On this episode, we’re exploring the world of non-fungible tokens (NFTs). Newly emerging decentralized technologies are causing a stir in the realms of art, gaming and now business strategy. But are NFTs the wave of the future or the latest passing fad? We asked artists, strategists and designers in and outside of frog to share their perspectives on why NFTs are raising questions about ownership, identity and value. Join Filip Peraić, Kelley Kugler, Spencer Scott and Adam Wrigley as they share their POVs on NFTs.
Design Mind frogcast
Episode 22: POVs on NFTs
Guests: Artist Filip Peraić and frogs Kelley Kugler, Spencer Scott and Adam Wrigley
[00:09] Welcome to the Design Mind frogcast. Each episode, we go behind the scenes to meet the people designing what’s next in the world of products, services and experiences, both here at frog and far, far outside the pond. I’m Elizabeth Wood.
[00:24] Elizabeth Wood: Today on our show, we’re talking about Non-fungible tokens, –better known as NFTs. NFTs have been riding high on the hype cycle for some time now, but they’re not without their detractors. In this episode, you’ll hear voices for and against this brave new world. What started as a discussion of NFTs quickly revealed how interwoven this conversation is with new notions of value, ownership, digital art, cryptocurrency and decentralized everything in the context of Web3 and the metaverse–which means we cover a lot of ground here. So, let’s jump in and meet our guests.
[01:02] Elizabeth Wood: First up, we’re joined by Filip Peraić, the artist behind the project James Harden Illustrated–a series of interpretative profiles of the famously bearded NBA player. Filip recently sold his first NFT–an art piece commissioned by Daryl Morey, president of the Philadelphia 76ers.
[01:19] Filip Peraić: My name is Filip Peraić. And I’m an illustrator and designer, living and working in Croatia.
[01:26] Elizabeth Wood: We’re also joined by Kelley Kugler from frog’s strategy team. Her dual passions for fine arts and tech first got her interested in NFTs and digital ownership. She won her first NFT in a competition to bring more women into the world of digital art and cryptocurrencies.
[01:42] Kelley Kugler: I‘m Kelley Kugler. I’m an associate strategy director with frog.
[01:46] Elizabeth Wood: Next up is Spencer Scott, also from the frog strategy team. He’s been exploring the world of NFTs and cryptocurrencies for about a decade, and now helps guide frog clients in their own experimentation in this space.
[01:59] Spencer Scott: My name is Spencer Scott. I’m an associate strategy director on the commercial strategy team out of our New York office.
[02:06] Elizabeth Wood: Finally, we’re joined by Adam Wrigley, a principal mechanical engineer at frog and a combat robot designer. He’s known around the pond for being a bit of a skeptic on NFTs.
[02:17] Adam Wrigley: My name is Adam Wrigley. I am a principal mechanical engineer. I’ve done a bunch of podcasts but usually they’re about robots. So I haven’t done any podcasts about NFTs.
[02:29] Elizabeth Wood: Before we dive too far into the logistics and applications and ethics of NFTs, perhaps it’s a good idea to start with some quick definitions.
[02:39] Adam Wrigley: NFTs are non fungible tokens. They’re a little bit of the blockchain that can’t be traded for another bit because it’s unique.
[02:48] Kelley Kugler: That essentially means that there’s a way of registering that something is authentic, that there’s a record of something that will always travel with an asset, whether that’s physical or digital.
[02:59] Filip Peraić: You could simply say an NFT is a piece of artwork that’s put on the blockchain. That’s maybe the most simple description. An NFT can be anything, really. It can be a painting, it can be a sculpture, anything.
[03:14] Spencer Scott: A few examples of NFTs include art. So I think this is probably the most common, you know, application where it’s kind of a JPEG or an image attached to a smart contract. But more recently, we’ve seen a lot of innovation in the NFT space. So everything from video and sports highlights, to music to land in the metaverse sold as NFTs, to digital avatars and the video game skins that they wear to outfit their avatars. So, you know, NFT is a really broad term. It essentially means a smart contract with some type of digital file attached to it.
[03:47] Adam Wrigley: Usually, NFTs have a link in them–a URL that points to a website somewhere that might be a funny GIF or something like that. But when I try to explain them, I say it’s kind of like you took a dollar bill, and you wrote a web address on it. That’s pretty much what an NFT is. I think these days also people tend to identify NFT’s as the artwork itself. But the artwork isn’t really an NFT, the artwork is the artwork, the NFT is, is a bit of tech, a bit of a piece of a blockchain. Yeah, it’s a really weird kind of niche distinction.
[04:20] Elizabeth Wood: Inextricably linked to NFTs is the conversation around the blockchain and cryptocurrencies.
[04:26] Spencer Scott: So, it’s helpful to explain blockchain first. It’s a distributed public ledger that really records transactions. And so a lot of people have heard of cryptocurrencies and NFTs, the metaverse, and a lot of this runs on blockchain. And so they’re kind of hundreds if not thousands of blockchains now, but some of the most common are Ethereum, Solana, Terra, Avalanche, Algorand, and Tezos. And this is really the underlying ledger that basically enables everything else we’re going to discuss today.
[04:52] Kelley Kugler: Cryptocurrencies–I see it really is just the next evolution of our digital currencies. It’s not terribly dissimilar to how we use money today through credit cards and the way we think about our money as an asset. But it’s just a different underlying technology that allows that to extend further.
[05:11] Adam Wrigley: I think what’s interesting about crypto is a lot of people think of it as sort of an anonymous online digital equivalency to cash. It’s not quite that, because it’s actually extremely public. So the blockchain is a listing of every transaction that’s ever happened: which wallet sent how much to which other wallet. And it’s all tracked permanently, again on a big distributed peer-to-peer network. So it’s somewhat similar to a credit card company, if the credit card company made every single transaction public, but instead of a name, it just had a, you know, little code that represented each person. But as soon as you know the little code, then you know every single purchase they’ve ever made. So it’s not really anonymous. It’s not really an equivalency to cash. It’s more like the credit card system. It doesn’t transfer real money. It transfers you know, digital representations of money. Cryptocurrencies in themselves are sort of a fiat currency that is backed by the trust that people have in the particular technologies.
[06:11] Elizabeth Wood: NFTs are said to be one of many signs that we are entering a new era of the internet being called ‘Web3’ or ‘Web 3.0’. But what Web3 really is and what it will truly enable is still up for debate.
[06:26] Kelley Kugler: Web3, I think, is really exciting because it’s a large evolution from where we’ve been with technology and digital experiences and allows us to in this point in time, redesign the way that we have structured the internet, and the way that we interact with each other across different borders and the way that we have designed the power balances and all of that in technology. It’s a design reset. Web3 can mean a lot of things, right? I mean, certainly it gets mixed up with metaverse and NFTs, and all of these things. But really, it’s the possibilities that are opened up through a new architecture.
[07:11] Spencer Scott: To understand Web3, I’ll give you a quick definition of Web1. Web1 was the early internet. And so this was, you know, read only and static for users. So you’d go to a website like Google or Yahoo. And, and you could read, but it was less of you generating content. Web2 emerged. And that was a lot of these kind of platform companies creating what was a participatory and very centralized internet. And so you had things like Facebook emerge where you were creating content, you are posting photos, it was very easy. LinkedIn, Twitter, etc. I think those are great examples of Web2 companies. And now we’re shifting into Web3. And it’s more decentralized. And people actually have digital ownership of the assets that they generate, and of the things that they do online. And there have been an emergence of trends like ‘play to earn.’ So for example, if you’re playing games on Web3, you’re actually earning assets or things that you can monetize. Or, you know, companies might be rewarding users for the content they create or for the activity that they’re doing, such as their attention. Traditionally, Web2 companies captured a lot of ad revenue. In Web3, we’re seeing that become a bit more diversified and the users are actually being rewarded for their participation.
[08:24] Adam Wrigley: Web 3.0 is an interesting word. I’m not sure exactly what it is yet. I don’t know if anyone’s exactly sure what it is yet. We tend to think of it as a lot of distributed networks and things like that. But distributed networks have existed for a long time. I remember Kazaa and BitTorrent and everything else. So I guess it’s bringing those types of distributed networks a little bit more into the mainstream. But right now, I’m not seeing a fundamental change in the way the internet is working, you know? Web 1.0 to Web 2.0 was a very, very different web experience for people. These types of technologies are new technologies that can power basically the same exact things we’re already doing. If it doesn’t change the end user experience, then I don’t know whether it should really garner a ‘three’ tacked onto Web yet from what I see.
[09:10] Elizabeth Wood: NFTs are meant to hold special significance in the metaverse, which is soon on its way or maybe already here–depending on who you ask.
[09:19] Filip Peraić: Well, the metaverse is like this virtual world where people will be able to, you know, connect, shop, play, work, anything. And in the future, a lot of huge brands and individuals and groups will create their own virtual worlds. Me and my friends, we are working on something that’s called Hoopsverse. It’s at the early stage, but we plan to publish it in the following months. And it is something that’s connected with NFTs. It’s a play-to-earn game. So it’s a cool thing. And now there’s lots of opportunities where people can take part of some blockchain game, some virtual world and really earn trade with other people.
[10:09] Adam Wrigley: In my mind, the metaverse is already here. You go on the internet to the websites that support virtual reality, that’s the metaverse. You play a video game? That’s a metaverse. Is there going to be one unified singular one? I’m not sure if there should be. And I’m not sure if there will be, at least in a totally virtual reality, space. But I think what people are trying to build is some sort of singular place that becomes like a virtual reality destination, which is just kind of anti-internet. That’s not really internet culture. And people generally don’t like when that happens. Websites are still separate.
[10:46] Adam Wrigley: So I think that in general, people see the NFT as that method of storage of digital goods across multiple metaverse websites–whatever we call them in the future. When you go to different places in the metaverse, your NFT could let those different places know that you have some digital good because the NFT is a way of storing ownership of a thing. You could use an NFT to represent a weapon in a video game, and then you could carry that weapon to multiple video games. But there’s a lot of other back end technology needed to make that work. And I’m not sure right now, if it’s something the people who make those things would want to happen. And if they wanted it to be enabled, they wouldn’t necessarily need an NFT to make it happen. I just am not seeing the desire by the content and world creators to have that interoperability, which is I think, again, driven by Facebook’s want to make the metaverse. Even the way people think of it, it’s like they don’t want it to be interoperable. If you’re the only ones operating a world, well, then I don’t need NFTs to tell me that you have this rare Halo skin because it’s stored on my Microsoft server and then that’s a lot easier to manage that database.
[11:53] Spencer Scott: The metaverse is kind of a future iteration of the internet made up of persistent shared 3D virtual spaces linked into what is a perceived virtual universe. And so, you know, what does that mean in layman’s terms? That means that it’s live so when you go on there are other people there that you’re interacting with. It’s social in that it’s communal. It’s interoperable, meaning you can use it across multiple different platforms. And typically they have functioning economies and there’s a sense of presence once you’re there, so it’s very immersive.
[12:23] Spencer Scott: You know, a number of companies have been approaching this from different angles. So a few names you’ve probably heard of Facebook rebranding to Meta, I think they’re building out their own metaverse. There’s Decentraland and Sandbox, which are kind of more traditional Web3 companies approaching this space. And then there are some gaming companies that kind of were early pioneers of this across Epic Games or Roblox. And I think it’s important to just state like the metaverse ecosystem is still being shaped. So there’s no clear winner yet. And there won’t really be a finite ‘Before Metaverse’ and ‘After Metaverse,’ it’s something that we view as an evolution that’s currently in process. And so a lot of those names I just listed, there are approaching it in different ways. It’ll be yet to see who emerges as the winner. Will there be one? Will there be multiple?
[13:08] Elizabeth Wood: NFT market principles draw heavily from the traditional art world. Only, with NFTs, artists have hybrid physical and virtual spaces to express themselves while they experiment with new revenue streams.
[13:32] Kelley Kugler: I’ve been an artist, I guess, my whole life. We’re tasked with solving these, like, wicked problems. You know, art, I think, is one of those ways that allows you to kind of get through it and make sense of things. I’ve been following an artist that I went to school with, and she has been kind of documenting her journey trying to transition her life from working in more of a corporate setting into really a studio artist setting. NFTs have emerged as one of these big enablers for her.
[13:54] Kelley Kugler: Alex Maceda, this artist I’ve been referring to, she was running a kind of competition of sorts. I saw it over Instagram saying, particularly to women, and in order to get them more engaged in the NFT space. And so I responded to that. And I was one of five women who received one of the NFTs. It’s a pretty simple watercolor. And I think, an appropriate manifestation of like, what is possible in the NFT space right now. It’s like a very exploratory, playful, not taking anything seriously or being too invested really, in this very nascent space. And so I don’t really know what to do with it yet. I’m excited to have it almost as like a prompt or an invitation to start playing in the NFT world.
[14:50] Spencer Scott: You know, first and foremost, I think aesthetically, I really like the art from some of my NFTs. I’d say second, you know, from an entry perspective, there’s a community aspect around NFTs and different NFT projects. And so some of the NFT projects I’ve been involved in have become DAOs, or decentralized autonomous organizations, where all of the holders of the NFTs have input over the direction of the project and the direction that it takes. So I’ve been involved there.
[15:17] Spencer Scott: They take a variety of shapes, and that’s what I love about them. Some are very simple and pixelated. And then on the other hand, I own a number of NFTs that were created by 3d artists that I’ll likely someday be able to use in the metaverse and so they’re much higher pixel density. And so I think it really varies. And we’ve seen a lot of different companies entering the space. And so, for example, Nike’s done a lot of work with their company RTFKT that they acquired, where they’re creating kind of beautiful products to be used in around the metaverse. So I think art is in the eye of the beholder, but I certainly appreciate the diversity of the art that’s currently in this space.
[15:49] Filip Peraić: I think this NFT community of artists, like, sense something big is happening. They feel this opportunity to monetize their work. Because I’ve been part of this digital world, this digital art community for, like, 10 years since I finished my school. And I never felt this huge wave of experiments of very cool stuff happening, of really weird, beautifully crafted art, which is not commissioned by anyone. So that’s maybe–to me–that’s the most exciting thing in NFTs.
[16:31] Elizabeth Wood: NFTs may be exciting, but they’re also energy-intensive. Exact, agreed-upon calculations are tough to come by, but processes involved with using the blockchain are generally accepted to have a larger carbon footprint than other things we do online, like stream movies or visit websites.
[16:48] Kelley Kugler: One major caution with all of this is the environmental impact of it. Right? I hope people are certainly talking about that. I am personally very conflicted because of the energy consumption that goes along with it and the negative impact you’re having. I know there’s a lot of work going on to change protocols and all of that in order to make it more energy-efficient. But that’s something that we can’t afford to not get ahead of.
[17:19] Elizabeth Wood: NFTs also raise concerns around biases and inequalities. As in, whose perspectives are being hardcoded into the technology? And, who benefits most from the development of NFTs?
[17:31] Kelley Kugler: Over the last decade or two, we’ve become very aware of the biases and the lack of representation that exists and is encoded into technology. I lived in San Francisco and in the early 2010s, and it was incredibly apparent when you walk into an engineering room what perspective is being encoded into the technology. And I think now there’s a lot more visibility and structural ambition to include more voices. So now, it’s really interesting, as I was saying, we’re part of this new design point and reset point with technology that like the blockchain and Web3 architecture allows us to take advantage of that we can make more informed decisions about whose voices are going to be included in the forefront. Right now, the data changes based off the source and exactly what you’re asking, but it’s pretty much accepted that about four out of five participants in this space of crypto and NFTs and meta and all of that, they’re male. Now’s the time to make sure that people are participating and there’s representation across the board.
[18:48] Kelley Kugler: Unless we are really intentional, we will repeat history and some of our mistakes of the past. And one of those that I think is going to be really important is making sure that there is equal emphasis and design for more introverted personalities and practices and places as extroverted. There’s a lot of research showing how platforms like Facebook or any social media platform today, really, it favors extroverted, really dominant personalities. I think as a society, we recognize the consequences of that. However, in order to make sure that doesn’t encode itself again into this Web3 reset point, we need to rethink. How do you include different personality types, not just demographics? And I think that’s going to be a really exciting conversation.
[19:48] Spencer Scott: There are definitely some considerations that people should take into account. I think when you’re creating artificial scarcity, you are by nature kind of pricing some people out of participation, which I think can be an issue. Some companies are just very premium by nature. And so if you get like a luxury hand goods company, they’re likely already pricing out a lot of different customers. Whereas a public good, where they’re releasing an NFT, and suddenly it’s pricing people out, I think that’s where there’s more of the kind of moral and ethical consideration.
[20:18] Elizabeth Wood: Exploring any emerging tech takes time–and trust. No matter how promising an experience may be, it will be difficult to get people fully on board without trust.
[20:29] Adam Wrigley: At the end of the day, trust is really all that matters. If people can maintain trust in the system and maintain interest in it, it doesn’t matter if the system is horribly inefficient and doesn’t make any technological sense and makes me very confused. It might still be worth a ton of money, if it can maintain that public trust. Because the public doesn’t care about how efficient the database is. They just care about what they care about. And if NFTs can maintain that trust that they currently have, can maintain that momentum, then everything’s good.
[20:59] Adam Wrigley: When you buy an NFT, really what you’re buying relies on a lot of trust with who you’re buying it from, the website you’re buying it from–because at its heart, the NFT itself is just one piece of code that lives on the blockchain, usually on the Ethereum blockchain. And it points to a website. So your actual piece of art that you’re buying is that website, which is hosted somewhere–usually on OpenSea–or another marketplace. But when you buy these NFTs, you’re putting trust in that marketplace to exist. Of course, the blockchain will probably exist for a very, very long time. But if the website that is hosting the piece of art that you bought goes down, then your art doesn’t exist anymore. I don’t know if everyone who’s buying these realizes that, but if OpenSea were to go out of business for whatever reason, all these pieces hosted there, they wouldn’t really exist anymore. And you would need another backup database to track what each NFT was actually pointing to.
[21:52] Elizabeth Wood: Here at frog, we’re working on a new report called ‘Expectations vs. Reality’ for our series Chief Challenges. In it, we talk about shifting consumer expectations in the age of Web3–and the realities of building brands and businesses within these new domains. The report explores three major strategies that apply here when trying to create value through NFTs. First, is to ‘Converge.’ This strategy is all about removing organizational silos to create seamless brand experiences in an increasingly hybrid world of digital and physical interactions.
[22:28] Kelley Kugler: I just think it’s going to be extraordinary when we take all of this creativity and playfulness and new possibilities and energy that’s a part of the metaverse and NFTs and all of this. It’s like the doors are wide open. And there are so many new people that are coming in as creatives. And once you harness all of the cool stuff that’s going to come out of that, and bring that back into the real world as I see it, like, you know, the spaces that we actually live and work and play in, that’s going to be just so vibrant. I can’t wait to be able to, you know, hold something and experience the tactility of it, but also be able to essentially, like, double click into everything and see what has come before and what digital layers…I don’t know it just think the possibilities are really endless.
[23:26] Filip Peraić: Everyone loves to touch objects. And I think naturally we have to feel something tactile. And I think that finally, this NFT huge wave and hype has brought some kind of new value to digital files. It’s like this new technology of ownership which is very good for digital files and digital art. Because, so far, you couldn’t really own your work. And now you can own it, sell it, and it’s written on the blockchain that you are the creator. So I think that’s very exciting for the digital files. The physical stuff will never go away. You know, I think, like, books won’t go away. It’s part of us as human beings. We have to have things, objects. We have to be surrounded by objects. We won’t run away from it despite this emerging virtual world around us.
[24:31] Elizabeth Wood: The second strategy is to ‘Transcend.’ This means not getting so caught up in the hype of NFTs, crypto, etc. that you lose the big picture. Transcending the hype is not just some moral imperative–it’s a core business objective. The tech we use, products and services we rely on–these are always evolving. Promises are always being made to transform this and disrupt that. Staying true to your company’s purpose can help better focus efforts in new domains.
[25:00] Adam Wrigley: I think whenever I see someone get so hyped on a tech, as opposed to its actual uses, its actual things–that’s what screams to me ‘fad,’ ‘hype,’ ‘this isn’t going to last.’ And cryptocurrency has been like that for a while. NFTs seem like that. The Metaverse feels like that. You’re hyped up about an idea. Not an actual thing. And that’s very dangerous. I think five years from now, no one’s going to be talking about NFTs. I think, maybe people will be talking about digital art. I don’t know if they’ll keep calling them NFTs. The way people use the word NFT it’s almost like, Hey, did you guys go to that new HTTPS? Right? It’s just a weird way to use the term. Maybe it’ll stick. But I think the hype is going to die down substantially.
[25:49] Elizabeth Wood: The third strategy in our ‘Expectations vs. Reality’ report that applies here to NFT-based experiences is to ‘Experiment.’ Launching something new is often a series of little explorations. It’s about testing hypotheses, prototyping, problem-solving and testing again. Being able to learn and adapt creatively is core to success here.
[26:12] Spencer Scott: To be honest, I’m surprised every day when I see new creativity from, you know, builders in the space or from different companies. But as more people are building in this space, I think we’re going to continue to be surprised at how much innovation takes place.
[26:26] Spencer Scott: I don’t know necessarily that, you know, everyone will be working and living in a Metaverse in the future and NFTs will power everything. But you know, I think NFTs are now starting to permeate the music industry. I think that’s interesting. You’re starting to see a lot of the film industry, start looking at the space and figuring out how they can be involved. Now you’re seeing the Nikes of the world get into the space you’re seeing, you know, Facebook begin to build or what is now Meta begin to build. And just so many traditional companies entering the space. We’re talking to clients across automotive airlines, power, sports, luxury fashion, consumer packaged goods. So, when everyone is asking you for a new technology, yes, there’s some element of hype, but a lot of companies are allocating a lot of capital and some of the brightest minds are taking note of the space. So I do think that it has tailwinds, that’ll mean it’s here to stay.
[27:20] Spencer Scott: I think the biggest thing for people listening to this podcast is that there’s a great opportunity right now to enter the space. I would encourage people to research before they participate. And you know, if you’re thinking about buying into a collection, you can typically experience the community behind a lot of these projects for free via their communication channels. They’re often on Discord, and others. So you can kind of join a Discord, you can learn about, who’s involved with this project? Who’s created this project? You know, how many NFTs are being released? How many they’re holding for themselves in the team? What is the ultimate plan or roadmap for these NFTs? And so, you know, I think there’s a really good educational opportunity without having to risk too much financially. We’re encouraging companies to look at this to de-risk for the future. And I think the same goes for individuals.
[28:06] Spencer Scott: Personally, I would have loved to be my age in 1995, with the advent of the Internet, when there were a lot of naysayers and it felt like a gold rush. And granted, there was the.com bubble. But, you know, regardless, a lot of those ideas that may have been too early for their time are now around and kind of large, thriving companies today. So I think the same can be said for this space. So if I had anything to ask of listeners, it would be that you go out, research, see if you want to get involved, and at least learn more.
[28:33] Elizabeth Wood: That’s our show. The Design Mind frogcast was brought to you by frog, a leading global creative consultancy that is part of Capgemini Invent. Check today’s show notes for transcripts and more from our conversation. You’ll also find a link to frog’s interactive series, Chief Challenges, all about navigating the new realities of leadership. If you liked this episode, you won’t want to miss the reports, videos and case studies we’re sharing in our upcoming edition called ‘Expectations vs. Reality,’ all about innovation in the age of Web3 and the metaverse. We want to sincerely thank Kelley Kugler, Filip Peraić, Spencer Scott and Adam Wrigley for joining us to share their POVs on NFTs.
[29:15] Elizabeth Wood: We also want to thank you, dear listener. If you like what you heard, tell your friends. Rate and review to help others find us on Apple Podcasts and Spotify . And be sure to follow us wherever you listen to podcasts. Find lots more to think about from our global frog team at frog.co/designmind. Follow frog on Twitter at @frogdesign and @frog_design on Instagram. And if you have any thoughts about the show, we’d love to hear from you. Reach out at frog.co/contact. Thanks for listening. Now go make your mark.