The recent drop in the value of nonfungible tokens (NFTs) has sparked some negative reactions from critics who claim that the NFT craze is over. However, some Web3 executives disagree and argue that the NFT market is actually maturing and moving toward more meaningful use cases.
NFTs are more than just digital art
NFTs are unique digital tokens that can represent ownership of any digital or physical asset, such as art, music, videos, games, collectibles, real estate, and more. They have gained popularity in the past year as a new way of creating and exchanging value on the internet.
However, the NFT market has also faced some challenges and fluctuations. According to a report by dappGambl, which analyzed over 73,000 NFT collections, as much as 95% of the NFTs studied had no value, as prices, sales volume and transactions have slid over the past year.
Some Web3 executives believe that this decline is not a sign of failure, but rather a sign of growth and innovation. Yemel Jardi, executive director of Decentraland Foundation, a virtual world platform powered by NFTs, told Cointelegraph:
“I wouldn’t say the NFT market has regressed. Rather, it’s maturing.”
Jardi explained that markets are cyclic and it is natural for there to be periods of adjustment. He attributed sliding NFT floor prices partly to “speculative trading” and said the value of NFTs should instead be anchored to their utility.
“As people become more educated about NFTs, their use cases and their utilities, the market will stabilize and the focus will shift from speculative trading to genuine utility and innovation.”
NFTs have diverse applications and benefits
Anjali Young, co-founder of Collab.Land, a tokenized community-management platform that uses NFTs to reward members and verify identities, said that she is not surprised by the anti-NFT sentiment.
“Any innovation — especially this one with financial impact, cultural value and status — will attract questioning during its downs.”
Young noted that many projects have stumbled since marketplaces such as OpenSea removed mandated royalty fees in late August. However, she claimed that NFTs are “here to stay” and expects they will be more frequently used for loyalty programs, rewards, advertising and proof of authenticity in the coming months.
Some examples of how NFTs can provide value and utility include:
- Collectibles: NFTs can create digital scarcity and uniqueness for collectors who want to own rare and exclusive items. For instance, car companies such as BMW and Porsche have launched their own NFT collections featuring their iconic models.
- Supply chains: NFTs can enable transparent and secure tracking of goods and services across the supply chain. For example, IBM has partnered with a coffee company to use NFTs to verify the origin and quality of coffee beans.
- Property rights: NFTs can simplify and streamline the process of buying and selling real estate by eliminating intermediaries and reducing costs. For instance, someone recently listed a $26.5 million building in New York City as an NFT.
- Media: NFTs can empower creators and consumers of digital media by allowing them to monetize their work and access exclusive content. For example, China Daily, a state-owned newspaper, announced plans to launch a platform for trading digital collectibles based on its news stories.
NFTs will shape the future of the digital economy
Tama Churchouse, chief operating officer of Cumberland Labs, a blockchain incubator and investment firm, recently wrote that NFTs are not “dead,” arguing that recent developments in the space show there are still signs of life.
He pointed out that some projects such as Loot, Art Blocks, Bored Ape Yacht Club, CryptoPunks, and Axie Infinity have maintained or increased their value and popularity despite the market downturn.
He also highlighted that some celebrities such as Jay-Z, Snoop Dogg, Paris Hilton, Tom Brady, and Steph Curry have embraced NFTs as a way of expressing themselves and connecting with their fans.
Churchouse concluded that NFTs are not a fad or a bubble, but rather a fundamental shift in how we create and exchange value online.
“NFTs are here to stay. They represent a new paradigm for the digital economy. One where ownership, creativity, community, and identity are at the core.”
Jardi agreed that NFTs are more than just a trend. He said that he believes governments and institutions will leverage NFTs in the future for various use cases.
“NFTs are not only about digital art. They are about empowering people to own their digital identity and assets, and to participate in the Web3 economy.”
