Now that the daily sales volume of non-fungible tokens (NFTs) is at its lowest since January, many are wondering if the end of the NFT dream is near.
The same question is being asked about cryptocurrencies, and it’s no wonder – the crypto market has taken a beating. Since the Terra debacle, the total crypto market capitalization had fallen below $1 trillion for the first time since January 2021.
With such a bleak outlook, the claim that NFTs are just a fad is a callback to claims by mainstream financial analysts that Bitcoin’s BTCUSD,
death is “just around the corner”. Since its inception, at least 461 such “obituaries” have been written, with many more to follow as markets rise and fall during bear and bull cycles.
So what is the real situation with NFTs? In short, they have reached a maturity threshold.
The initial hype and unsustainable growth was fueled by NFT profile pictures popularized by Bored Apes and Crypto Punks. They were attractive to investors, traders and collectors because of their insane valuation and sky-high prices. But as happens during economic downturns and bear markets, investors realized they were better off putting their money elsewhere.
The drop in daily sales volume was a clear signal that things needed to change. And the change they have. NFTs and their markets have matured and proliferated; NFTs in particular have undergone a gradual but significant change, becoming more than a collector’s item or a work of art.
A good example of this evolution is what Washington Wizards NBA team owner Ted Leonsis has in store for the existing Top Shot series.
You can buy NBA NFTs featuring game and player highlights, but Leonsis plans to expand the utility of these digital collectibles by giving owners tickets to upcoming games. For example, you can not only buy a souvenir to commemorate the greatest moments of your favorite team, but also get a seat for the next match.
This approach is known as token gating: using an NFT token to give owners access to an exclusive set of benefits, whether it’s a product, discount or service.
NFTs are smart contracts that aim to prove ownership, but due to their flexibility and programmability, they can be automated and adapted for different purposes. Another common feature of NFTs is to assign royalties to the issuer each time the NFT changes hands.
In our earlier example, maybe the owner wanted to trade the NFT after seeing the game, or did he buy it hoping to sell it at the last minute to desperate fans who want to go to the game? The NBA, the issuer of the ticket, would earn a portion of the revenue each time the NFT changes hands.
And it’s not just retail – governments are embracing technology too.
According to a Yahoo Finance article, “The High Court of England and Wales has granted Fabrizio D’Aloia, the founder of Italian-based online gambling company Microgame, permission to sue anonymous individuals via a non-fungible token ( NFT) decrease.”
The importance of this decision is best emphasized by Joanna Bailey, an associate at Giambrone & Partners LLP, who worked on the case:
“This is very important because it shows the court’s willingness to adapt to new technologies and embrace blockchain and step in to help consumers where previous legislation and regulators simply could not.” (From CoinDesk.)
A similar decision was made by a US court in June.
These methods of notifying potential litigants are useful in scenarios where a person’s whereabouts are unknown and only a digital wallet related to that litigation exists.
As you can see, NFTs are slowly evolving and becoming part of the so-called fiat world. Although current market conditions are bearish and may pose a challenge to the industry, these technologies are here to stay. If you’re worried about the future of NFTs, don’t be. The industry is just getting started.
To put money where my mouth is, I decided to test the waters and start my own token project. In one of my next articles I will tell you more: challenges, adoption, results and testimonials from my clients. I think it will be interesting reading and an indication of how easy or difficult it is to implement NFT technologies in the real world.