Take Sarah, a bright, ambitious college student whom I had the pleasure of meeting at a Grace Hopper Celebration event last fall. She was all-in on NFTs. Each discussion was charged with energy regarding the upcoming primary release. They talked about what return on investment she could expect and how she intended to “make it” in Web3. She missed some school to day-trade digital monkeys. Now? She's back to ramen noodles and regrets. Reservoir's recent decision to pull the plug on its NFT services should be a stark warning, especially for Gen Z.

NFTs Quick Riches Or Fool's Gold?

Let’s keep it real, the NFT world has been driven primarily by speculation and FOMO. The lure of instant wealth and private gated-society life allures most, particularly millennial investors. This excitement easily leads them to overlook or ignore the significant risks that come along with it. We all have watched as project after project have spurred the launch/pump/dump cycle that has left a majority of crypto’s bagholders in disappointment. The Reservoir situation is particularly galling. Blog A company that Coinbase Ventures helped fund just two months ago recently closed another round — $14 million in Series A funding. Today, it is inexplicably jumping ship. If the smart money is fleeing, isn’t the question you should be asking why?

This isn’t only about loss of revenue, it is about the betrayal of a commitment. Web3 at least on paper was meant to be the opposite, decentralized, democratic, empowering. It still sometimes seems like a shiny new reinterpretation of the same tired Wall Street trick. This time around, it’s with shinier, digital assets and aimed at young, impressionable kids. It’s hard to swallow the idea that the “disruption” is nothing more than a repackaged platform for the same abusive model. It’s the same stuff, except it’s just wrapped in a shiny blockchain veneer.

Speculation Over Substance A Fatal Flaw?

The art world’s core issue with the NFT marketplace is the speculative, get-rich-quick, irresponsible-bubble approach at its foundation. In the process, we’ve misfocused on the goal of simply amassing digital JPEGs rather than creating true utility and value. When you look at the thousands of NFT projects today, how many are truly solving a real-world problem? How many just pretend they do beyond offering cool trophies and the vague prospect of having someone buy them up in an IPO. Very few! The focus has been on creating artificial scarcity and driving up prices, not on building sustainable ecosystems with real-world applications.

This mirrors a larger problem in our economy: the prioritization of short-term gains over long-term sustainability. It’s the mentality that brought us the 2008 financial crisis and still drives wealth inequality today. In their current ostentatious, airy-fairy, oblivious form, NFTs threaten to only deepen these disparities that already exist. Those with capital can afford to speculate and potentially profit, while those without are left holding the bag when the bubble inevitably bursts. This isn't the future we were promised.

While Reservoir is abandoning its NFT API, they're pivoting to "Relay," a broader token infrastructure project. This is telling. They haven’t stopped focusing on the potential of blockchain technology. Instead, they’re pulling back on the one application that’s gotten the most hype and generated the most outrage. As such, they’re betting on the underlying technology—not the momentary trend.

Regulation Needed To Protect The Masses?

The NFT space is largely unregulated, making it the perfect hotbed for scams, fraud, and market manipulation. From rug pulls to wash trading, the Wild West nature of the market has exposed countless investors. We deserve stronger consumer protections and an end to the worst practices that kill competition and bring irritation, misdirection, and harm.

Regulators need to step up and:

  • Define NFTs as securities: This would subject them to the same regulations as stocks and bonds, requiring greater transparency and accountability.
  • Crack down on wash trading: This illegal practice artificially inflates trading volumes and deceives investors.
  • Establish clear guidelines for NFT projects: This would help prevent scams and ensure that projects are legitimate and sustainable.

Some might argue that regulation stifles innovation. The current lack of regulation is stifling something far more important: trust. Without trust, the NFT market can only go so far.

While I'm critical of the current state of NFTs, I'm not a blockchain skeptic. The new technology has the ability to disrupt other industries, including finance and supply chain management. The hype cycle must come to an end. We have to move from speculative projects to transformational innovation, from hype to public safety utility.

Gen Z, you're the future. But make no mistake — you, as builders, have the power to shape the direction of Web3. Don't let the hype blind you. So be critical, be discerning, and demand more from the projects you help fund. Create lasting value rather than chase momentary magic. Demand transparency and accountability. And last but not least—in fact, most importantly—never be afraid to challenge the status quo. The future of Web3 depends on it.

  • DeFi (Decentralized Finance): Democratizing access to financial services.
  • Supply Chain Management: Enhancing transparency and traceability.
  • Digital Identity: Securely managing and verifying identities online.

As disappointing as Reservoir’s exit may be, it’s a unique opportunity. This is an opportunity to avoid learning lessons the hard way. Here’s to resetting the hype-o-meter and creating a Web3 that’s sustainable, equitable and beneficial to all! The digital shift has indeed occurred. So wake up and smell the coffee, or better yet, burnt digital toast.

Reservoir's exit isn't just a setback; it's an opportunity. An opportunity to learn from our mistakes, to recalibrate our expectations, and to build a more sustainable and equitable Web3 for everyone. It's time to wake up and smell the coffee, or maybe, the burnt digital toast.