Non-Fungible Tokens (NFTs) emerged as a ground-breaking concept in the blockchain realm around 2017.

They are unique digital assets representing ownership and authenticity of various digital and physical items, including art, music, collectibles, and virtual real estate. NFTs gained significant traction in 2020 and early 2021, riding a wave of enthusiasm fuelled by high-profile sales and endorsements from artists and celebrities.

The technology’s core principle, using blockchain to establish ownership, appealed to creators seeking new ways to monetise digital creations in a world where copying and sharing were prevalent.

This led to headline-grabbing sales, like Beeple’s artwork selling for $69 million and Jack Dorsey’s first tweet for $2.9 million. At its peak, an NFT sold for $91 million.

However, as the NFT market expanded, concerns emerged. Environmental impacts of energy-intensive blockchain networks drew criticism, and the market became saturated low-quality offerings. By mid-2021, some questioned the sustainability and long-term value of NFTs.

Now, NFTs that sold for millions are worth 95% of their value at the time. So, was it all a hype? Or is the drop in value temporary?

We asked the experts just that, and here’s what they had to say:

Our Experts

Ian Wright, Founder at Business Financing

Maxime Sebti, Director of Growth at Human Protocol

Dora Jiang, International Resources Manager at Conflux

Vlad Hategan, Expert at dappGambl

Aigerim Omarbekova, VP-Marketing at Race Kingdom

Rob Hollands, CEO at Metacask

Ian Wright, Founder at Business Financing

“Like many people, I watched the NFT craze come and go at a seemingly rapid pace. Whilst the reality is that NFT growth was a slow burner for a number of years, there’s no denying that the hype disappeared seemingly as quickly as it arrived.

“So, what actually happened to NFTs, and why did it all occur so quickly?

“As with most investment opportunities outside of what we’d deem to be ‘typical’, it wasn’t just a singular issue, rather a perfect storm centered around the broader cryptocurrency decline starting in late 2021.

“Many passive investors in NFTs simply bought into the initial hype and saw the writing on the wall as cryptocurrencies like Bitcoin and Ethereum started to decline and, with that, the way in which value was derived from NFTs as the primary coins used to purchase and assign value started to fall.

“I would say to any investor looking to ‘buy into the hype’ to use NFTs as a cautionary tale, not only related to cryptocurrency more broadly, but also to attempt to gain a deep understanding of what you’re buying-into (and not just trying to jump onto the bandwagon of gurus in the social media space who are personally invested in you buying whatever NFT or coin they’re trying to push that week!). ”

Maxime Sebti, Director of Growth at Human Protocol

”The NFT art world ate their own market. When NFTs were becoming popular, crypto-bros were lauded for creating token-gated communities and new spaces that investors and fans could pour their internet money into. It all created an environment where people thought digital art was the next big thing.

“Unfortunately the value bottomed out pretty quickly and the value of selling these items onwards dropped like a stone because NFTs never really had luxury status. You can’t fake luxury through price and exclusivity alone, brands need to have longevity, value over time, heritage and social cache. The hype for NFT art faded and unfortunately took the shine off the token element of this technology with it.

“While some NFT art sellers are trying to reframe themselves as media moguls, those with a smarter interest can see the value of NFTs as a sort of passport to exclusivity, experiences, access to new things and even loyalty schemes. It’s not as sexy as selling jpegs of apes to celebrities, but it is a strong technology that can be used in innovative ways. The tech is here to stay (and rightly so) but digital art/luxury is not where the value creation is.”

Dora Jiang, International Resources Manager at Conflux

“The NFT market is currently experiencing its most illiquid phase. Recent data from sources like NFTGO and Dune Analytics indicate a 44.22% decline in volume from the previous year, with the number of buyers plummeting by 47.27%. Does this signify the demise of NFTs? Not necessarily.

“Diving deeper into the data, we observe that the number of NFT holders has surged by 57.6% over the past year and has multiplied almost tenfold in two years. The market trajectory has evolved from a sales boom in 2021 to a stock consumption cycle in 2022. As of 2023, we’re witnessing a stabilization phase, akin to the settling of froth after a vigorous shake.

“While trading volumes of NFTs have waned, the discourse is now shifting towards real-world applications and signs of broader NFT adoption. For instance, Ticketmaster has embraced token-gated tickets, and Starbucks has launched its NFT-based membership program, Odyssey.

“A similar trend is evident in China. The Chengdu FISU World University Games has partnered with Conflux Network for exclusive NFT minting during the games. This initiative aims to elevate the fan experience in the city, celebrating Chinese culture and narrating the enchanting tales of Chengdu.”

Vlad Hategan, Expert at dappGambl

“NFTS are in the midst of a bear market seeing numerous projects struggling to find buyers. This is starkly different from the 2021/22 bull run, peaking at nearly $2.8 billion in monthly trading volume and a result of many NFTs being created without any clear use cases.

“A recent analysis of the NFT market, conducted by our team, revealed that 79% of all NFT collections have remained unsold whilst 95% of NFTs have a market cap of $0 ETH. This is the daunting reality that despite the euphoria often surrounding the NFT space, potential buyers and investors are now looking to buy into more than collectables which only served as a ‘flex’, like Bored Ape Yacht Club, but NFTs with clear use cases, compelling narratives, or genuine artistic value.

“As the market matures, NFTs are likely to pivot from mere collectables to assets with tangible utility and significance to help them weather market downturns. Examples of these use cases are already beginning to evolve, seeing NFTs which help preserve cultural heritage, create usable in-game purchases as well as venture into the real estate industry – holding more long-term value than the majority of the current NFT market.”

Aigerim Omarbekova, VP-Marketing at Race Kingdom

“The NFT market is currently undergoing a collapse, leading to a clearance of the market as anticipated. That presents three important lessons:

“1. In contrast to the past, having utility and a community around an NFT project does no longer guarantee success. Projects like Recur, backed by substantial funding of over $50 million, are shutting down.

“2. To navigate these challenges and shape the responsible and sustainable development of the Web3 ecosystem, establishing syndicates of experienced Web3 veterans and builders could help. This approach can mitigate risks associated with scammy projects, drawing parallels to the role of labor unions in fostering reliability and reputation among individuals.

“3. It’s worthwhile to explore the potential governmental and corporate applications of NFTs to expedite regulation and mass adoption. For instance, in the United Arab Emirates, employees have to attest their college/university diplomas.

“As a holder of the New York University diploma, for me this process took five months because of certification in the USA. If diplomas were soulbound NFTs recognized by institutions globally, it could significantly streamline processes like certification and paperwork, benefiting expats like myself. NFTs are not only for fun and art. We need to understand that.”

Rob Hollands, CEO at Metacask

“Like so many new technologies, NFT’s (Non-Fungible Tokens) stormed into our lives in summer 2021, reached peak interest at the start of 2022, with the popularity of the internet-breaking Crypto Punks and Bored Apes, before a swift decline. This is textbook ‘Hype Cycle’, the first wave of excitement is followed by the disappointment of early, complex and often novel use cases.

“As the cycle goes, the noise of one new technology is replaced by the next, firstly Metaverse and most recently, AI. That doesn’t mean the journey for NFTs and more generally Web3 is over, quite the opposite. Whilst other technologies take the limelight, NFTs are quietly finding new, sophisticated and practical uses and moving beyond those looking for the next ‘collectible’ jpeg.

“We’re seeing powerful solutions focused on bridging the physical and digital worlds by giving real-world assets a unique and authenticated digital identity. For example, Metacask is revolutionising the ownership of premium spirits, using NFTs to allow consumers to take ownership and trade luxury spirits, and companies such as Starbucks are developing NFT use cases which connect the brand with consumers in new and meaningful ways and reward loyalty.

“As we edge towards 2024, we’re starting to see just what the technology can accomplish, grounded in realistic expectations and genuine use-cases. Expect a continued focus on more real-world applications rather than the next hyped jpeg collection.”

Source: TechRound