Now that the volume of daily non-fungible token (NFT) sales is at its lowest level since January, many are wondering if the end of the NFT dream is near.
The same question is asked about cryptocurrencies, and it’s no wonder – the crypto market has taken a beating. Since the Terra debacle, crypto’s total market capitalization had fallen below $1 trillion for the first time since January 2021.
With such a bleak outlook, to argue that NFTs are just a fad is reminiscent of traditional financial analyst claims that bitcoin BTCUSD,
death is “just around the corner”. Since its inception, at least 461 such “obituaries” have been written, with many more to follow as markets rise and fall during bear and bull cycles.
So what is the real situation with the NFTs? In short, they have reached a maturity limit.
The initial hype and unsustainable growth was fueled by profile picture NFTs, which were popularized by Bored Apes and Crypto Punks. They were interesting to investors, traders and collectors alike due to their insane valuation and increase in pricing. But as happens in economic downturns and bear markets, investors realized that putting their money elsewhere was a better option.
The decline in daily sales volume was a clear signal that things had to change. And change they have. NFTs and their marketplaces have matured and proliferated; NFTs in particular underwent a gradual but significant change in becoming more than a collectible or a work of art.
A good example of this development is what Ted Leonsis, the owner of the Washington Wizards NBA team, has in store for the existing Top Shot franchise.
You can buy NBA NFTs featuring highlights from plays and players, but Leonsis plans to expand the usefulness of these digital collectibles by giving owners tickets to upcoming games. For example, you can not only buy a souvenir to commemorate the greatest moments of your favorite team, but also get a seat for the next game.
This approach is known as token gating: using an NFT token to give owners access to an exclusive set of benefits, be it a product, discount or service.
NFTs are smart contracts aimed at proving ownership, but due to their flexibility and programmability, they can be automated and adapted for different uses. Another common feature of NFTs is to assign royalties to the issuer each time the NFT changes ownership.
In our previous example, maybe the owner wanted to trade the NFT after seeing the game, or he bought it hoping to sell it at the last minute to desperate fans who want to go to the game? The NBA, the issuer of the ticket, would earn a portion of the revenue each time the NFT changed hands.
And it’s not just retail – governments are also embracing the technology.
According to an article from Yahoo Finance, “The High Court of England and Wales has allowed Fabrizio D’Aloia, the founder of Italy-based online gambling company Microgame, to sue anonymous individuals over a non-fungible token (NFT) forfeiture.”
The importance of this ruling is best highlighted by Joanna Bailey, a Giambrone & Partners LLP associate who worked on the case:
“This is so important because it shows the court’s willingness to adapt to new technologies and embrace blockchain and actually step in to help consumers where previous legislation and regulators simply could not.” (From CoinDesk.)
A similar move was made by a US court in June.
These methods of informing potential litigants are useful in scenarios where a person’s whereabouts are unknown and only a digital wallet related to the particular lawsuit exists.
As you can see, NFTs are evolving and slowly becoming an integral part of the so-called fiat world. While current market conditions are bearish and may present a challenge to the industry, these technologies are here to stay. If you’re worried about the future of NFTs, don’t be. The industry is just getting started.
PS
To put my money where my mouth is, I’ve decided to test the waters and start my own token gate project. In one of my upcoming articles, I will tell you all about it – challenges, adoption, results and my clients’ testimonials. I think it will be interesting reading and an indication of how easy or difficult it is to implement NFT technologies in the real world.
