Why NFTs will grow as climate change worsens

The NFT market may have declined, but the long-term future of the format still holds great potential.

This may seem surprising when considering key NFT performance metrics. The value of NFT sales in August 2022 ($0.6 billion) was 14% of those seen the previous year ($4.5 billion). This is a direct result of the “crypto winter”, which suppressed the valuation of NFTs linked to cryptocurrencies.

Still, the total number of NFT transactions rose 4% compared to August 2021, with 4.7 million registered, and the sum of unique buyers per month is up 73% from a year ago. There is still interest in the technology.

A key driver of increased interest will be the impact of climate change. A majority of all age groups are already extremely or very concerned about this, and it should be expected that concern will increase as the effects continue to increase in the near future.

Finding greener alternatives to so many facets of today’s consumer behavior will gain more focus as extreme weather conditions continue. This is where NFTs have a role to play.

VIP+ partnered with consumer insight firm Maru to assess consumer perceptions of various activities and concepts that are either good or bad for the environment. Among younger consumers aged 18-34, the concept thought to do the least harm to the environment was “digital versions of physical products that have no associated travel or packaging waste.” This is a description that can easily apply to many of NFT’s entertainment companies that want to launch.

The majority of consumers between 35 and 54 also believe that digital versions of physical products cause the least environmental damage, interestingly at the forefront of carbon neutral schemes. It may be because of the activities needed to trigger a carbon neutral scheme, where the goal is not to add more carbon to the atmosphere, while digital versions will reduce carbon emissions from manufacturing, travel and packaging waste.

Older consumers – who have the least to lose from climate change – have different views on what is harmful to the environment, probably in part because they do not want to change existing behaviour. They are more likely to say collectibles are not harmful (62%) than 18-34s (42%) and 35-54s (45%) and have a skepticism about NFTs even if they are stored on carbon-neutral blockchains.

After explaining carbon-neutral NFT platforms to survey takers in greater detail, a majority of all age groups say that NFT versions of physical collectibles are better for the environment. This represents a core message angle for future NFT collector lines from the entertainment company.

Educating consumers about this and being seen as taking the lead on environmental issues will result in increased public perception and represent a PR win for those who take these steps now.

This is promoted by almost half of 18-34s and those over 55 and just below this mark for 35-54s saying that knowing that carbon neutral NFTs exist positively influenced their perception of NFTs.

Younger consumers are already well on board with the risks of climate change (with our survey finding that 83% of 18-34 year olds have some level of concern). They are also more likely to already have NFTs – see VIP+’s “Demographic Divide” report – and can therefore be expected to drive the push for digital collectibles over the next few years.

It is for this reason that the NFT format will continue to grow in scale as climate change worsens. There remain issues for the technology to resolve, such as perceived complexity to own and the possibility of an NFT being a scam or investment risk.

Pricing is another, as many entertainment companies have set a floor price of $50 per NFT purchase for their initial offerings, which must be lowered to reach the mass market both domestically and internationally.

VIP+ expects that growth will pick up in relation to environmental considerations. Companies looking to enter the space would be smart to start signaling within the next year that they are doing so in part for environmental reasons and choosing sustainable platforms to do so.

These factors are obviously very different from the short-term ones behind the boom and bust of the NFT market in the early 2020s. Therefore, expect the future NFT market to be very different from the current one.