NFTs have been in the market since 2014 and had a few investors. But in 2021, BOOM! The market price rose from $95 million in 2020 to $25 billion in 2021. The surge in popularity began when an artist called Beeple sold his work at an auction for $69million. This sparked the NFT sales. NFT ecosystem is continuously changing. Let us see how it is going look like after the boom.
Why talk about NFT ecosystem now?
The explosion of NFT is majorly due to the Bitcoin and Ethereum bull run. After the Covid lockdown in 2020, many people who lost their jobs turned to other income options, and crypto was a blessing in disguise. Post major lockdowns, businesses have started to open, and consumer confidence has improved. Recently, El Salvador became the first country to adopt bitcoin as an official legal tender. Its president decided to give the citizens up to $30 of free bitcoin. So are many other countries looking to create their digital currencies. Mass adoption of crypto has made people explore the various blockchain applications, of which NFT has seemed to grab the most attention.
Growing Use Cases
The NFT market appears to be maturing by adding use cases and shifting towards NFTs with utility. NFTs have made crypto more approachable, bringing people into crypto.
Talented artists have been able to sell over $2 billion worth of artwork on Ethereum. In December 2021, a major art fair like Art Basel exhibited NFTs on par with painting and sculptures. This was a massive achievement in the World of art.
Diving into the Metaverse
Play-to-earn games that reward players with in-game assets have gained much popularity. For the first time, gamers can own their assets and sell on NFT marketplaces for a profit. Axie Infinity, one of the most popular games, surpassed $1 billion in trading volume. With more than 3 million daily users, video games could link music, fashion, art, and events.
Retail market and fashion
Big brands like Adidas, Nike Inc, and Gucci are betting on NFTs. They have their own NFT collections, which has increased demand for branded NFT assets. Nike recently bought a virtual shoe company RTFKT, renowned for its viral sneaker designs and collectibles.
Many celebrities talk about NFTs on social media, contributing to the buzz. Stars like Jay -Z and Lionel Messi have caught a ride on the NFT express. NFL Quarterback Tom Brady established his own sports-focused NFT platform called Autograph.
Have you seen Instagram or Twitter profile pictures being some variation of a monkey, a giraffe, or an animal’s funky rendition? In January 2022, Twitter announced that users could swap their profile pics for NFTs. Meta jumped on the bandwagon immediately.
NFTs have also given rise to exclusive metaverse social clubs. For instance, the Bored Ape Yacht club, which sells profile pictures of 10,000 unique bored apes, is the largest NFT avatar by market capitalization. Because of its finite number, people compete to buy them. Moreover, owning their NFT means you get to go to all their parties in real life. It’s like a membership pass, where other people assign the value.
Breaking it down
Looking at the larger picture of the NFT ecosystem, NFTs are tokens created on the blockchain which prove that you are the owner of an artwork. Smart contracts power NFTs because they help sell and transfer NFTs, interact within the metaverse, etc. Essentially, NFTs are codes that manifest as video, photos, art, or games. This is to say, NFTs are riskier than buying crypto from an investing perspective because it’s essentially gambling. People buy NFTs just for the fun of it.
With NFT adoptions taking place much faster than anticipated, legal questions surround the NFT ecosystem. Some governments monitor copyright rules and fraud and explore ways to scrutinize NFT transactions. Fashion house Hermes sued MetaBirkins NFTs, alleging the token violated its trademark. Nike sued StockX LLC, alleging they sold NFTs associated with its sneakers without permission.
Here to stay?
Experts remain split on this – some say ‘bubble’ while others say, “They are here to stay.” It’s the technology behind the NFT – smart contracts on blockchains that add real value. Some companies want to make NFTs more accessible for everyday investors. Suppose NFTs are the building blocks of the next-gen internet; developing a broader application will stop it from becoming mundane.
Reach out to our Agiratech strategist to stay updated about NFT and its future scope.