What’s in store for NFTs in 2023?

Before it was shut down, a disclaimer on the NFT market of FTX, the now-defunct crypto exchange that owes billions to its creditors, warned potential investors: “NFTs do not necessarily have intrinsic value. They may also be illiquid. If you buy an NFT , you won’t necessarily be able to sell it too much later, or get any specific benefit from it.” FTX founder Sam Bankman-Fried joined the ranks of other disgraced millennial consultancies; the company went bankrupt in November and Bankman-Fried is likely to take a plea deal.The link to FTX’s marketplace now leads to an overview of the case.

Alongside FTX’s dramatic implosion and descent into a so-called “crypto winter”, the value of NFTs also fell. Last year, the industry peaked on January 8 at $17 billion, according to data from Dune Analytics, but by the end of September, NFT trading volume was down 97%. Even at their peak, NFTs faced ethical criticism over their environmental impact and the difficulty of enforcing royalties for artists whose NFTs are resold, among other things. The apparent end of the NFT “hype” has shown its face in a number of high-profile embarrassments: Several celebrities lost their small NFT fortunes, and most recently, some were even sued for promoting the famous Bored Ape NFTs without disclosing that they received a paycheck. Coachella music festival found itself in hot water after selling $1.5 million worth of NFT passes that were stuck after the FTX collapse.

Perhaps the most striking sign of NFT’s bleak future is not their declining value, but their increasing similarity to the rest of the art market. Featured by celebrities, sold by auction houses, and with million-dollar price tags for a select few, the medium is arguably almost unrecognizable from the format some artists were drawn to in the beginning.

Artist and researcher Kyle McDonald said his first involvement with NFTs was in the artist-led exchange platform a2p in 2019, where “a few dozen digital artists traded artwork as trading cards.”

“No currency, no collectors, no payouts. Just having fun swapping and chatting about work we made and loved,” McDonald shared Hyperallergenic.

NFTs once presented a long-standing way for digital artists to make their practice financially sustainable, echoed Lauren Lee McCarthy, an NFT artist, computer programmer and professor of design media arts at the University of California. Digital creators were finally able to monetize their work, and new ones entered the market as well. The burgeoning field was also seen as a democratizing force. NFTs allowed artists to show their work to audiences they might not have had before, says software engineer and cryptoskeptic Stephen Diehl, “even if that audience is speculators or hedge funds or people who buy up art in the first place to flip it.”

Then the traditional art market got its hands on NFTs. Christie’s and Sotheby’s launched dedicated NFT departments and the two auction houses sold works for record prices: A CryptoPunk NFT went for $11.7 million at Sotheby’s and an NFT by the artist Beeple went for $69 million at Christie’s.

Now, McCarthy believes that the only crypto-artists selling their work are those connected to a gallery, institution or other organization – just like in the regular “art world”.

“My pessimistic view is that the days when NFTs were a chance for any outsider to make it big are long gone. You need a connection to an established institution again, just like before, McDonald said Hyperallergic. “It was a real but temporary moment of decentralization, but it was only part of a longer process of recentralization.”

McCarthy offered an even more pessimistic view, though she continues to make NFT art herself.

“I don’t know if it’s ever been so utopian,” McCarthy said. “I think there’s always been an aspect of it that’s always been an insider’s game.”

In the eyes of some NFT artists and researchers, however, one aspect of NFTs has not yet disappeared: the medium’s ability to create community. María Paula Fernández, who has worked on NFT software design since the system’s early days in 2018, said her initial interest in NFTs was not only due to their artistic possibilities, but also their potential as financial instruments. But the most interesting thing about the field lies in people’s ability to network, which she believes happens every time an NFT transfers ownership or changes value, she says.

McCarthy also pointed to NFTs as a way for artists to finally exchange digital art among themselves, stating that while artists have been sharing this work for some time, there was no good way to exchange it because there was no system to preserve it and archived. The blockchain then replaced JPEG files stored on a desktop.

Christiane Paul, professor of media studies at the New School and adjunct curator of New Media Arts at the Whitney Museum of American Art, described another appeal: “the gamification of the NFT art market,” which occurs when NFTs are publicly displayed and traded. Even during this downturn, she says, artists will continue to work with “the mechanism” (Paul describes NFTs as a mechanism for sale, not a medium). “Artists never stop painting when painting is declared dead – always a good sign – and there’s not a huge market for it,” Paul said.

Even if artists continue to create NFTs, the market downturn means they likely won’t be able to sell them. But will the death of “hype” bring new artists to the format? With rock bottom sales prices, some creators may no longer see the field as a pyramid scheme and may therefore be less cautious about entering. It has been suggested that without the possibility of getting rich, artists can use NFTs as a space for “experimentation”, and crypto enthusiasts argue that the crash reflects any normal economic cycle and prices will eventually bounce back.

However, McDonald has no plans to re-enter the room. He said he began rejecting NFTs in 2020 after their environmental impact came to light. Last year, Ethereum switched to a new protocol that is expected to be less energy-intensive, but McDonald also cites “widespread fraud, anti-regulatory practices, individualism, casino-style speculation, [and] lies about royalties and duration.” Like others, he believes that the real purpose of NFTs in the crypto ecosystem is to bring in new crypto users and convince people to spend their money there.

Software engineer Molly White, who runs the critical and informative blog Web3 Is Going Just Great, echoes this view.

“I think it’s important to see the NFT for what it is — which is just a platform for speculation,” White said Hyperallergic. “The goal is for people to be able to make money off of it, and people don’t care what the actual image is.”