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It’s been a while since Saturday Night Live was a staple of Monday morning conversation, but this week as our team gathered around the Zoom screen to join our check-in call, the sketch comedy show was top of mind. I can’t imagine many missed it, or at least the news surrounding it, but last weekend’s episode featured special guest Elon Musk.

In his opening monologue, Musk commendably revealed for the first time his Asperger’s diagnosis, while poking fun at his unbelievable track record of innovation: “I reinvented electric cars and I’m sending people to Mars on a rocket ship. Did you think I was also going to be a chill, normal dude?” Musk joked about Dogecoin, a cryptocurrency which, along with NFTs (non-fungible tokens) and other blockchain-based value exchange systems, has taken over headlines recently.

Musk’s statements during the show around Dogecoin’s validity sent it into a downward spiral, while his follow-up statements that SpaceX would accept it as legitimate payment for a mission to the moon sent the cryptocurrency skyrocketing. At the same, his decision to halt acceptance of bitcoin for Tesla payments based on environmental factors caused the digital tokens to plummet.

These volatile reactions to Musk’s statements, brought about primarily by posts on Twitter and reactions in social networks, echo GameStop’s stock surge earlier this year. They demonstrate the power of communities, virtual and in-person, to self-organize around a common cause, whether it’s a well-loved retail videogame chain or a parody cryptocurrency that began as a meme.

All jokes aside, those who have been following the news this year around the valuation of cryptocurrencies and NFTs combined with blockchain technologies will recognize broader implications for how we conduct business and exchange goods in the future of our society.

Coordination without a coordinator 

In the past few years leading up to today, my analysis of innovative corporate strategies has revealed an emerging pattern, which I call “coordinate the uncoordinated”. It’s a paradigm shift from the past where power came from control and ownership of assets to a world where power comes from coordination of resources or services.

Many business models today don’t own the products or services they offer. Dectar, labeled “the Uber of tutors”, matches tutors with students to provide educational services. Meero connects photographers to business services and gigs; I interviewed the founder and CEO of this new unicorn, valued at over $1B, and will share some fascinating insights in an upcoming post.

Last year, I wrote that blockchain would be the next iteration of this strategic trend. Today we are seeing the understanding and utilization of blockchain become more widespread.

Blockchains store records of transactions that cannot be altered. Most blockchains are decentralized —no single person or company has control, all users can view the history of transactions, and the records coordinate themselves. The next paradigm shift will take us beyond coordinating the uncoordinated to an era of coordination without a coordinator.

NFTs beyond art & gaming 

The convergence of two strategic trends – digital/platform models and community coordination – is leading to a future of transactions coordinating themselves. Digital and platform models showcase companies like Airbnb and Uber, which provide value by connecting users to providers of services.

Community coordination, which has emerged in 2020, is the ability of communities to coordinate themselves, often via social networking sites, without an official leader or organizer. Blockchain technologies take this a step further by removing intermediaries.

NFTs have dramatically disrupted the art world this year. Like cryptocurrencies, NFTs are backed on the blockchain. While cryptocurrencies like bitcoin are fungible, meaning they can be exchanged for one another, NFTs are non-fungible, meaning each one has a unique value and cannot be exchanged. Their uniqueness is appealing in digital art, where investors can be sure that they are purchasing the artist’s original work.

Creators, in turn, gain greater ability to get paid for their work and protect their intellectual property. Artist Beeple recently sold an NFT of his work for $69 million. In gaming, NFTs have been used for years to trade virtual collectible items and the market continues to grow.

Fast Company predicts that the future usefulness of NFTs will extend broadly outside of art. A further step toward the death of the middleman, NFTs have the potential to disrupt any industry that relies on layers of lawyers and middlemen to interpret contracts and ensure fair transactions. Smart contracts on the blockchain can be trusted because the information in them cannot be changed. They can automatically ensure that the contract is honored.

For-profit middlemen are being replaced by a more efficient model. This has the potential to transform markets like property, land ownership, vehicle sales, and financial services. The sharing economy that started with cars and hotel rooms will extend to banking and finance.

“In this case, the sharing economy refers to decentralized asset ownership and using information technology to find efficient matches between providers and users of capital, rather than automatically turning to a bank as an intermediary,” states PWC’s global report on Financial Services Technology. “The blockchain ‘public ledger’ will become an integral part of financial institutions’ technology and operational infrastructure.”

A friend of Outthinker, Jared Klee, who was previously at IBM helping to build blockchain networks and who knows more about their possibility than most experts, is demonstrating the power of applying blockchain technologies in the financial services industry. His company, Triple Point Liquidity, is a platform that connects fund administrators, general partners, broker-dealers, and limited partners to facilitate the transaction of private and illiquid assets.

Conclusion 

Those who have raised their eyebrows at the rising valuations of tech stocks and attributed the rise of cryptocurrencies to lockdown boredom combined with stimulus money might be quick to write off NFTs.

But according to Fast Company, history tells us to be careful about dismissing NFTs as a passing fad, since the importance of technological innovations often becomes clearer “once the hype dies down”. There are still environmental implications and a few kinks to work out, but the future of NFTs presents opportunities across industries.