How a Viral NFT Project Survived the Crypto Crash

A year ago I told you about Loot, a collection of non-fungible tokens that had inspired an energetic community to form around it. A series of short, text-based descriptions of fantasy-genre items like swords and amulets, Loot captured the imaginations of builders and speculators who wondered if the underlying NFTs might one day serve as the basis for graphic novels, movies, video games, and more—an open source code art project that could eventually become the basis for a crypto-flavored Marvel Cinematic Universe.

Loot was also the first NFT project that I found personally compelling, at least as a journalism major. Its creator, Dom Hofmann, was well known to me as one of the founders of the short-form video pioneer Vine and the idiosyncratic social network Peach. It was an art project more than a startup – Hofmann made 7,777 randomized “bags” of loot available for free to anyone willing to pay the transaction fees necessary to mint them on Ethereum. And the project exploded overnight: five days after launch, Coindesk reported, Loot bags had generated sales of $46 million, and had a market capitalization of $180 million.

Of course, in those days many of NFTs sold for eye-watering sums. What made Loot stand out was the way a community of builders stepped up almost immediately to start building out an ecosystem: create art for the items in the bags; form guilds for people who owned the same “rare” items; and write smart contracts to allow people to trade the commodities held in their NFTs.

The dream was that all of this would coalesce into something more than the sum of its parts. But 2022 has been disastrous for the larger NFT market, wiping out most of the theoretical value of even the most prized collections. And so as we approached the anniversary of Loot’s launch on August 27th, I got curious: what had happened to Loot in the year since it went viral?

“I think it’s going well, in the sense that the things that are being built on top of it right now are really interesting, or very ambitious, and in some cases both,” Hofmann said by phone Thursday. “A lot of them are closer to the kinds of things that I thought we might see in the early days of the project.”

Hofmann had spent the previous hour and a half on the phone with a developer who was planning to launch a Loot-related project, something he said he does quite often. His full-time job is running Sup, a 12-person game studio working on various projects that he largely refused to discuss on the record. But Hofmann continues to lurk in Loot forums, tweeting up when he feels he has something to offer, and messaging frequently with Loot developers.

That development continues despite the fact that the speculation mania surrounding Loot has cooled. The project’s market value has dropped to just under $6 million, and the price of the cheapest Loot bag available for sale has dropped from about $20,000 when I wrote about it to about $1,438 today.

So what are the developers building? One project everyone I spoke to pointed me to is HyperLoot, which the creators call a “visual building block on top of Loot.” Essentially, Loot owners log into their website with their crypto wallets, and HyperLoot generates an image of what’s in their bag on the body of a digital adventurer. That image can then serve as your profile picture, the basis of a novel, a character in a game, and so on. Like the original Loot, HyperLoot creations are released under the CC0 “no rights reserved” license, effectively placing them in the public domain.

HyperLoot is building a software development kit that will allow people to build using these creations more easily, co-founder Thanakron Tandavas told me over direct messages. The company also builds its own video game, CCO Wars — essentially one Super Smash Bros.-style fighting game, populated by public domain NFT characters. Think Bored Apes vs. CryptoKitties, coming eventually to a console near you.

“I feel the same success can happen with Loot as other successful open source projects that embrace permissionless innovation, [like] Linux or Android,” Tandavas told me.

The artist Shahruz, who goes by one name, told me about a similar public domain project he is working on called 32 swords. It’s “an elimination reality series” where players must have both Loot and another NFT known as Manny. The game is human chess, with each team given 12 hours to discuss and vote on their next move. As players are eliminated, their Loot Bags are given away to the other contestants or spectators.

Shahruz was also attracted to the idea of ​​creating art from public space.

“I think there’s a lot of unique kinds of fun in working with existing projects and communities this way, rather than just creating new properties all the time,” he told me.

So what is there to learn from Loot a year out?

One, Hofmann said, the early wave of hype surrounding the project wasn’t as helpful as you might have guessed. Because the project was public domain, the early days were essentially a free-for-all for people making cheap clones and other related projects that distracted from the more serious developers. It took a while before the hype died down and the better projects came to the fore.

Two, early enthusiasts probably underestimated how challenging it is for public projects to merge. At the height of Loot’s hype cycle, many people wrote blog posts and tweetstorms about how Loot could form the basis of a video game. But there is one really far from writing a list of magical items for shipping Fire Ringand the entropic forces that can cause years of delays for even the best-funded video games are magnified exponentially for games built by part-timers and volunteers.

Even in 2021, it was obvious that turning Loot into a video game would be incredibly difficult. But some of the intermediate steps have also proved difficult.

One of the aspects of NFTs that Hofmann finds appealing is “composability,” the idea that blockchain applications are modular and can be put together like Legos. In the weeks after Loot launched, other developers “composed” various secondary elements intended to work with it in this way: a compendium of beasts in the Loot universe, a list of dungeons, some visual elements, and so on.

But the result was a kind of Frankenstein’s monster that was less than the sum of its parts. You can write a new smart contract that tries to merge the pieces, but as soon as someone wants to add a new piece to the stack, you may have to start over.

“It’s really, really, really hard to make a bunch of parts of something that should be related to each other, relate to each other — and also be open to future parts that need to be connected,” Hofmann said. “Being future-proof is a bit difficult.”

Three, while much of the focus on NFTs in recent months has been on the price crash, Hofmann said one of the biggest reasons web3 projects haven’t made much progress lately is how expensive Ethereum is to use. Transaction fees typically cost $10 or more to perform a single action, making projects inaccessible to anyone but rich geeks.

“Because of that, I think there’s a whole range of use cases — I’d even say most use cases — that are out of reach,” Hofmann said. “Under normal circumstances, you’re talking about close to $10 and maybe even $100 to do a transaction. … The price is prohibitive.”

All that said, Hofmann remains deeply interested in the technology. Filmmaking also used to be expensive, he said—thinking back to the time when, as a young teenager, he bought a book on filmmaking and learned he was expected to scrape together $50,000 for an entry-level film camera. Today, every smartphone comes with a full-cap camera; that the entry barrier has disappeared.

And he still likes the fundamental characteristics of NFTs: the fact that they represent a piece of data that resides outside of an application; the fact that the data has a verified owner; the fact that the data can be transferred to another verified owner.

“These are pretty big inversions of the way most of the internet works right now,” he said. “Removing the value part from it completely, just thinking about what it means to be the owner of the data and be able to prove that you are the owner of the data. What that enables, just as a technology primitive, it’s super interesting. It’s not something that exists exactly now.”

A project Hofmann is working on, Corruption, attempts to build on these properties. It’s a role-playing game that takes place entirely on the blockchain – it doesn’t even have a website – with holders of the relevant NFTs playing by interacting with Discord bots. Among the game’s more outlandish features is the CPC, or “community-playable character”, whose actions are voted on by the community.

I don’t know if Corruptions – or Loot – will ever reach an audience of more than a few thousand people. (Hofmann estimates that Loot has about 200 developers currently involved in some capacity.)

But I am struck by the extent to which developers like him continue to work to do something out of NFT and its strange properties. No one I spoke to today suggested that developers have come particularly close to cracking the code – just that it all continues to feel interesting enough to keep working on.

A year from now, Hofmann said, there will likely be Loot-related fiction in the world, and perhaps the first Loot-related video games. And as other CC0 projects join the public, they’ll likely continue to clash with Loot in surprising new ways.

“It’s just moving so fast,” Hofmann said of the NFT landscape. “And it changes so much.”