Non-fungible tokens (NFTs) have been in the headlines for the past few years. As large sections of the population tried to understand why NFTs existed, demand rose, institutions were built, and language entered our collective consciousness.
There’s an elephant in the room though: NFTs are hard to use and mostly digital snake oil. But these problems create the opportunity to provide answers. The accessibility and legitimacy of NFTs are ripe for change. As financing flows into the space, the market is beginning to mature, and this change is gaining momentum. We are entering a new era of NFTs – NFT 2.0 – where technology will be easier to access from the mainstream, and the core value proposition of NFTs will be more transparent and reliable.
Thinking about the rise of NFTs
In their short existence, NFTs have exploded on the crypto scene, with trading volume exceeding $17 billion in 2021. This number is expected to swell to $147 billion by 2026. Even more impressive is the fact that this volume is owned by less than 400,000 holders, Which totals a massive transaction volume of $47,000 per user.
Along with the skyrocketing rise of the industry, NFTs themselves have gone through massive changes since their inception. For example, CryptoPunks, which were minted for free in 2017, rose to the rank of excellent companies, peaking with the sale of $11.8 million at Sotheby’s last year. A few years later, Larva Labs, the company responsible for creating Punks, was acquired by Bored Ape Yacht Club’s parent company, Yuga Labs, for an undisclosed amount.
Evolution of NFTs
Rejected as an early fad, NFTs have shown a tremendous amount of staying power, attracting the attention of major celebrities and brands and even appearing in Super Bowl commercials. Companies such as Budweiser, McDonald’s, and Adidas have dropped their own collections, while Nike has entered the space with its acquisition of RTFKT Studios.
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As organizations define their own NFT strategy, the overall space has mirrored the past several decades of technological innovation, only under a significantly accelerated timeline. While the iPhone took about 10 years to reach its current version, NFTs have gone from 8-bit pixel images and Pong-like blockchain games to high-resolution 3D animations and complex gameplay mechanics to win with massive multiplayer experiences in several years.
While actual NFTs are evolving, the ecosystem of pick and shovel solutions is also rapidly advancing. The onslaught of NFT platforms and tools has significantly lowered the barrier to entry, creating a deep saturation in the market. As of March 2022, there were more NFTs than public sites, creating a significant amount of noise that many found difficult to penetrate.
The staying power of the asset class and huge transaction volumes have changed the ways in which creators approach the space. Many sped up their Web3 strategy or treated their fans as a source of cash, leaving a mess of slips, rug pulls, and abandoned projects. Simply put, most companies and creators aren’t ready to get into Web3, and they need hand-carrying and white-glove services more than tools.