The NFT sector is just getting started. Here’s what to expect
From marquee NFT drops selling out on Instagram to major film festivals selling VIP passes as NFTs, 2023 proves the staying power of these new digital assets. The NFT frenzy of 2021, where Bored Apes was snapped up for millions of dollars, brought this digital asset class into the mainstream. Looking beyond pure financial speculation, NFT use cases span a range of industries and real-world applications.
Early signs of optimism in 2023 – such as OpenSea processing over USD 320 million in Ethereum NFT trades by the end of January – point to a new opportunity for industry leaders to build better infrastructure to support these digital assets and pave the way for increased utility and use.
Market recovery leads to renewed interest
Crypto Winter has put the non-fungible token space to the test, but in 2023 the sector is starting to show some signs of life. A report from DappRadar estimates that Ethereum’s NFT market is up 68% from its November low. The steady rise in recent months is likely to help drive projects and creators back into the NFT market as they look to ride the bullish trend.
In an adjacent space, Web3 gaming has had an incredibly strong start to 2023. Investments in blockchain games and metaverse projects have reached USD 156 million, with venture capitalists fully on board with the sector’s long-term potential. This promising development will carry over to the NFT market, as both Web3 gaming and the metaverse heavily utilize NFTs to enhance the user experience.
Furthermore, prominent companies and well-known brands increasingly deal with NFTs. For example, Starbucks is leaning into NFTs to connect with customers on a deeper level, with its recently launched Odyssey program offering games and virtual exploration of coffee farms. With this kind of mainstream exposure, one can expect NFTs to continue to fascinate corporate entities and consumers alike.
Where are NFTs headed next?
The underlying technology of NFTs will be a key tool across a range of industries. NFTs can also be used to track goods as they move through the supply chain, offering a verifiable record and reducing the risk of fraud and counterfeiting. Moreover, NFT use cases are already being explored in real estate – providing digital, verifiable and immutable records of ownership.
Within games, NFTs already provide tradable ownership of in-game assets, while in the metaverse, users will be able to purchase NFTs tied to real-world objects. By 2027, the in-game NFT space is expected to grow into a USD 15 billion market.
A number of clothing brands are now using NFTs to create exclusive, interactive experiences for their customers. A number of luxury brands, including Gucci, Louis Vuitton and Givenchy, are embracing the metaverse and offering digital twins through NFTs. To date, fashion NFTs have sold a whopping $245 million.
In the future, NFTs will also change the way business is conducted in other sectors. For example, the $1.1 trillion concert ticket industry is seeking new ways to ensure fans have legitimate access to events, and blockchain technology offers a transparent marketplace where tickets can be distributed as NFTs. In addition, NFT’s ability to prove ownership could end fraudulent ticket sales for good.
NFTs also create new revenue streams for artists and creators who want to foster a relationship with fans. Beyond real concerts and galleries, those participating in the creative economy can showcase their work on popular NFT marketplaces and alert community members whenever there is a downturn. In this way, creators can get in touch with new target groups and distribute limited edition collectibles.
The nuts and bolts of NFT technology itself are also evolving. While still in the early stages, NFTs are used to represent digital identity, allowing users to prove who they are in Web3. First illustrated in a whitepaper co-authored by Vitalik Buterin last year, soulbound tokens (SBTs) are a new, non-transferable NFT asset class that can serve as a Web3 user identity. In addition to decentralized identities, SBT use cases span across decentralized finance (DeFi), gaming, community engagement and user authentication.
Reduces user experience friction
While the use cases are seemingly endless, there is a lot of work to be done to make NFTs accessible to crypto newbies. Users still have to go through a series of tedious steps to make an NFT purchase. Aside from the less-than-ideal purchase process, high gas taxes also significantly hinder mass adoption.
The main priority for NFT managers to prepare ahead of the next bull market should be to implement solutions that save end users time, effort and money. This includes accepting a wide variety of payment options, including local payment methods as well as credit cards and services such as Apple Pay. In addition, users should never have to take the fall for fraudulent transactions.
Introducing more people to the potential of NFTs requires the industry to establish seamless processes. While mass adoption won’t happen overnight, polishing the customer journey is a big step toward making this space more accessible. In the not-too-distant future, users should be able to plug in their credit card numbers at one secure checkout to make their purchases easy.
The future of what NFTs will look like to ordinary people is still taking shape, but with the entry of iconic brands and significant investment pouring into the space, it is certain that NFTs are here to stay.
