Bored Ape prices are down, but the NFT market is headed for new highs

There is no doubt that non-fungible tokens (NFTs) have taken a hit in recent months. Market conditions have plummeted, fraud and hacking are frequent, and there is an increasing number of low-quality projects, leading many to question the value of NFTs and their place in Web3.

During the last crypto cycle, NFT market conditions have been highly correlated with and dependent on the general crypto market. As technology and digital assets increased in value, it became easier for individuals and investors to justify speculating in the nascent NFT asset class – often paying exorbitant premiums with the belief that some tangible utility and value could be derived at some point in the future. Combined with the fact that NFTs are by nature relatively rare and illiquid, it set up the perfect storm for dramatic price increases that fell even more dramatically back to earth.

Market conditions are also linked to developments in the ecosystem, which include widespread fraud and content oversaturation, causing increased concern for parties already involved in the space, and hesitation for consumers and businesses looking to enter the space.

What is important for us to realize is that this is a natural part of the NFT space’s development. Over-speculation followed by real-world struggle is not only to be expected, but necessary for us to take action and correct the issues at hand to ensure that these digital assets can continue to grow and prosper.

Related: Anonymous hacker served restraining order via NFT

Fraud and hacks are of course harmful to projects and users participating in the NFT space. No creator should have their work duplicated and sold under someone else’s name, just as no buyer should unwittingly become the victim of fraud or theft. Projects should not be concerned that a hacker could take advantage of infrastructure vulnerabilities and steal huge sums of money. Also, early backers don’t have to fear that project managers will either run out of working capital or simply abandon the product at early stages of the roadmap.

But what these security breaches reveal is where the points of failure are in the system, so we can work harder to fix them and prevent them from happening in the future. They also prove an important point for blockchain projects: that they must prioritize infrastructure and security partners in order to succeed in the long term and prevent future financial losses. In addition, companies and projects must look internally at how they can best protect users. They need to leverage open source technology and develop their own features that help strengthen security – OpenSea and MetaMask are taking steps to do just that.

Where scams and hacks cause mistrust and unrest, the increasing number of low-quality projects has led to a general oversaturation of the NFT market. People are tired of hearing about NFTs that either have no artistic value or no tangible utility. In a crowded market, it becomes difficult to gauge which projects or collections are worth any money at all.

My take on the NFT market action today… pic.twitter.com/iDjrJeQdMt

— Peter Smith (@OneMorePeter) 22 August 2022

The advantage here is that the market’s decline weeds out some of the lower quality NFT projects. Projects will be forced to deliver on their promises, pivot strategies to remain competitive and better cater to audiences.

First, marketplaces need to start curating artwork to ensure that the highest quality pieces aren’t drowned out by the sheer number of NFTs and duplicates listed. They must also better adapt to evolving copyright and IP standards. Projects that are not purely focused on digital art will need to deliver real benefit to consumers or other businesses in order to succeed in the long term. Benefits can come in the form of ownership privileges, exclusive memberships, redeemable rewards, or entry into communities of like-minded individuals.

And perhaps most importantly, we have only begun to touch the tip of the iceberg in terms of the full potential and number of use cases for NFTs. This highly disruptive token standard can and will support efficient and secure digital ownership of valuable assets. Event and travel tickets, immutable forms of identification and digital domain standards are among other exciting opportunities that also include financial products, medical records, real estate and intellectual property.

Related: Targeted phishing scam nets $438K in crypto and NFTs from hacked Beeple account

The challenges we face will be overcome and will result in a healthier ecosystem of solid projects that reshape our lives in new and unimaginable ways. Also, McKinsey & Company predicted that the Metaverse would likely reach a value of $5 trillion by 2030. Guess what the building blocks of the Web3 metaverse are? NFTs. Small surprise, then, another study predicted the NFT market would reach $230 billion in value by 2030.

Because NFTs represent digital ownership that is both immutable and easily transferable, they will serve as digital identification or tickets to events in the Metaverse, provide proof of attendance or payment, and act as proof of ownership for games, wearables, or digital property. NFTs will form the basis of all activities in the new digital economy within Metaverse.

NFTs lay the foundation for the next generation of innovative products and services. As we continue to get through these growing pains in this nascent industry, one thing is absolutely clear that NFTs are here to stay.

Anthony Georgiades is the co-founder and president of Pastel Network, a Layer 1 blockchain for NFTs and Web3 technology. He is also a general partner in Innovating Capital, a technology fund with a focus on disruptive companies and digital assets. He has previously spent time on the investment team at First Round Capital and on the operational teams of various startups. He studied economics, management and computer science at the University of Pennsylvania’s Wharton and engineering schools.

The opinions expressed are those of the author alone and do not necessarily reflect the views of Cointelegraph. This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice.