Two years ago, the notion that NFTs could propel a new era of economic growth was the stuff of fantasy. Any junior analyst tabling such a thesis would have been consigned to tea-making duties for the remainder of their contract. But then, in late 2020, something happened. NFTs, for so long derided as right-clickable, downloadable JPEGs by those who couldn’t or didn’t want to understand them, became cool.
It’s hard to pinpoint the precise moment when NFTs broke big. Was it when Beeple’s ‘The First 5000 Days’ sold for $69M at auction? Was it when Art Blocks' curated collections began selling out in record time? Or was it when celebrity artists like Damien Hirst entered the fray, and celebrity buyers like Eminem and Jimmy Fallon began flaunting NFTs as status symbols and Twitter avatars?
In truth, there was no eureka moment: just a series of firsts that made it clear to even the most ardent skeptics that NFTs had made it mainstream. For years, the crypto community had been searching for the use case or killer dApp that would onboard the hordes en masse. It turns out that the breakthrough had been here all along. The non-fungible token, which had been smoldering since 2014, had finally caught ablaze and consumers were hooked.
A phoenix reborn
In less than 12 months, NFTs grew into a multi-billion-dollar industry, but they couldn’t stop the industry-wide decline that had set in by late 2021. The value of the crypto market took a nosedive, bringing the floor price of NFTs crashing down with it. The dawn of a new bear market in 2022, coinciding with a global economic downturn, seemed almost inevitable.
While the days of buyers dropping $3 million on a single CryptoPunk have abated, if not entirely ended, what hasn’t diminished is the use cases that have flourished. Not only are they still very much alive, but new ones are being created regularly: concert tickets, metaverse passes, liquidity shares, governance rights, music albums, royalty streams, etc. You name it, NFTs can deliver it. But the greatest benefit NFTs have delivered is their ability to foster close-knit communities.
On the surface, this sounds like a marginal benefit, but it’s one whose effects cannot be overstated. Look through every successful NFT collection over the last two years and while the art may be nice and the roadmap intriguing, the commonality they all share is their community spirit.
Bored Apes Yacht Club perfectly embodies this. It’s easy to forget now that they’re being flaunted by Snoop and Eminem that in the first few months, no one gave a damn about the NFTs except for existing holders. If the community hadn’t banded together, aped strong, followed one another on Twitter and kept pushing the price floor higher, BAYC’s meteoric rise may never have happened.
When the crypto markets begin their recovery, it will be the communities that have stayed together that could rebound the hardest. In this environment, you may not want to bet against blue chip NFTs — as well as well-branded emerging, cult collections — leading the charge.
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From floor to ceiling
Before NFT floor prices begin heading north, there’s work to refine the basic infrastructure. The nuts and bolts that make crypto’s core infrastructure tick over, from tokenomics to interoperability, still need to improve. And what better time to build than in a bear market? It might not make headlines, but crypto developers are quietly alleviating paint points and enhancing network performance in readiness for the next bull market.
Everywhere you look, there's innovation, laying a framework that will make Web3 palatable to the next 100 million users and hopefully the first billion.Boba Network, for example, has devised a Hybrid Compute system that enables NFTs to be updated automatically with Web2 APIs. This could be used, say, to issue sports NFTs whose attributes — and thus value — change in line with the player. Given the value of the fantasy sports market, this could be a game changer.
Elsewhere, the interoperability problem unique to metaverses, namely their siloed and incompatible nature, is being solved. One blockchain making great strides in this regard is Flare, whose native interoperability protocols promise to unite disparate NFT elements across metaverses. For example, users from different ecosystems such as Decentraland and The Sandbox will be able to enter Metropolis World and utilize their assets to their full capacity.
Holograph is also progressing in uniting NFT communities, tackling the problem from a different angle. Its Omnichain marketplace allows users to trade and collect NFTs from various chains without having to switch networks and deal with the hassle of multiple native gas tokens. It’s also introducing cross-chain arbitrage so traders can profit from minor differences in NFT pricing on marketplaces across different chains.
Another example is WakeUpLabs issuing NFT certificates on RSK. Minted on the Bitcoin network using RSK infrastructure, these provide verifiable proof of farmers’ water savings. By the time the next bull market rolls around, there could be another dozen use cases for NFTs having emerged, on RSK and elsewhere. Blockchain networks that were once meant for serious business only have begun embracing non-fungible tokens now. They’ve discovered there’s much more you can do with them than create PFPs.
There’s a lot that needs to improve before the masses can FOMO into crypto again. Inflation, energy prices, stocks, wages and all the rest must start moving in the right direction. These are problems that NFTs can’t fix. But for everything else, you can bet there’s someone out there working on a non-fungible solution for it. And when crypto returns start increasing once more, you may not be surprised to see NFTs dramatically assisting in that growth.
Tomer Warschauer Nuni is CMO @Kryptomon, a serial entrepreneur and investor focused on the innovative blockchain and NFT gaming industry.
This article was published through Cointelegraph Innovation Circle, a vetted organization of senior executives and experts in the blockchain technology industry who are building the future through the power of connections, collaboration and thought leadership. Opinions expressed do not necessarily reflect those of Cointelegraph.