Non-fungible tokens (NFTs) surged in popularity and prices in 2021, but the market has since returned to ground level and it’s unclear whether it will recover.
NFTs are unique digital tokens recorded on the blockchain to prove ownership and authenticity. They cannot be copied or replaced, but may be transferred and sold by their owners.
According to data from analytics platform NFTGo, as of this writing, the market value of NFTs denominated in Ethereum (ETH) has dropped by 40.59% over the past year, and transaction volume has dropped by 40.81%.
The market value of the US dollar fell by 41.16%, and the trading volume fell by 66.77%. Meanwhile, market sentiment ranks 13th out of 100, with an overall rating of “cold.”
Arno Bauer, senior solutions architect at BNB Chain, told Cointelegraph that from a practical perspective, NFT projects are constantly adding value, and the growth of this functionality may be the future of NFTs.
Bauer said the NFT market is showing “promising signs of innovation and creativity,” which brings significant potential for the technology’s growth and development.
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“Market sentiment, the cultural shift toward digital ownership, and the potential for NFTs to integrate into every aspect of our lives also contribute to the positive outlook for NFTs going forward,” he said.
Bauer added: “While current market conditions may seem bleak, continued innovation and the potential for integration with the digital and physical worlds suggest that NFTs are yet to see their glory days and their continued relevance and growth are highly likely.”
In the long run, NFT
As for long-term use cases, Ball said NFTs “will likely evolve over time” and become increasingly tied to real-world assets, such as property ownership or unique physical goods.
Currently, NFTs are most successful in the art world, with some selling for tens of millions of dollars.
Digital artist Pak sold an NFT project called “The Merge” on Nifty Gateway for $91.8 million in 2021, while Mike Winkelmann (aka Beeple) sold “Everydays” for $69.3 million through Christie’s the same year :The First 5000 Days”.
Blockchain games also use NFTs to represent in-game items such as weapons and armor, and there is speculation that the technology will make the jump to mainstream gaming. Various types of music assets are also sold as unique NFTs.
Bauer believes NFTs may become more attractive to the mainstream market as more powerful technology offers enhanced use cases and security of ownership.
He speculated that NFTs could be linked to financial instruments, representing shares in a company or investment fund, or to social achievements, symbolizing badges of achievement in various fields.
“Beyond art, the ability to tokenize unique assets and provide verifiable ownership will create a plethora of applications in a variety of fields,” Ball said.
“Collaboration with traditional industries, technological advancements, clear regulatory frameworks and educational efforts can significantly increase the utility and adoption of NFTs.”
“Addressing sustainability issues may make them more attractive to a wider audience,” he added.
NFTs have the potential to make a comeback
Jason Bailey, co-founder and CEO of NFT tool and self-custody solution ClubNFT, told Cointelegraph that he believes “NFTs will come back and become mainstream” as cryptocurrencies and NFTs rebound periodically, much like previous tech crashes.
According to data collection platform Statista, the NFT market is expected to continue to grow in revenue, users and market capitalization.
As of 2023, the number of NFT users is 13.95 million and is expected to reach 19.31 million by 2027.
However, Bailey believes that NFT currently has some problems, most of which are amplified by rampant market speculation, and these problems need to be solved before NFT can become mainstream.
He said that NFTs and the ecosystem around them are very complex, and almost everyone is still vulnerable to many risks that they are not even aware of.
“Many of us have been trying to thoughtfully educate people entering this space so that they can be safe, but the reality is that NFTs are not going to become mainstream until complexity is replaced with a simple path that is safe by default,” Bailey said.
“For example, the vast majority of people don’t realize that NFTs are almost always at risk in some sense, except for fully on-chain NFTs, which is really a very small part.”
“The steps required to protect artwork from disappearing and prevent NFTs from being compromised are complex, time-consuming and error-prone,” he added.
related: AI-based tools bring security and transparency to NFT market
Bailey believes that in the long term, NFTs or similar technologies could be invaluable in authenticating digital documents such as marriage certificates, diplomas and licenses.
Overall, he believes that NFTs solve too many current issues related to digital ownership, including scarcity, authentication, provenance and provable ownership, that cannot be ignored.
“We need to build infrastructure now during the bear market to allow for smoother onboarding and protect NFT adopters from malicious actors during the next NFT bull market,” he said.
“Once these issues are resolved, NFTs will absolutely become mainstream because the digital ownership train left the station decades ago and there’s no stopping it.”
Meaningful projects could be game-changers for NFTs
Andy Ku, founder and CEO of digital content Web3 ecosystem Altava Group, said in an interview with Cointelegraph that he believes that the previous highs of the NFT market were based on the hype cycle, so it is difficult for a single NFT to reach such high heights again.
Now let google bard write me some tweets about the NFT market…
MF is really interested in these… pic.twitter.com/aLjUbwH3gT
— beeple (@beeple) August 22, 2023
According to CoinGecko, the value of many top NFT collections has dropped significantly over the past year.
As of this writing, shares of Bored Ape Yacht Club are down 67.1%, CryptoPunks is down 33.2%, Mutant Ape Yacht Club is down 59.2%, and Azuki is down 49.3%.
Ku believes that if we can see more meaningful NFT projects on the market bringing tangible benefits to more people, then the comprehensive volume is likely to drive an increase in the overall market value.
related: In the era of creator economy, what is the next step for NFT and Web3?
“NFTs should provide value and utility beyond digital art or PFP. Two areas I particularly believe in are asset-backed NFTs and membership-based NFTs,” he said.
“The core value of NFTs is as immutable representations of things, making them ideal for assets and memberships.”
NFTs for subscriptions, membership models and loyalty programs are starting to gain traction, with examples already on the market in hotel venues and gyms.
“In terms of asset-backed NFTs, master art, real estate, and precious metals like gold are all good examples of assets that people believe in,” Ku said.
“NFTs will provide great proof of ownership for these assets and are very portable,” he added.