Non-fungible tokens (NFTs) have taken the world by storm. From the breakout successes of Axie Infinity and Bored Ape Yacht Club to adoption by Reddit and Instagram, engineers, creators, and influencers have traded, built, and experimented with various forms of NFTs. As a mobile developer, you may be wondering if it makes sense to adopt this new technology in your apps.
In this blog post, we provide an in-depth analysis of the core technology and use cases of NFTs and offer seven reasons why iOS and Android app developers should add NFTs to their apps today. We draw our conclusions from our 80+ interviews with mobile developers, crypto engineers, and NFT experts across the world.
What are NFTs?
Non-fungible tokens (NFTs) are units of data on a blockchain that represent the uniqueness of digital items (see link). The key to understanding NFTs is the concept of non-fungibility. If an item or product is non-fungible, that means it is not interchangeable with another item. Examples include your driver’s license, college diploma, or personal CD collection. There are millions of college diplomas out there, but your diploma is unique because it has your name, educational institution, year of graduation, and headmaster’s signature. In other words, non-fungible tokens have unique properties.
In contrast to non-fungible tokens, we have fungible tokens. These are items that can be exchanged and traded with one another, because their value, not their properties, defines them. The clearest example is the US dollar or Bitcoin, as 1 USD bill is always exchangeable with another 1 USD bill.
But what exactly can NFTs do for mobile developers? In the following sections, we describe how NFTs have the potential to revolutionize mobile development and the Internet as we know it and provide seven benefits that NFTs can bring to iOS and Android developers.
1. Scarcity can upend the abundance of mobile apps
The Apple App Store and the Google Play Store have created an abundance of apps.
Today, the most famous examples of NFTs are avatar images (e.g. Bored Ape Yacht Club, Crypto Punks) or game characters (e.g. Axies, CryptoKitties). To many people, these look like toys, speculative bubbles, or worse, scams. Look closely, however, and one can see the early signs of a revolution driven by digital scarcity.
To know why, consider the economic model of mobile apps in particular and the Internet in general. Before the app stores, and especially before the Internet, delivering software was costly: developers had to package their applications in CDs, find distributors in different markets, and pay various middlemen to ensure that consumers could install a copy. The only viable economic model then was to put a price on each software copy. That all changed when the Apple App Store and the Google Play Store removed the distribution and transaction cost of apps. A developer in India could distribute their apps to billions of users all across the world with one click. The marginal cost of mobile apps has become zero: it costs developers nothing to offer their apps to one additional customer. The result is abundance: the world population is now the addressable market for any mobile developer (see link). Since the Apple App Store’s first version in 2008, hundreds of thousands of developers have published millions of iOS and Android apps to serve billions of users all over the world. On top of that, in-app content has also been commoditized, with billions of YouTube videos, TikTok clips, and in-game items being produced daily.
This world of abundance is fantastic for consumers, but one questions whether it is always good for producers, creators, and developers. In many cases, abundance implies a lack of pricing power for producers. In this lens, the uniqueness of each NFT helps re-impose digital scarcity. By tokenizing their content as NFTs, musicians, artists, game creators can create verifiable records of the content’s ownership and provenance and bring about new forms of monetization. For example, singers have sold their NFT songs for thousands of dollars each on Catalog, an NFT music platform (see link). Relationships such as that between artist and fan can be un-commoditized through NFT tickets, memberships, and collectibles.
As a huge and growing amount of content is being published in mobile apps every day, mobile developers have a massive opportunity to leverage the scarcity model of NFTs and make their apps more economically appealing to users, creators, and contributors.
2. Programmability unlocks new use cases and innovative business models
One great feature of NFTs is that they are not static concepts; instead, they are a programmable standard. That means each developer is free to adopt, modify, and experiment on NFTs however they want to fit their product needs, create new experiences for their customers, and unlock innovative business models. As an iOS developer told us, “developers should think of NFTs as a powerful canvas on which people can envision new landscapes and uncover new treasures.”
Arguably, the most famous use case of NFTs’ programmability at the moment is royalties. Specifically, NFT royalties are automatic payouts that the original creator of the NFT receives every time a secondary sale of their NFT occurs. According to Galaxy Digital, NFT creators on Ethereum alone have earned over $1.8B in royalties (source). We also see other very interesting applications of NFT royalties. For example, Mirror, a web3 publishing site, automatically routes earnings to the Ethereum addresses that contributed to a research project or novel (source). The implications for these use cases are profound, especially at a time when there is discontent over creator earnings on existing apps such as TikTok, YouTube, and Instagram (source and source).
But that is just a start. The founders, developers, and creators we met have described to us a vision of an NFT-powered mobile economy. At this moment, they are using NFTs to solve difficult problems in mobile gaming, domain ownership, live streaming, social networks, messaging, and so many others. We expect to see even more NFT use cases in the near future.
3. NFTs as investments connect the supply and demand sides in mobile apps
How will NFTs change the dynamics of buying and selling music albums?
There is no avoiding it: NFT investments have a bad rap. A significant portion of the NFT space was plagued with Ponzi schemes, scams, and grifts in the last few years. That is not, however, the full story. NFTs as investments can bring about very positive transformation in the relationships between creators (the demand side) and consumers (the supply side) in a mobile app.
Anyone that has attempted to build a two-sided network on iOS or Android can tell you how impossible the task is. It is so incredibly difficult for game developers to convince artists to create new in-game items, for social media teams to attract the initial batch of dancers or photographers, for ride sharing companies to build the first driver fleet in a city, for booking app builders to convince both hotels and tourists to try out their marketplaces, and so on. In many cases, the economic incentives just do not work. Why should designers and artists contribute to a game not owned by them, when the financial rewards are close to non-existent?
NFTs offer the solution to overcome this challenge. For example, Royal allows fans to invest in music and own a piece of an album’s streaming royalty rights through NFTs. In other words, the music NFT holders collect a portion of royalties whenever the album plays on Spotify and Apple Music. Suddenly, supporting artists or streamers is now more than an altruistic endeavor, but an investment vehicle for fans and users to generate profits and share the successes of their content creators.
From an economic point of view, this brings together a new alignment between the demand and supply side of a market. From an app developer’s perspective, it is a golden opportunity to turbocharge their user base and build enduring network effects.
4. Shared ownership brings new value to app users
Mobile users have become much more conscious of mobile app practices in recent years. While previous generations of users extolled the virtue of free apps, today’s users raise concerns over data privacy, identity theft, and unwarranted tracking. In fact, study after study have shown that the vast majority of mobile users now worry about privacy, location tracking, data sales, etc. Being a free app no longer works as a value proposition.
This is where NFTs come in, with a new value proposition of users’ shared ownership. In our view, this works in two ways:
One, NFTs can empower ingenious designs in which users participate in setting the direction and product roadmap of mobile apps. Experiments in DAOs (decentralized autonomous organizations) have suggested that this can be a powerful way for users and app developers to work collaboratively. Because it is also crucial for developers to gather feedback from users, we see NFTs as a potential mechanism to bring developers and users even closer together and reduce the time and effort to reach product-market fit.
Two, many game developers have told us how excited they were about sharing the value of in-game items, actions, and benefits with gamers. In their telling, this is an amazing and natural development of the relationship between gamers, games, and developers. If this becomes a reality, mobile games can become a democratized, open, and fair environment for all participants to enjoy and grow. We find great inspiration in this vision, and believe that it can be applied to other mobile verticals beyond games.
5. NFTs can improve mobile apps’ user retention and engagement
By now, everyone knows the sobering statistics around mobile apps’ retention. According to mobile intelligence startup Quettra (source), the average mobile app loses 77% of users within just three days after the install. After 30 days, 90% of users leave the app. Some verticals, such as education, face even tougher retention problems. And without strong user retention, user growth will inevitably plateau and decline.
More worryingly, there is no systematic method for a mobile app to improve user retention. Most advice that we have seen centers around talking to users, improving the onboarding flow, or tackling another set of users. These are helpful suggestions, but they don’t provide app developers with a clear, well-defined toolkit to fix retention. We also note that retention is a very different problem from new user acquisition, as most business verticals and markets have well-understood user acquisition strategies.
Interestingly, most developers and founders we talked to told us that they saw improved retention and engagement among NFT holders relative to non-NFT holders. While the evidence is still largely anecdotal, the reason might lie in the promise of investment profits and the value of shared ownership. Several developers also found that NFTs helped them create and sustain active user communities outside the apps. This is incredibly valuable, as it suggests significant opportunities for developers to cross-sell other apps and services to their NFT communities.
All this indicates that NFTs can offer iOS and Android developers a much needed route to drive retention and find product market fit.
6. Developers can find new monetization opportunities with NFTs
We have talked at length about how NFTs can create new monetization opportunities for content creators. For developers themselves, NFTs can also help realize new business models and monetization strategies.
For instance, Axie Infinity, the leading NFT games, have found great financial successes by taking a 4.25% fee when players trade NFTs on its marketplace and by charging fees for breeding Axies in-game. In 2021, Axie Infinity generated $1.5B in revenue, an incredible amount for a startup (source). Bored Ape Yacht Club, on the other hand, monetizes successfully through both direct sales (selling Bored Ape NFTs and Otherside Metaverse Land NFTs) and secondary resale royalties.
Given the flexibility of NFT programmability, we expect to see even more business model innovations from NFT apps and projects in the near future.
7. NFT derivatives (semi-fungible tokens and soulbound tokens) promise even more diverse and advanced use cases for mobile developers
The power of crypto and NFTs also comes from constant innovation. Two recent standards offer even more use cases and applications for web3 developers: semi-fungible tokens and soulbound tokens.
Semi-fungible tokens (SFTs) are a form of assets that can be both fungible and non-fungible during their lifecycle. When an SFT is first created, it acts as a fungible token and can be exchanged with another SFT. However, once it is redeemed, the token loses its face value and becomes an NFT. An example is a movie ticket, which has face value and can be exchanged for another movie ticket before the movie screening. After the screening ends, the ticket loses its face value and becomes a unique collectible. Many game developers have said that SFTs are especially useful in mobile games, as they can represent both in-game currency and items.
Soulbound tokens (SBTs) are another innovative concept, inspired by the game World of Warcraft (source). The easiest way to think of SBTs is that an SBT is an NFT that cannot be traded or sold (i.e. non-transferable). Thanks to this property, SBTs unlock advanced use cases in governance, identity, and decentralized finance, among others.
While both SFTs and SBTs are still young at the moment, we foresee strong adoption and experiments on these standards in the coming months, so iOS and Android developers should closely follow them for ideas and inspiration.
From here to there: How to add NFTs to mobile apps
From the above analysis, it is clear that NFTs represent amazing opportunities for iOS and Android developers to improve their products, serve their customers, and build new business models. The next question is obvious: How do developers get started in integrating NFTs into mobile apps?
Dreamerly is here to help. We offer iOS and Android developers a suite of toolkits to enable NFT mining, selling, and trading with just a few lines of code. Our easy-to-use, compliance-focused, and fully configurable tools address the biggest challenges that mobile developers have faced when adding NFTs. For more information, visit our page.
Mobile developers can also check out our previous blog spot, where we discuss the pros and cons of building NFT features on iOS vs. Android.
Dreamerly is a suite of easy-to-use, compliance-focused, customizable SDKs and APIs powering NFT features in iOS and Android apps. Our mission is to help mobile developers create amazing web3 experiences for their customers.