How the company managed to attract the mass user to trade digital avatars

​“Collectibles.” How millions of Reddit users suddenly fell in love with NFTs

06.11.2022

155

6 min

In July, the social platform Reddit launched its own marketplace of avatars in the form of non-fungible tokens (NFTs) on the Polygon blockchain. The company presented the project avoiding the usual terms in the crypto sphere, calling its product “collectibles.” Thus, even established critics of NFTs and those who did not take cryptocurrencies seriously got involved in avatar trading. The trading volume on the platform is already in the millions of dollars, and the number of its users is growing every day.

Reddit began selling avatars featuring the platform’s mascot named Snoo back in the summer, but the first collection did not generate much excitement. But the second batch of NFTs sold out in about 24 hours. According to Dune Analytics, users have registered more than 2,5 million wallets since the marketplace opened, and total sales of NFT collections reached $10 million.

To purchase an NFT, it is not necessary to have a crypto wallet, users can use the built-in app Reddit Vault with familiar payment methods. Tokens with platform avatars also appeared on other marketplaces, such as OpenSea and Rarible.

The price per NFT depends on the collection: the cheapest avatar costs 0,01 ETH (about $15), and the most expensive was sold for 30 ETH ($40 451 at the time of the transaction). In total, there are about 86 000 NFTs on the network, and their total capitalization reaches $100 million. The technology for creating tokens is tied to Reddit’s internal feature, which allows users to generate an avatar, enabling them to issue unique NFTs.

NFTs, but not NFTs

The essence of Reddit’s collectible avatars is clear: they are the usual non-fungible tokens that can be bought, sold, and exchanged. However, the platform itself rarely uses terms familiar in the crypto sphere in any related material. Even the classic “NFT” next to Reddit tokens can only be found on external marketplaces.

Instead, the forum’s representatives prefer to use the word combinations “collectibles” or “collectible avatars,” and “vaults” instead of “wallets.”

The Reddit site ranks 5th in popularity in the United States and 20th worldwide, with more than 1,5 billion registered users. The platform’s team figured out how to find an approach to the average consumer, who is unfamiliar with the crypto market or biased against it. Reddit made token purchase itself very simple and clear — the trade can be paid for with any bank card. In this, all the functionality of the NFT marketplace is available through the application for smartphones.

The Polygon blockchain, on the basis of which the Reddit NFT platform is built, was also not chosen by chance. It is a second-tier network for scaling Ethereum, which significantly reduces fees and increases transaction speeds. In addition, it is easy to create a user-friendly marketplace to trade tokens based on it. Earlier, Instagram added support for NFTs on the Polygon blockchain, which means that collectible avatars can also be displayed on the social network.

Reddit co-founder Alexis Ohanian told Fortune in an interview that avoiding classic crypto terms was necessary to make the technology more accessible to the masses. “In the future, we see blockchain as one way to bring more empowerment and independence to communities on Reddit,” Ohanian shared. The platform has also started airdropping tokenized avatars to old forum members for free to attract the attention of ordinary users.

Of course, not knowing the intricacies of interacting with crypto tokens and not understanding the very fact of having an avatar just as an NFT became a problem for some. The respective investment risks or elementary security rules are not explained on the website and marketplace pages.

In the r/avatartrading thread, scammers tricked inexperienced users into revealing the seed phrase from the wallet, thanks to which they managed to steal collectible avatars worth over a thousand dollars. In parallel, fake collections appeared on OpenSea, posing as NFTs of the social platform and also attracting gullible novices.

There is a lot of irony in the thematic channels and social networks about how “normies” (ordinary people who are far from cryptocurrencies) learn the world of NFTs. Thus, a post by a Reddit user went viral, in which he shared how he spent $2 000 on avatars when he was drunk, and the next day their price went down to $1 400. He said that he wanted a partial or full refund from the platform for the money he spent, and in return, he offered to give the tokens back. “This is how a normal and honest business would operate as it's not even 24 hours since I bought. What is this, NFT??,” he summarized his request.

Entry threshold

According to Nikita Zuborev, senior analyst at Bestchange.ru aggregator, Reddit’s strategy of avoiding crypto terminology is a well-thought-out PR move: “Buying an NFT is something new, risky and complicated while buying an avatar is something as typical as possible and in the spirit of the times.” The focus should not be on the technology of storing the asset or its names, but on how exactly the base of this trading platform is arranged, Zuborev believes, admitting that this approach to the spread of non-fungible tokens may be adopted by other platforms.

Despite its shortcomings, the Reddit initiative will help encourage more global adoption of NFTs and Web 3.0 technology in general, the analyst notes. “Paradoxically, it’s much easier to adopt what you’re using even before you realize what exactly you’re using, and understand how easy it was,” Zuborev comments on the new experience of Reddit users.

The main difficulty of entering the cryptocurrency market, according to Zuborev, is the need for technical literacy. He notes that exchanges have simplified this process over the past few years, but the level of knowledge required is still high.

Low stakes and new trends. What’s going on in the NFT market

“For the average user, the NFT niche is absolute chaos with no rules of the game,” comments Roman Nekrasov, co-founder of ENCRY Foundation. An untrained person doesn’t understand why some digital pictures of dubious quality suddenly cost hundreds or even millions of dollars, the expert says, drawing an analogy with modern art.

“If you don’t in a whirl of this sphere every day, you don’t feel where the wind will blow and which direction will be the hit of the season, you won’t be able to make money on it,” warns Nekrasov, adding that it is easier for a beginner to deal with cryptocurrencies than with NFTs. In his opinion, basic articles about cryptocurrency are enough to get a general idea about the market.

It is worth noting that Reddit NFT’s trading figures have been on the decline since November and have reached September levels. Nevertheless, Reddit has shown impressive performance and brought Web 3.0 technologies into the lives of ordinary users. It remains to be seen how this surge in the popularity of digital avatars will end, but at the moment the social platform’s marketplace has already managed to overtake OpenSea in terms of the number of users.

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