Bullish on Redeemables
Diving into one of the most promising NFT use cases
There are three kinds of people left in the NFT industry:
Multimillionaires with gambling addictions doing their best to lose their fortune on Rollbit, shitcoins, and the NFT of the moment
Washed up entrepreneurs hoping that being early to blockchain will restore their former glory
Overpriced JPEGs readers.
The latter might be best described as forward-thinking leaders, artists, and creators interested in market trends tinged with a smattering of degen culture. In short, the best people around ;)
What all of us share, however, is the burning desire to know when and how this damn bear market will end!?
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At the end of last year, I made a bet on redeemables when I launched our OPJ NFTs (redeemable for 1 bottle of Overpriced Jin – geographic restrictions apply) because I believed there was a massive and promising market for digital twins of physical goods and that these will serve as one of the many Trojan horses to get the broader public into web3.
I still believe this.
So I have been intrigued and excited to see how much recent attention OpenSea seems to be paying to the redeemables market – beginning with this Tweet thread (X thread?) from OpenSea CEO, Devin Finzer, a couple months back.
If ever there was a company with a strong incentive to figure out what’s next?! in the NFT market and then lead that charge, it’s OpenSea.
From their recent Puma x Gutter Cat Gang x LaMelo Ball sneaker drop, which required entirely new e-commerce-like back + frontend infrastructure and which we spoke about last week on Overpriced JPEGs, to the MNTGE Patchworks drop, to the Invisible Friends physical collection – OpenSea is signaling a strong interest and belief in the redeemables use case.
What’s more, digital → physical redeemables (phygital) are only one part of this equation. “Redeemables” as a category encompasses so much more than many realize and has already left a huge mark on the NFT industry from PFPs to art to gaming. Think:
Claim (aka redeem) your dog from the Bored Ape Kennel Club using your existing BAYC
Burn two of Jack Butcher’s 80-check Checks to redeem a 40-check Check (try saying that 5 times fast)
Redeem a Parallel Alpha Access Pass for access to the Alpha version of the game.
The redeemable category – which arguably launched in full last year when a team of devs published an EIP introducing the necessary extension to turn an NFT into a redeemable NFT – can involve a physical item, or not, a burn mechanic, or not. It’s truly one of the most flexible tools creators have.
Given all this, it's time we start paying more attention to redeemables. So here it is: five reasons we love redeemables and why you should too.
1. Builds a Stronger Customer Relationship
In the past, much was made of the idea that NFTs are an ownership stake in a brand or business. As we know at this point, this … isn’t … really true. Certainly not in a legal sense.
Redeemable NFTs make no such claim. What they do do is build a digital connection between the brand and the individual, allowing the brand to build out even more interesting and unique customer experiences, enabled by the NFT, that go beyond even the utility of the original product – whether that’s invitations to future brand events, a first pass at purchasing products, or discount codes for existing goods. Some redeemable NFTs are exchanged for an entirely new item, while others allow holders to keep the NFT in the redemption process.
In our case, issuing an NFT for a bottle of gin gives us the opportunity to know more about our specific, individual customers than any typical spirits brand ever would.
Spirit brands, in particular, rarely have a direct connection to their consumers, instead working through retail stores, bars, and distributors to meet each state’s many and varied liquor laws.
But by issuing a redeemable NFT first, we have the potential to actually learn about the other specific interests and spending habits of our Overpriced buyers – opening up the possibilities for future collaborations with other projects or artists we see our holders favor. In this way our holder’s interests are made public, while their identities can remain private.
And this proposition becomes even more interesting, of course, as more web2 brands issue NFT redeemables or, at least, NFT receipts that allow us to see the broader brand habits of our audience.
2. Determining Demand Up Front
One of the most powerful arguments for digital > physical redeemable NFTs is waste prevention.
At OPJ, we quite literally couldn’t have launched a line of gin without NFTs. We couldn’t have afforded to manufacture 5,000 bottles, only to have 1,200 sell. Nor would we have wanted to produce 200 bottles and leave 1,000 fans in the lurch.
For any project – luxury or novelty projects in particular – determining demand up front ensures not a single product goes to waste.
For a long time, folks were so focused on the idea that NFTs are bad for the environment, that many didn’t realize the ways it’s good for it.
3. Secondary Trading + Longevity
NFTs, like the blockchain, will outlive us all.
A digital good – unlike your Coach bag or Rimowa suitcase – is immune to the vicissitudes of real life (spills, breaks, purges).
It’s also much more powerful for secondary markets in industries where collecting, trading, and value storage is common (sneakers, baseball cards, art, luxury spirits).
Rather than shipping your $150,000, 175-year-old whisky bottle, from buyer to buyer, individuals can trade the NFT – redeeming for the physical product only when it's actually ready for use, thereby protecting the end product, saving your closet space, and keeping it around for longer.
In our case, our OPJ NFT will stick around long after the bottle of gin itself has gone (unless of course you keep it decoratively, which we wouldn’t blame you for cus it’s 🔥🔥).
This is cool for posterity, as a digital scrapbook of the things you own, but also is what allows that customer <> brand relationship to flourish long after the product is gone.
4. Bringing More Fun + Art to the Everyday
A lot of traditional art – the kind you hang on your wall – has been confined to the status of “luxury good for the rich.”
NFTs broadly – and redeemable NFTs, specifically – provide an incredible opportunity to partner with artists and to make art more accessible and widely seen – to bring it into more of what we do and buy.
At OPJ, we partnered with the incredibly talented Amber Vittoria to design our bottle label and our NFT, meaning you’re not just getting a bottle of gin, you’re getting genuine artwork.
And many artists have used redeemables to bring more interactivity, engagement, and fun to their work (again, think Checks by Jack Butcher, Crowds by Danny Cole, or The Currency by Damien Hirst).
5. That Web3 Holy Grail: Social Signaling
Social signaling, of course, is one of the biggest arguments for NFTs overall, but it applies exceptionally well to redeemables, which already lend themselves to luxury goods.
Taking our gin as an example … Sure, 3 people may come to your home in the next few months and see your bar cart. Or (we hope) you’ll throw a dinner party and serve Overpriced Jin to all your friends. But with a digital collectible, the whole internet becomes your dinner party.
And while it’s certainly the case that socially signaling through NFTs has largely been confined to PFPs on Twitter, we know it’s true and full potential hasn’t actually been realized yet. (That will come once we normalize wallets that get showcased … like Instagram but for the things you do + buy …)
***Note: OpenSea is a sponsor of Overpriced JPEGs