The Seattle NFT Museum features original artworks along with explanations of the technology behind them, and is intended to help visitors navigate the new world of Non-Fungible Tokens. — © AFP
While non-fungible tokens promised much, they have entered a period of decline and lowering consumer interest. NFTs, once disruptive and which captivated global attention by promising to revolutionise digital art, ownership, and authenticity, are collectively less valuable they were at the start of 2023. This is according to a review of the sector undertaken by the firm Fasthosts.
An NFT (non-fungible token) is a digital item that is a unique digital identifier integrated on a blockchain. NFTs are bought and sold online. NFTs come in many forms, including trading cards, virtual worlds, domain names, music, and art pieces. As an example, in 2022 they became the focus of attention when taking over the art world and making new millionaires and “richest living artists” overnight.
In 2021 and 2022 it appeared that NFTs would lead the forefront of our digital world. This has proven not to be the case.
Fasthosts’ State Of The Web Report examines the rise and fall of the .nft domain trend, and it leads to the question whether NFTs are just another fad?
In January of 2021, the popularity for the search term “.nft” went up by 138 percent more than average as it started to dominate the headlines. The top-level domain name .nft was the second most popular domain name globally for 10 months out of 12 in 2022, amongst other popular choices such as .eth, .coin, and .crypto.
In August of that year, the domain name .nfts.com sold for an incredible 15 million dollars, making it one of the largest public domain name deals ever.
At that time, the global NFT market was valued at $11.3 billion, encompassing a variety of collections such as art, metaverse tokens, and gaming collectibles, among others. We saw artists flock to the new medium, attracted by the potential to sell their digital art directly to their buyers.
Different social media platforms and businesses started to embrace the digital tokens. In this market space, large brands, and sports figures such as Christiano Ronaldo signed deals, and we even saw Donald Trump expand his NFT collection. But with so much prospect, by November 2022 the paradigm shifted. NFTs flatlined, and the buzz died down.
According to the NonFungible Report, the 3rd quarter of 2022 saw a 77 percent fall in traded dollars, and a net quarterly loss of $450 million was recorded for the first time ever. What happened?
As NFTs gained traction, they also gained criticism, which led to a drop in their demand. There were a few factors at play here, such as their environmental impact on the blockchain, low-quality content, pricing, and the circulation of scams. Many started to question the true value of digital assets. As the crash commenced, several announcements were made that did not present NFTs in a positive light – Mark Zuckerberg said NFTs were done with, a Frida Kahlo drawing was destroyed to make NFTs, companies pushed back, and the British government dropped plans to mint them. The crash was described as a “crypto winter”, but like each winter, spring is never too late to follow.
In 2023, NFTs are still showing signs of life. Although they have received criticism, a few lessons were learned. Large sales continue to take place, and the future of NFTs looks bright despite the downturn. Creators realised the importance of value in their content, platforms and marketplaces started to implement stricter regulations, and buyers learnt to exercise caution before investing.
High value businesses are still turning to NFTs, such as the Premier League in early 2023, alongside big brands like Louis Vuitton, Sony, and McDonalds. NFTs are also expanding into other ventures such as financial loans where tokens can be used as collateral. For example, Air travel providers Flybondi recently partnered with TravelX to start offering bought tickets as NFTs.