What insights does the wildly popular Reddit NFT abroad bring us?

Original author: Eric Choi

Original compilation: Deep Tide TechFlow

Reddit is a popular online site that allows users to discuss, vote, and share content (similar to Tieba). It has over 1.5 billion registered users, 430 million monthly active users, and 52 million daily active users.

I treat Reddit as a search engine. For example, when searching for cars before making a purchase, I use Reddit to look up "Honda CRV" and read comments in relevant subreddits.

Why did Reddit issue collectible avatars in the form of NFTs?

Reddit issued collectible avatars (NFTs) to provide a way for artists within its community to profit from their work. Reddit retains only 5% of the sales revenue to support the creator program, with the rest going to the artists.

Reddit collaborated with about 30 artists to release a second generation of 40,000 collectible avatars. Released on October 21, 2022, they sold out within 24 hours, showing significant improvement compared to the first generation released in July 2022, which took weeks to sell out.

Those who purchased the NFTs can use them as profile pictures on Reddit and other platforms, or sell them on secondary markets like OpenSea. According to RedditFloor, the most expensive NFT is currently valued at around $14,000.

How did Reddit attract non-Web3 users to purchase its NFTs?

1. Reddit used the term "digital collectibles" instead of NFTs to reduce psychological resistance among non-Web3 users. In fact, this is not Reddit's first foray into NFTs. In the summer of 2021, Reddit released a limited series of 4 CryptoSnoos NFTs, which are digital artworks based on Reddit's mascot Snoo.

2. Non-Web3 users can easily create their wallets using familiar password setups. There is no need for mnemonic phrases or understanding public addresses (0x…).

3. The 40,000 collectible NFTs can only be purchased with fiat currency at a fixed price. Non-Web3 users do not have to worry about how to buy ETH or MATIC on cryptocurrency exchanges.

Why did Reddit choose Polygon?

The main goal is to keep transaction costs low and be energy-efficient. The Polygon blockchain is known for its flexibility, scalability, and low gas fees, while retaining the advantages of the Ethereum blockchain. The Polygon organization is also leading the mass adoption of Web3. It has partnered with top brands like Coca-Cola, Starbucks, DraftKings, and Meta to onboard users into Web3.

How has it performed so far?

Since its launch, approximately 3 million wallets have been created on Reddit, with the market value of Reddit NFTs around $100 million and a daily trading volume of $230,000. This is quite surprising, as OpenSea has only created 2.3 million wallets so far.

So, has Reddit NFT achieved mass adoption?

Not yet, for two reasons:

1. The number of users is still small.

There are fewer than 100,000 unique Reddit NFT holders, which is less than 0.1% of its daily user count (52 million). Even if all 3 million Reddit cryptocurrency wallets purchased Reddit avatar NFTs, it would still be less than 6% of the daily user count.

2. Reddit has not yet found a sustainable business model.

If we generously assume that all 40,000 NFTs were sold at $99.99 each, Reddit would have earned about $200,000 from NFT sales. Reddit's revenue last year was $350 million, so NFT sales accounted for only 0.006% of its revenue. However, Reddit has undoubtedly taken a successful first step toward mass adoption in Web3 and set an example for other Web2 companies.

Here are the key insights from Reddit NFT's explosive success:

1. Serve your community before making money. Reddit empowers artists to showcase their work and takes 5% of the revenue from NFT sales.

2. Reduce friction when creating cryptocurrency wallets. Reddit allows users to create a cryptocurrency wallet with just a password. No mnemonic phrases, no public addresses.

3. Allow users to purchase NFTs with credit cards. No Web2 user is willing to go to a cryptocurrency exchange to buy ETH or MATIC just to purchase an NFT.

4. Choose a blockchain with low gas fees. No one wants to pay $50 in gas fees to buy a $30 NFT avatar.

5. Start small and iterate continuously. Reddit has 52 million daily active users, but it has released fewer than 100,000 NFTs. The team will collect feedback from holders and other users to improve the purchasing process for the next version of NFTs.