Non-fungible tokens burst into the public consciousness in a big way in early 2021. Digital collectibles like Cryptopunks and Bored Apes came from nowhere to dominate the crypto landscape. The NFT craze quickly caught fire, with a seemingly endless string of headlines of people paying multi-million dollar price tags to acquire the most sought after tokens.
However, the dramatic rise of NFTs was followed by an equally stunning collapse, with prices dropping like a stone as the crypto industry was dragged down by bear market forces. So it’s not surprising that there’s a lot of speculation around the future of NFTs. For many, what was once seen as a disruptive force was quickly turning out to be just another fad.
The Rise And Fall Of NFTs
Projects like Cryptokitties, a blockchain game where people adopt, raise, and trade virtual cats, were the driving force behind the march of NFTs into the mainstream. Some of the most valuable crypto cats sold for over $100,000, and people all over the world began to sit up and pay attention.
What followed was a Cambrian explosion in the popularity of NFTs, and their values skyrocketed. Twitter founder Jack Dorsey sold a tokenized version of his original tweet for $2.9 million, while an animated GIF of the Nyan Cat was traded for $500,000. The artist Grimes sold a digital artwork for more than $6 million. Then, digital artist Beeple’s work was snapped up for a stunning $69 million, setting a new world record for digital art.
The crypto space was in a trance, yet many voices warned that the NFT space was in a bubble. They were quickly proven right, as prices of digital collectibles cratered almost as soon as they rose.
The value of NFTs is highly subjective because they’re not based on fiat money or backed by any tangible asset. So it’s no surprise that once the mass hysteria around NFTs started to die down, so did the prices people were willing to pay. Recently, Bloomberg reported an estimated decrease of 98% in NFT trading volume since hitting its all-time high of $146 billion in April 2022. The NFT bear market had arrived.
The Appeal of NFTs
This is not the end of the story however, for NFTs are still an extremely powerful technology that make it possible to create digital scarcity without any centralized intermediary. Like cryptocurrencies, NFTs are built on blockchain technology, though they are a different kind of digital token, with unique properties. Whereas a Bitcoin can be split into numerous satoshis, NFTs must remain a single, non-divisible token.
Until now, the main use case for NFTs has been as a certificate of authenticity and ownership for digital artwork. Yet, there are many more interesting applications that the technology can be applied to. NFTs can actually be used to prove ownership of almost any kind of asset, and provide special access and benefits to holders.
We’re still in the early days of discovering the best real-world use cases for NFTs, but what is clear is that they hold power that far exceeds owning a few JPEGs stamped onto a blockchain. So-called utility NFTs are expected to be the driving force behind a second wave of growth, enabling superior ways of working, transacting, interacting and playing online.
Big NFT projects like Bored Ape Yacht Club understand this trend well, adding utility to their NFTs by granting holders access to exclusive parties and rewards, and there’s a lot more to come as they begin to show their worth in numerous different industries.
NFT Utility Is Key
Really, the only restriction on the utility of NFTs is our imagination. One of the most often cited examples of their benefits in the real world is the real estate industry. With the use of time stamped NFTs for instance, it’s possible to transfer land title documents from one party to another, and track the history of its ownership and value. NFTs also provide a way to streamline and speed up transactions via smart contracts, making the technology a perfect fit for the space.
One of the first such projects was created back in 2017 by Propy, which sold an NFT that carries the right of ownership to an apartment in Kiev, Ukraine, that previously belonged to TechCrunch founder Michael Arrington.
NFTs can carry some interesting benefits too. For instance, owners of the Crypto Baristas NFTs are able to receive discounts in participating cafes across the world to take part in the “complete caffeine experience”.
Logistics firms can make use of NFTs to authenticate products, ensure quality and verify their origin. This is possible because all NFT-based transactions are immutable and transparent. For instance, a food industry supplier could use NFTs to prove the origin of their products, providing evidence of where it has been and how long it spent there.
A more creative use of NFTs was explored at the recent Paris+ par Art Basel 2022 exhibition, where generative artists Zancan and William Mapan used the technology to reimagine the digital canvas. The exhibition was all about exploring the intersection of art and blockchain and how low-cost, eco-friendly Tezos NFTs are making the technology more inclusive and accessible. To that end, the artists worked with fx(hash), a generative art platform built on Tezos, to create an interactive live minting experience for NFTs. At the exhibition, each visitor was invited to scan a QR code and mint a totally unique NFT-based artwork that was rendered autonomously, using the artists’ code. Once rendered, the unique artwork was immediately minted as an NFT, displayed on-screen at the exhibition, and dropped into the wallet of the person who created it, as a gift.
NFTs can do a world of good too. The GainForest project based in Switzerland is fully focused on saving the world’s rainforests for future generations. It does so using NFTs that represent actual forest locations in the real world. The idea is that NFT holders can help out by tracking the health of the area of forest their token represents.
For now, the development of utility NFTs is an ongoing process. It’ll likely be some years before the technology goes mainstream. However, these early projects showcase how NFTs can be a much more useful tool than simply representing visual art and collectibles.
We might have witnessed a bubble during the early days of NFTs, but the technology is by no means a fad. NFTs remain far from reaching their prime, but it’s clear that digital art and collectibles were just the start of something big.