Non-fungible Tokens (NFTs) have been a topic of discussion for a few years. With a large percentage of people in the blockchain space having tried to understand, purchase and launch projects around NFTs, the demand has increased massively, and institutions are being built to support the new sector alongside the new terminology that accompanies it.
With the many benefits and uses that come with making NFTs, it is difficult to use, and a large majority are digital snake oil (methods/products that is considered fraudulent). The current problems create opportunities to provide answers and more secure ways to carry out processes. The accessibility along with the legitimacy of NFT needs to change.
With the increased funding and investments into the blockchain space, markets are starting to mature accelerating or slowing down the momentum making it a very unpredictable market. In NFT 2.0, technology is more mainstream and accessible making the value proposition of the NFT more consistent and transparent.
mainstreamNFT’s growing market has had $17 billion in trading volume since 2021. By 2026, the market value is expected to reach $147 billion by 2026. This is even more staggering that the value arises from less than 400,000 holders of NFT which equates to $47,000 transaction volume per holder.
NTFs have seen significant change since their initial launch for example CryptoPunks which was minted for free in 2017 rose to blue-chip status peaking with $11.8 million in sales last year. Larva Labs the company that created CryptoPunks was bought by the Bored Ape Yatch Club’s parent company Yuga Labs for an unknown amount, so this could contribute to a surplus of funds invested into the project.
NFTs have shown their longevity and ability to hold power in the blockchain space, attracting the attention of celebrity figures, brands and even in commercials. Brands such as Budweiser, McDonald's, Nike, and Adidas have joined the space with their own collections of NFTs.
While organisations plan and implement new strategies around the NFT field, the overall space has mirrored previous successful technological patterns showing an accelerated product timeline. Products such as iPhone took roughly a decade to reach the version we have today. On the other hand, NFTs have matured from 8-bit pixelated images, and pong-link blockchain games to high-fidelity 3D animations, complex play-to-earn game structures with advanced multiplayer experiences in a couple of years so the predictions for the future are equally as optimistic.
With NFTs evolving, the ecosystem of pick-and-shovel solutions (an investment strategy that seeks profit from industries that support a hot sector) is advancing too. The introduction of NFT minting platforms and toolings has reduced the barrier to entry, creating a deep saturation in the market. From March 2022, there were more NFTs than public websites creating noise and making it way more difficult to find valuable NFT projects to invest in.
The retention power of NFTs alongside the transaction volumes has shifted how creators enter the space. Typically, users tend to have rushed their Web3 strategy or treated fans as a liquidity source which in turn increases missteps, rug pulls and abandoned projects. Most companies and creators aren’t ready to enter Web3 requiring more hand-holding services rather than an independent platform.
It is argued that NFTs are following the same pattern as email technology took. In the 1990s companies were required to hire specialists to code emails for them. Early adopters founded agencies that serviced Fortune 500 companies to execute early digital strategies. The information gap provided these agencies with a competitive advantage in the technological and educational sector making it easier for brands to do by themselves.
Similarly, we are in an era whereby brands are looking for experts to educate and prepare them for a Web3 future. It is expected for brands to fully disintermediate and manage their Web3 strategies in-house. Onboarding for NFTs is common in the space but requires complex processes. Some companies are finding solutions to this, by simplifying the more difficult aspects of crypto creating opportunities for deeper engagement with users or investors.
The current form of NFTs was not designed for mainstream consumption. Onboarding for consumers is not an easy process due to the volatility which is damaging to long-time investors and distorts the artist-buyer relationship. There has been a significant increase in conflict around the sticker price of an NFT and the value it holds for consumers with many NFT collections are not seeing demand in their projects which may be a result of poor execution around their road maps.
Core NFT buyers are becoming savvier to rug pulling and scams, which in turn can lead to less minting new collections. The reality of NFTs requires a sizeable washout to weed out those looking for quick returns and properly incentivise buyers in the space. As the vapourware is eradicated during the bear cycle, anti-fragile companies can last when shifting from Web2 to Web3. Agencies and platforms if timed incorrectly will be wiped out but those prepared for volatile market change will maximise high-margin projects while streaming in large revenue returns.