Over the last two years, non-fungible tokens (NFT) have emerged as one of the most active and notable aspects of Web3.
The data stored on blockchains by NFTs can be connected with files that include various forms of media, such as photos, videos and audio. In certain cases, it can even be related to physical items. The owner of an NFT will often have ownership rights to the data, material or object associated with the token, and these tokens are usually bought and traded on specialized markets. The growth of NFTs was meteoric in 2021, but it has not been very steady since then, and it seems to have dropped sharply in 2022.
Why NFTs Exploded in Popularity in 2021
In 2021, two of the most active markets for NFTs were collectible art projects and the video game industry. NFTs have ushered in a new era of gaming, which has resulted in the proliferation of new types of games, such as blockchain-based game-winning games that provide players with in-game benefits. Users now have the opportunity to own in-game assets for the first time and make a potential profit from such assets by trading them on NFT platforms such as OpenSea.
Axie Infinity, a game that included both NFTs and its own native cryptocurrency, became the most popular crypto game overall. Axie’s NFT market has reached a milestone of $1 billion in total trading volume. In addition, the game accounted for two-thirds of blockchain game NFT transactions in 2021, according to a report covered by Cointelegraph in March this year.
The gaming industry can help bring NFTs into the mainstream due to their massive popularity. Pavel Bains, executive producer of Mixmob – a card strategy racing game – told Cointelegraph:
“NFTs in crypto gaming are a massive tool, probably one of the top three driving forces in crypto mainstream adoption. Right now, the biggest roadblock we’re facing is that the games aren’t very fun to play. Some will say, ‘Oh , the onboarding experience is bad… Using a crypto wallet is not ideal. You have to abstract it.’ I don’t believe that. Kids will suffer to get what they want if it’s fun.”
Fear of missing out also seemed to play a major role, with the massive success of picture-for-proof collections like the Bored Ape Yacht Club (BAYC) soaring from a mint price of $300 to as much as $3.4 million for a rare golden monkey.
No matter what it is, there are usually two types of adopters: those who see the potential in a trend and are willing to stick with it, and those who join because everyone else is doing it. NFTs are no different.
How NFTs fared in 2022
NFT sales remained quite strong in the first half of 2022, with crypto users spending $2.7 billion on monetizing NFTs during that period. However, despite a strong start to the year, there were some negatives within the NFT space.
At the beginning of this year, the floor prices for BAYC fell below $100,000, only to recover, and the cheapest Bored Ape just sold for 73 Ether (ETH) ($125,000) on OpenSea.
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This year also saw users lose their Bored Apes due to user error. “Fat finger” mistakes have caused Bored Apes worth hundreds of thousands to be sold for far less. For example, Ape #835 sold for 115 Dai on March 28th this year, and Ape #6462 sold for 200 USD Coin (USDC) on May 15th.
Ape #6462 was purchased for 200.0 USDC
— boredapebot (@boredapebot) May 15, 2022
In September, daily NFT trading volume on OpenSea fell nearly 99% from its May 1 peak of $405.75 million, with a daily volume of $10.29 million at issue. When it comes to individual collections, BAYC currently has a daily trading volume of just $400,000, according to DappRadar. According to the decentralized application researcher, CryptoPunks has no trading volume since 7:20 am UTC on October 3rd.
Due to current market conditions, one can expect to see fluctuations in the value of NFT projects, according to experts. Yaroslav Shakula, CEO of Yard Hub – a framework for NFT, Web3 and blockchain enterprise ideas – told Cointelegraph:
“NFTs have certainly been hit by the bear market but, in many cases, less severely than classic cryptos and altcoins. What happens next depends on the global political and macroeconomic situation. All technology stocks and risk assets are now flowing against the US dollar, so in the short and medium term, one could also expect fluctuations in the prices of NFT.”
Despite these low volumes, NFTs continue to enjoy significant visibility.
Many people may have noticed a noticeable increase in the amount of profile pictures of people on Instagram and Twitter that include a monkey, bear or other NFT image.
In January this year, Twitter announced that users will be able to officially use NFTs as profile pictures through Twitter Blue. The premium, subscription-based version of Twitter allows users to connect their wallets and post a hexagonal profile picture after an NFT is connected. Meta quickly followed Twitter’s lead and implemented a similar feature for Instagram and Facebook.
Celebrities continue to be involved in the NFT space, with Snoop Dogg recently teaming up with Mobland, a mafia-themed metaverse, to create digital herbal NFTs. The weed farms were developed as part of NFT 3.0, the third generation of NFTs.
The future of NFTs
Not only do some industry professionals feel that the NFT market will continue to exist, but they also anticipate that it will continue to expand and play an increasingly crucial role in the digital economy. According to a report covered by Cointelegraph, the NFT market could be worth $231 billion by 2030. This is due to continued adoption within the video game, music, art and digital collectibles industries.
Shakula is bullish on NFTs in the long term, telling Cointelegraph, “In the long term, NFTs definitely look good – I’m sure they have a big future. This technology opens up a lot of new opportunities, even for classic businesses and common users. They can be used to tokenize assets and provide them to employees as perks and benefits.”
Experts also believe that our lives will become more virtual in the coming years. It is possible that in the near future people will be able to perform their daily activities in a virtual space, using virtual assets. Basically, this will represent the creation of a metaverse in which everything is transformed into an NFT token. Although it is not known how this will co-exist with our physical life in the “real world”, the revolution is already on its way to fruition.
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Some experts believe that NFTs will soon reach mainstream status. Jack Vinijtrongjit, CEO of AAG – a Web3 development company – told Cointelegraph, “NFTs are evolving from just being a collectible and speculative tool to real use cases, such as identity and customer relationship management. We can already see companies like Starbucks using it as a replacement for their membership card and universities issuing NFTs for degree. I believe we will see NFTs move from niche to mainstream as a result.”
The video game industry’s reaction to the introduction of NFTs has been the subject of much speculation. Although some companies are currently delivering digital assets as part of blockchain games like Ember Sword, the widespread adoption of this technology has not yet occurred in the gaming community, leading many specialists to wonder how or even if they will take off in mainstream gaming. industry