Headlines predicting the death of Bitcoin have become a common occurrence over the past decade. However, the current crypto winter has seen very few of these dire proclamations. This time, it seems a little different. With Bitcoin hovering around $28,000 and a spot Bitcoin ETF on the horizon, it’s hard to write off its potential. Ethereum also shows no signs of dying down. Despite this, the blockchain industry and its commentators are still looking for a target to criticize, and they have found it in the nonfungible token (NFT) market.
NFTs have been declared dead, deceased, and lifeless. Rolling Stone even claimed that “Your NFTs are actually — finally — totally worthless.” It is true that most NFTs are indeed worthless. However, this should come as no surprise to those who have been in the crypto industry for a few cycles. In the 2017 bull market, most ICO tokens became worthless by the 2018/19 winter. The same fate befell countless DeFi protocol tokens after the DeFi summer of 2020.
Currently, there are over 1.8 million tokens in the market with an aggregate market cap of a little over $1 trillion. However, the top 10 largest protocols and tokens account for over 93% of the total market cap. This leaves a long tail of worthless zombie coins that make up the majority. Given this history, it is not surprising that NFTs are following a similar trajectory.
The low barrier to entry for creating an NFT project has attracted many who hoped to strike it rich. Anyone can create an NFT collection in a few minutes with a few keystrokes. When a frenzy of trading activity and money flooded into this market in mid-2021, the free market responded by providing supply. Unfortunately, supply does not always equate to quality, especially in the crypto industry.
As a result, NFT trading volumes have plummeted from around $1 billion a week in mid-2021 to less than $100 million today. A-listers who once enthusiastically promoted NFTs have quietly taken down their NFT Twitter avatars. It is safe to say that this is the first real NFT winter. However, amidst the bleakness, there are signs of life in the NFT market.
For those willing to look beneath the surface, there are examples of NFT projects that are thriving. PayPal, for instance, filed a patent application for an NFT purchase-and-transfer system. Pudgy Penguins, an NFT collection, has expanded into physical toys and is selling on Amazon and Walmart. Collaborations between NFT projects and mainstream brands, such as Doodles with Crocs and Veefriends with Reebok, have also shown promise.
Furthermore, NFTs have made their way into the music industry. Harry Styles fans were able to download an app featuring a digital wallet for future NFT rewards at one of his concerts. Justin Bieber is collaborating with a blockchain music platform to turn a song into an NFT with royalty streams for the NFT holders. Even top auction houses like Christie’s and Sotheby’s are bringing mainstream artists into the NFT world.
It is important to remember that despite the current situation, NFTs are not dead. The fundamental technology behind NFTs, as well as blockchain, will continue to evolve. Weak projects, scams, copycats, and fast money may fade away, but NFTs themselves will endure. As we transition out of this NFT winter, we can expect to see more sophisticated and commercially viable NFT projects that enrich the ecosystem in new and meaningful ways.
In conclusion, while many NFTs may currently be worthless, it is important not to discount the potential of the NFT market. Amidst the decline in trading volumes, there are signs of life and innovation that indicate a brighter future for NFTs. As with any emerging technology, there will be cycles of hype and disillusionment, but the underlying potential remains. It is essential to look beyond the current state and focus on the long-term evolution of NFTs in the blockchain industry.