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When Reddit unveiled its second batch of collectible avatars on October 20 at 2:59 p.m., Ethan mustered up the courage to pick up the phone.
When he saw that the iOS App Store took a 30% share, he decided to buy it for PC. Ethan, a 38-year-old graphic designer from Northern Virginia who spoke on the condition of anonymity to avoid being doctored, rejected the idea that Apple would accept money from independent artists. He was ready to buy some NFTs from the whimsical Reddit mascot Snoo, created by Internet designers like Rojom and Foustling, when he discovered that Stripe's payment card integration didn't work on the desktop. Instead, he was there with his iPhone and PayPal account.
When he called his bank to ask if it was a fraudulent purchase, Ethan scrolled and clicked on his favorite collection. He tried to cheer himself up as soon as possible so that he could return to the market. Does 38-year-old man pay real money for animal art online? He ended up buying about $300, an amount he thought he could recoup with a second sale. Is that right?
The announcement of the drop, dubbed the Spooky Season Collection Avatar by Reddit, takes us back to a more prosperous time in cryptocurrencies around January 2022, when NFTs were all the rage and people spent millions, often beating each other, to one for sale. A pixel JPEG of a primate wearing glasses.
Reddit's fall goes against the logic of Crypto Winter, where total NFT trading volume fell by 99%. Reddit has added millions of new wallets to the crypto ecosystem and generated millions of dollars in revenue for artists to create their iconic avatar designs, publish them on the Ethereum-linked Polygon blockchain, and sell them to users who use them as profile pictures . to have everything while avoiding unmarked signs. was afraid of interchangeability.
Not a hateful NFT
Ethan does a great job of showing how social media creates an unlikely success story. A few months ago, he would have been as confused as his wife when she found out that the avatar she drew was worth hundreds of dollars. Not an NFT fan. As an artist, he was lured by the initial excitement and opened an OpenSea account as NFTs grew in popularity. But he avoided going too far.
I think that's an exaggeration and I think the bar has been set too high," he said.
Of course, Reddit agrees. Reddit co-founder Alexis Ohanian told Fortune that he originally introduced the avatar prototype more than a decade ago. For years, the platform has toyed with the idea of letting users customize a soccer mascot like Snoo as their avatar. Eight years ago Reddit released a simple build tool, and two years later it was fixed. Apart from a short test of four NFTs in June 2021, it is not related to the blockchain technology that will allow users to trade and sell on the secondary market. The latter is built into Reddit's platform currency and premium offerings.
That all changed in July, when Reddit launched "collectible blockchain-powered avatars," billed as limited-edition Snoo pet artwork, which users can purchase and combine with other artwork to create profile pictures.
Reddit never once uses the word "NFT" in the roughly 800-word article.
NFTs are hated by many, one Reddit user told Fortune. "The name itself has a bad reputation."
Making technology more accessible is a smart move. A spokesperson said: "We see blockchain as a vision of the future that will bring more empowerment and independence to the Reddit community." We are looking for tools to become more self-sufficient and self-sufficient.
See the promotional post for a simple explanation of the benefits of blockchain. Avatars are stored on Ethereum-compatible Polygon, which gives buyers "ownership and portability" and the right to use the artwork on and off Reddit. In other words, they can sell it on a secondary market like OpenSea.
Reddit is trying to move away from some of the technical and complex requirements of NFT. Users do not need to create a cryptocurrency wallet, as all transactions can be made with paper money. Instead, they will use "storage" or blockchain wallets, which are already featured in another feature on the Reddit website, according to the community.
Ethan has been on Reddit for almost 11 years, but like most users, he missed the July news. Ethan saw Reddit start submitting user avatars for free in August to gain more traction, but he kept his distance. His favorite artwork draws his attention to the thriving r/avatartrading subreddit, an informal network of users who come together to offer advice and bids.
He started researching different artists and even went to the r/avatartrading Discord server to talk to them. Rojom, a Reddit bestseller who created a whimsical black-and-white version of The Dream that mixes body horror patterns and religious symbolism, is a favorite. While Rojam's avatar now sells for thousands of dollars on OpenSea, it originally cost less than $100 when it was listed on the Reddit store.
"You don't need to know anything"
Ethan was happy to be able to create his own avatar by combining other people's items. He thought of using one of the musicians named Le Rock with a guitar in his profile picture because he himself plays the instrument. Best of all, the cost of gas—the barrier that initially kept Ethan from NFT—isn't that high. He figured out how to collect free avatars and even bought some from the first generation that started in July and are still for sale.
Low barrier to entry Ethan says he really likes what Reddit is doing. You don't need to have any prior knowledge of blockchain, seed words or wallets.
This made them so popular that the first avatars went out on October 3rd. Sales also increased, with $1 million in sales on Oct. 3 after about $40,000 changed hands, according to Polygon Analytics.
The initiative to collect avatars, which was initially slow to gain momentum, is now showing promise. "Remember when Avatar was mocked on Reddit and called a huge flop?" Another subreddit on r/cryptocurrency, one user wrote. He turned 180 degrees.
Meanwhile, the r/avatartrading subreddit is growing. One of the hosts, better known as "Matt", joined in August to find out how to get his free airdrop. There are very few participants. At the beginning of October, there were more than 3.5 thousand of them.
Matt says the community grew out of the hype around early avatar collections like Drip Squad. There are still enough users for r/avatartrading members to purchase other collections in the hope that they will be very popular. The gamble worked because the market increased and some customers bought the avatar to sell it immediately.
Avatar's November 2 total: $10.36 million
With the release of the second generation Avatar on October 20, things started to spin, with some of the most popular collections selling out within minutes. Sales soared, and by Halloween the total was quickly above $10 million.
It's like day trading, Matt said. After investing over $900 into the campaign, he claims to have 60 avatars worth a total of 15 Ether, or about $23,000.
But is this demonstration temporary or will it continue?
According to Michael Anderson, co-founder of cryptocurrency-focused venture capital firm Framework, NFTs must offer value beyond the speculative. For these NFTs to have long-term value, "you have to build in the utility of the core," he says.
Illustrations are quirks that can serve as status symbols, such as the Bored Ape avatar worn by celebrities such as Mark Cuban and Paris Hilton. Although some of Reddit's avatar collections have less pressure, this is not a key aspect of the project, which has nearly 3 million active avatars.
Another use case is token gating, which Anderson defines as something of value to the community, such as B. Accessing different places on Reddit. New users can also encourage Reddit avatars to reach out to other parts of the cryptocurrency ecosystem where NFTs are still a joke.
Reddit Chief Product Officer Pali Bhatt made the announcement during a TechCrunch discussion on October 18. He said more than 3 million Redditors have created wallets or vaults, and 2.5 million vaults have been used to buy avatars, a number that has grown to nearly 3 million today, according to Polygon.
According to statistics provided exclusively to Fortune by OpenSea, the number of new members of Polygon increased by 75% after it was discontinued on Reddit on October 20, and Reddit attracted three times more new users than any other project in the previous six months . Additionally, 20% of Reddit NFT owners transacting on OpenSea buy other NFTs through the service.
Vance Spencer, co-founder of Raamwerk, said, "It's definitely great to bring new people into the field in any way you can." But how do you convince people looking for Reddit NFTs or Starbucks gift cards to use DeFi?
According to r/avatartrading moderator Matt, NFT Reddit users are unlikely to find success outside of social media, especially given the poor state of the cryptocurrency market.
In our interview, he said, "I don't see a lot of talk and people wanting to come out." How can they do that?
The biggest problem now is that Reddit attracts millions of people who will never deal with cryptocurrencies. This momentum is reinforced by the fact that Reddit avoids all crypto branding, including the scam and hack warnings that are common in the industry.
According to Matt, the scammers targeted r/avatartrading users and tricked them into sharing their ransom phrases, so the scammers could steal their NFTs. One user claimed to have lost an avatar worth thousands of dollars.
Moderators have made an effort to inform users and invite visitors who can provide safety and security advice, often staying overnight to provide assistance. "After activating a lot of new Web3 users and a lot of NFT users and basically hanging them out to dry," Reddit is completely quiet, according to Matt.
A Reddit spokesperson says r/avatartrading is an unofficial group, while the official Reddit forum where the platform posts news and updates is r/collectibleavatars.
Despite being illegal, r/avatartrading reached 10,000 members on October 25th. Ethan, a graphic artist living in Virginia, was impressed.
He says the last example of overnight growth he personally saw was on r/WallStreetBets when GameStop got involved.
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