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Facebook (now Meta) did everything it could to maintain its monopoly in all its history. Could it do the same with NFTs?
NFT investors are ecstatic as major social media companies finally come out with major NFT integrations. Twitter, a significant hub for NFT users, was the first to roll out the feature.
NFT owners can now showcase their NFT profile pictures with a particular hexagonal shape. That way, users can instantly see whether that Bored Ape picture is legit or just “right-click-saved.”
What is more, more social media companies are will soon follow. Reddit and Discord have been working on a similar concept since 2021. Now, Meta is joining the game as well. As a result, users may soon create NFTs sell and showcase them on Facebook and Instagram.
Social media integrations are a big deal for NFTs. NFT owners want to show their collections to their offline and online friends. They also want these platforms to verify real NFTs from copied images.
However, social media could also spell the downfall for NFTs. Fundamentally, centralized platforms don’t jive well with NFTs. In no case is this more obvious than with Meta.
NFTs and the Blockchain
What are NFTs all about? Unlike some may tell you, these are not just glorified JPEGs you can gamble your money with.
Like crypto, NFTs are a blockchain product, a permissionless, decentralized ledger. The blockchain promises to end our reliance on centralized authorities, both corporate and governmental.
NFTs are all about decentralized digital ownership. The concept is simple. These “non-fungible tokens” are entries on the blockchain. On the blockchain, there is no single entity in charge of it.
Whether Google, Meta, or Twitter, no corporate entity can take your NFTs away from you.
This is a big deal. There’s a reason why NFT buyers should not rely too much on centralized platforms. To understand that, we should look at what centralized digital ownership looks like, for example, in online gaming.
Every year, gamers spend $50 billion on in-game items. Some of these are cosmetic, like skins. Others give some boost to the player. In either case, the players’ ownership of these assets goes only as far as the devs want.
Gaming developers have complete control over how the player uses these assets. For example, they can change these items’ stats, change how rare they are, or even delete them from players’ inventories.
A player that gets banned from the game can say goodbye to his assets. That’s even if they spent thousands of dollars to get them!
NFT owners don’t want social media companies to have the same power over their NFTs. However, they might get there.
Profits Over Decentralization
Even with the first Twitter release, we already see corporate incentives at play. For example, Twitter will only let premium users use NFT verification.
That means that Twitter users don’t just have to pay for their NFTs to showcase them. They also have to pay $2.99 for Twitter Blue. That alone is a sort of an invalidation of the decentralized nature of NFTs.
And that’s from Twitter, a company whose former CEO Jack Dorsey is a true believer in blockchain and decentralization. Unfortunately, other companies will likely come up with even more egregious monetization schemes.
To Dorsey’s credit, he doesn’t call all the shots. As in other major big tech companies, founders have to keep shareholders happy. So Dorsey has made plans to make Twitter more decentralized. One of these initiatives is Blue Sky, an open-source protocol aimed to decentralize social media.
Twitter is funding a small independent team of up to five open-source architects, engineers, and designers to develop an open and decentralized standard for social media. The goal is for Twitter to ultimately be a client of this standard.
However, he admitted that this was somewhat hopeless. Twitter, he said, is a centralized entity, and it has the wrong incentives for the job. Dorsey himself acknowledged that during his recent Twitter fight with Web 3 promoters.
Twitter started as a corporation. It’s had corporate incentives from day 1. It’s trying to offset those, and it will, through @bluesky
In some sense, any founder has his hands tied. Venture capitalists and other investors fundamentally care about just one thing: profits.
As tech companies grow larger, investors gain an ever more significant share of the company. With it, they gain majority control. That’s the case for almost all big tech companies – except Meta.
Zuckerberg’s World Domination
Meta is the only big tech company under complete control – Mark Zuckerberg. No other tech founder holds the majority of the voting shares of a major tech company.
To maintain control over the company, he has split the company’s shares into two classes. Class A is for regular investors, while class B has privileged voting rights. Specifically, they get ten votes per share.
Meta CEO has 75% of all class B shares. That means that despite owning only 14 percent of all shares, Zuckerberg still holds 58% of the vote.
That is why industry analysts call Zuckerberg the most influential person that ever walked on Earth. Of course, his role in Meta is precisely the opposite of what NFT owners would want. But even that’s not enough for him.
It’s not just that Zuckerberg is not giving away control of Meta. Meta itself is doing everything in its power to retain control over the market.
That includes buying up smaller companies. So, for example, when Facebook’s growth started slowing down, and Instagram picked up, Facebook bought up Instagram. The same happened with WhatsApp.
Facebook has a history of buying up smaller companies that compete with it. The social media giant bought a whopping 78 companies in the last 15 years!
This includes $2 billion for VR projects Oculus and $500 billion for CTRL-labs. However, they also bought a lot of other, more minor apps.
They bought a VPN app Onavo, potentially to get more data on mobile users. Moreover, they bought Face.com, a facial recognition company, for obvious reasons.
Other acquisitions were closer to their original business model. For example, when they bought LiveRail, a video monetization platform.
Meta: A ‘Crypto’ Monopoly
Its practice of buying up smaller companies has made it a target of U.S. regulators. They, as well as many prominent U.S. politicians, accuse Meta of monopolistic practices.
For example, in August 2021, the Federal Trade Commission refiled its anti-trust case against the company. The FTC said that the platform has a “durable monopoly power in social networking services.”
Lacking serious competition, Facebook has been able to hone a surveillance-based advertising model and impose ever-increasing burdens on its users.
Just like an actual venture capitalist, Zuckerberg puts growth and profits first. And he shows no signs of stopping. Soon, he may move that model into the blockchain.
Specifically, Meta recently made news by announcing they want to move into the “Metaverse,” which accompanied its name change.
The Metaverse is a series of virtual reality worlds running on the blockchain. NFTs will be crucial building blocks of it. That’s why Meta’s involvement in NFTs will likely be massive, which could cause problems.
Meta’s crypto ambitions go a long way. In 2019, the company announced its ” wildly ambitious plan to bring cryptocurrency to the masses” – Libra. It was Facebook’s stablecoin to be available for use on the platform.
After receiving severe pushback, the company shelved the project to bring it back as “Diem” a year later. Facebook – or Meta, has a habit of rebranding after getting bad press.
NFT Endgame – Back To In-Game Assets?
So far, Meta has announced its crypto, its NFT integration, an NFT marketplace, and the Metaverse. These are all the building blocks to take over the NFT space from the bottom up.
Soon, it will start competing with exchanges like OpenSea and blockchains like Ethereum. At first, Meta might adopt an existing standard for buying and selling NFTs. Think Ethereum ERC-721 standard.
But soon, it might let users mint NFTs on its blockchain network. Moreover, it might let users port Ethereum NFTs to Meta’s blockchain.
Soon enough, Meta might start using its position as a powerful social media platform to coerce users to port their NFTs. They might steer users into using their own NFT standard.
Other major tech companies might do the same. What is worse, they may start feuding. For example, Meta could decide not to show Google NFTs, just like it doesn’t want to show YouTube videos. Soon enough, platform-specific centralized blockchains could dominate the NFTs’ space.
NFT owners should not rely too much on centralized platforms, especially social media. On the other hand, decentralized social media cannot come soon enough.