NFT Project Failures, Part One

What's a project failure, and who gets to decide something has failed?

I’ve been trading NFT’s since late September, which in NFT time is about 400,000 years. In that time, I’ve witnessed many failed projects, and I’ve even been taken in by a couple of them. Since everything is a learning opportunity, I thought it might be useful if I wrote about NFT project failures. What does it mean for an NFT project to fail? How does it happen? Are there warning signs, particularly for legitimate projects that don’t otherwise raise red flags? If you’re at the helm of a failing project, do you hop on a lifeboat, do you strike up the band as it sinks, or do you try to turn the boat?  

I’m still working on the other long, promised project, but I want to try and start a discussion this week around the idea of an NFT project failure. In this, the first part of the series, I’m going to attempt to define failure in the NFT space. In the next part, I’ll outline the different types of failures I’ve seen. In Part III, we’ll talk about the common points of failure and when they occur. Throughout the series, I’ll provide anonymized case studies.

Rationale: Why Failure?

Why discuss failure? The self-deprecating jokes are too easy to make, so I’ll avoid them (But please know that I am human and thus no stranger to failure). I chose to write about failure for this series this not only because I’m a cynic. It’s also that one big hurdle NFT’s must clear before mainstream adoption is the perception that they’re rife with scams (and that these scams are intrinsically and inherently different from the other flavors of scams with which people are more familiar). Further, defining the goals of NFT projects – or indeed, any projects – can be a vague and amorphous process. So is failure, even though it is generally perceived as concrete. Like obscenity, you know failure when you see it, right? In the time I’ve been in the NFT space, I’ve observed several types of project failure, which I’ll cover in this series.

Whose Failure is it, Anyway?

There is a world of difference between malicious or intentional project failures (i.e., scams or “rugs”) and the less intentional types of failures. There’s plenty of content out there about how to avoid scams – and technically, I suppose a scam in which the scam artists make off with large amounts of money is, from their perspective, actually a success! Anyway, I don't think there’s as much discussion about what a failure is, who gets to declare or define it and whether that matters, and whether common failure types can be avoided. I hope this series makes a positive contribution to the discourse surrounding NFT’s.  

If you ask an NFT trader what makes a project fail, the answer will probably be simple: They lost money. Yet if you ask a developer or artist what failure is, the answers might be a little more complicated, or at least, the answers will be shrouded in business-speak: They didn’t meet their goals or targets. They disappointed holders. They couldn’t meet deadlines. There were technological issues. External events and “the market” worked against them. But these answers refer to outcomes, not processes. They refer to the difference between expectation and reality, as the memes say.

It generally requires a market consensus to declare an NFT project a failure, and this consensus usually happens through inaction and apathy rather than through action and passion. Just as a speech act is one that transforms the world,¹ perhaps consciously not purchasing an item, in aggregate and without coordination, functions in some sense as a speech act. There have already been some egregious court rulings stating that spending money is an act of free speech, so perhaps the conscious and conspicuous not spending of money – both within and outside of the context of a formal boycott – is also related. (I’m probably the only one interested in these things.)

On several occasions, I have seen members of project teams declare the project a failure; in a few of those circumstances, it surprised me because the creators were clearly well-intentioned and the problems seemed surmountable.  Whether that is a rhetorical or practical distinction, I do not know. However, to me this distinction entails several important concepts: First, until the project launches, and even for an amount of time thereafter, the team has the power to define and frame it. That shouldn’t surprise anyone. Second, though, it also suggests that NFT’s differ from traditional businesses in both the metrics used to assess them and in the timelines that are used to assess them. Maybe this is the newness of the space, and maybe if I had more familiarity with the cycles of software or app development, I would find this aspect less remarkable. I believe that words matter in NFT’s just as they do in life, so calling a project a failure – especially from within the team – is a powerful act.

Failure in NFT’s tends to be defined as a binary, at least from the perspective of traders. NFT’s don’t seem to have bad quarters or even weeks; they have releases (mints) and then they have long tails, which are themselves strongly shaped by the mint and perceptions of its success (or lack thereof). It’s extremely rare for a project to have an unsuccessful mint and then recover, but it does happen. By an unsuccessful mint, I mean a slow sellout, contract issues that disappoint or confuse stakeholders, popular perceptions that the mint process has been unfair (e.g., friends of team members end up with the rarest items), a lack or perceived lack of communication, and so on. Yet even though this is the most common kind of failure from the NFT trader’s perspective, it is far from the only type of failure that exists.

It is far more common for projects to die out slowly over time – the proverbial dying with a whimper and not a bang. This less dramatic failure might consist of a “slow rug pull” or fade as project creators back off from their customers, an acknowledgment that roadmap or white paper promises and milestones cannot be met, or the departure of team members.

Profiles in “Failure”

Here are a few (anonymized) examples of projects that were considered “failures” by various stakeholders. Note the various points in the project life cycle when the “failure” occurred and the resolution(s). We’ll come back to some of these case studies in later installments, when I’ll talk about the projects in more detail and outline some of the decisions that might have led to different outcomes.

Project 1: 3D PFP with Charity Fundraising Angle

n=4,444

What happened: A project creator got a DMCA notice because, despite apparently having consulted with an IP attorney, his work was too derivative of copyrighted images. He was asked to immediately cease the already-slow mint and remove all images.

Who dubbed it a failure? Some investors, third-party observers

Then what? The creator worked very hard to generate new, non-derivative content and send it to the initial buyers, but the momentum was gone.

Project 2: 3D Land for Planned Blockchain RPG

n=1,200

What happened:² The mint was plagued with issues: First, there were unspecified “technical issues” just before the mint, resulting in an announcement that anyone who minted would be airdropped another one for free. Then, after only a few hours of minting, the team abruptly announced that the project would be “closed” and that anyone who minted would be refunded, and that the project Discord would be closed a few days later. Presumably, the slow mint - fewer than 100 items minted - was a major driver in that decision. The mint price was also outrageous (0.25 for WL, 0.4 for public), which probably did not help.

Who dubbed it a failure? The team themselves!

Then what? I wasn’t able to confirm whether the refunds were sent as promised. The sale contract has been paused, however. The team’s wording in the Discord seemed to imply that they were not even going to continue to work on it, which was a bit shocking since it was clear a significant amount of work had been put into the project. Either it was an unnecessarily convoluted and unsuccessful scam, or the team couldn’t navigate a problem and chose to “close the project” rather than work through it. The project was incredible, in the literal sense (meaning: It seemed too good to be true, particularly given the lack of buzz). However, I like to give people the benefit of the doubt, and so I hope they come back and make it work.

Project 3: Woman-Centered PFP

n=3,000

What happened: Some technical issues with the mint led to the team announcing that they would refund people who had minted. The team promised to build a stronger community and strategy.

Who dubbed it a failure? There was some “FUD” (fear, uncertainty, doubt) in the community, but the team themselves dubbed it a failure quite quickly, refunded minters, and shut it down.

Then what? The mint was re-scheduled and began recently, but the new mint has gone poorly, too.

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Thanks for reading! Have you seen any NFT projects fail? If you’ve worked on a project, what do you think are the most critical failure points? Have you seen any projects emerge from the ashes? Let me know!

Thanks again for your time; I hope I have added some value to your NFT experience. Or at least to your inbox. Don’t forget to subscribe and click the tiny heart if you liked the post. This counts as “engagement” for the omniscient algorithms that be, which will help more people find this newsletter. You can share it, too, though, and ensure that more people find it!

1. For more on Speech Acts, read this link or the book How to Do Things with Words by J.L Austin.

2. It’s worth noting this project had some red flags surrounding it to begin with.