The Future of Art NFTs lie at the intersection of Web 3 and the real world
The past 18 months have seen the incredible rise and catastrophic fall of the NFT industry. In a relative search survey, it was revealed that compared to January 2020, when search interest on Google was at its peak, it is now only 14% of overall interest. Simply put, people don’t care about NFTs anymore, with this technology fading into obscurity as quickly as it arrived.
One only has to look at some of the investments made to see how quickly NFTs have lost their value. A YouTuber, Logan Paul, invested $623,000 in an NFT in early 2022. As of October, the same NFT is now worth $10, having lost all value. To make matters worse, it is just one of the many NFTs he invested in, after losing millions of dollars on these bad investments.
For many skeptics, this is not surprising. The NFT world made a big mistake – no usability. After the initial hype started to fade, people lost interest. Without an actual use for these virtual assets, there was no reason for them to retain any value. With no use and no public interest, they simply became useless.
Of course, for those who play the art angle, every piece of art has value. Still, when you look at the process of creating these NFTs, often using AI art or generative tools, you begin to wonder how worthy they are of the title ‘art’.
In this article, we’ll chart the rise of NFTs, point to the reasons for their downfall, and explain how this industry may still have a future if investors play their cards right. Let’s get right into it.
Why did NFTs have value in the first place?
The simple answer to this is that they didn’t. NFTs, with no usability or function (nor artistic integrity, for the most part), never had any value. Yet people all over the world spent millions of dollars on them every month. There were over 250,000 monthly users buying and selling NFTs on OpenSea at one point.
Beyond that, billions of dollars were pumped into the effort, with some of the most expensive associates, such as the Bored Ape Yacht Club, worth over $2.5 billion at its peak. So if these digital assets had no real value, how were they worth so much money?
This all comes back to public perception. NFTs could very well have one of the best PR campaigns we’ve ever seen. With massive artists collaborating with major celebrities to buy their collections, as well as the tirade of news outlets covering this area of blockchain, the world was flooded with information about NFTs.
Back in late 2021 and early 2022, you really couldn’t do anything without running into NFT news. Whether a new collection sold for millions or a new celebrity had joined the list of buyers, there was always something going on. This level of PR translated into a huge wave of hype and excitement surrounding NFTs.
Those who understood NFTs wanted one because they thought they would go up in value. Those who didn’t understand NFTs wanted one because of FOMO (fear of missing out), with their favorite celebrities all buying one. This wave of buying and public discussion around NFTs created a simple supply and demand scenario.
As public popularity (or notoriety, shall we say) increased, more people wanted to buy these NFT funds. Since they cannot be duplicated, each asset was unique, individual and sought after. The more interest in each NFT there was, the higher the prices. This was apparently going to continue until people started to lose interest.
After a few months of non-stop NFT news, there was a sudden downturn. In late January 2022, Google started picking up much less traffic for people searching for NFTs. As public interest faded, so did the relative demand for each NFT, causing prices to begin to fall.
It’s safe to say that the skeptics who stayed away won the battle this round.
Can NFTs be useful?
NFTs have had a rocky journey up to this point. Recovering from the bullrun has not been easy, with investors worldwide losing billions of dollars in total value. Despite their history, the technology behind NFTs actually still has its place. While the NFT hype revolved around digital art, which is unavailable, there are other uses that have much more merit.
One community that has seen incredible use of NFTs, without falling into the trap of massive price swings, is the Play2Earn community. The blockchain gaming world has been enriched by NFTs, with online platforms using NFTs to reward their community with various assets. Online games can, for example, give users ownership of certain goods, which they can then rent out or choose to sell.
The reason why NFT games have seen such success is that the game focuses on the importance of every NFT they make. Instead of just creating an NFT to sell it, they incorporate these elements into their games. Being digital assets in digital worlds, the NFTs become an active part of the game itself.
Gaming companies manage to overcome the biggest problem with NFTs – their lack of user-friendliness – by incorporating them into the gaming systems that customers are already interested in. Now users can play an online game and earn goods or currency that have real value. This value does not come from simply having an NFT, but because the NFT has in-game value as an item or asset that enhances the player experience.
This is an area where NFT technology radically improves an industry. With ownership at its core, the introduction of NFTs ensures that absolutely everyone can have a part of the game’s success. Not only does this improve the experience of players, but it allows them to align the game’s success with their own financial gain.
If a user plays a game a lot, they will be able to unlock more NFTs. They can either use these NFTs to have more fun in the game or sell them to other players for fiat currency. This is a win-win situation created by NFTs.
The technology that NFTs bring to the world does not stop short of games, there are a number of industries where they come in handy. The key factor that users cannot overlook is that to succeed, NFTs need a central function and ease of use at their core.
NFTs and the real world
Beyond gaming, NFTs given a purpose have a lot of value in the real world. One only needs to look at NFT tickets to see their value. An industry like ticket hunting and sales can greatly benefit from digital assets. Being able to trade 1-1 for fixed prices allows users to avoid fraud in this field.
Likewise, by converting online tickets to NFTs, stadiums and bands will create permanent assets that mark show attendance. Users can sell these tickets in the future, creating auctions around particular shows that fans want to hold a ticket for. Since it is impossible to duplicate an NFT, being admitted to a stadium will also be a much easier process, since everyone who holds a ticket is the real owner of the digital asset.
Again, these examples only work because there is a utility level for the service. Beyond just a digital resource, using a function or purpose in the real world gives meaning – and value – to NFT.
A good example of this in action is the very recent State of Art exhibition in Paris, presented by Tezos. Alongside a number of auction art events, the spotlight of the new art festival was a ground-breaking intersection of art and technology. Tezos, an energy-efficient blockchain, sought to reimagine the digital canvas for artists.
Tezos allowed artists to stamp their artwork live at the festival, creating unique works of art seemingly out of thin air. By rendering pieces from the artist’s code, the artwork was then minted as an NFT and allocated to the user’s digital wallet.
This event connecting NFTs to reality is an ingenious way. In addition to simply receiving an NFT, users can live through an authentic art experience, their moment of creation imprinted and permanently captured in the form of an NFT.
Live creation of art demonstrates the power of NFTs to further enrich a chosen field. As with gaming, the introduction and popularization of NFTs can help the field itself offer more to customers. In this real-life art exhibition example, artists were able to truly bring their art to life, providing an additional experience for the audience.
Final thoughts
If the past year has made anything clear in the NFT world, it’s that without functionality, they’re worthless. No matter how interesting or beautiful an NFT is, its value is only related to how much an audience is willing to pay. When popularity dies, only ease of use remains. Without a clear function of an NFT, and without some viewers wanting to buy it, it loses all value.
By finding the core motif that makes NFTs have a real purpose, they can still become a useful technology. As we have seen in the blockchain gaming world and are starting to see it in the performing arts field. NFTs that have a real impact or purpose still retain their popularity.
The cross between real-world usability and NFT’s central technology can be a relevant combination, but only when done correctly.
