. Understanding is limited. People are a little fuzzy about the metaverse and NFTs and are seeking information.
Where we stand today, it is exceedingly difficult to over communicate
Every fear hides a wish, wrote David Mamet in the play titled 'Edmond'. Lack of knowledge coupled with FOMO is a lever to be used to advantage. Address the fear, communicate, and get them onboard. Authentic and open communication builds trust. Conduct AMAs regularly. Communication builds community.
Responding to comments, suggestions, elevates users experience and encourages them to share more. Appreciate good content. Go beyond the like button, comment and share. Use Discord to create separate servers for the community to share memes, fan art, information on other projects of interest and more. Common interests build communities.
Appoint mods who have been active in the community. Discord servers can be a treasure trove of great ideas.
An engaged community is a competitive advantage and an indispensable part of successful project
Build partnerships early
Partner with other projects that compliment your road map and bring in believers from their community. Indirect networks via collabs. bring value to all partners and help build credibility for the team and in its execution capability. Brand partnerships have a great rub-on effect and are a terrific way to demonstrate acceptance of your project even before it is launched.
Neuno, a marketplace for digital wearables and collectibles is one great example of building partnerships early. Deadfellaz, Giuseppe Zanoti and Diesel were onboarded early with airdrops executed for DF and GZ for 500 OGs. It is challenging to cold start a community but not impossible. Just keep it simple and stick to the basics and people will find you and join you.
In conclusion, staying above board versus pseudonymous identity is a great first step.
A crypto punk for a PFP is cool, but more human like credentials are desirable via a visible profile
Being authentic, listening to the community, communicating effectively and getting a few collbs going is half the work done. Network effects will take a bit of time to kick in.
Keep chipping at it.
[This article was first published on LinkedIn on 08Apr'22]