Everything blockchain comes in waves and cycles, and the nonfungible token craze is absolutely no exception. The hype wave of the first half of 2021 as many celebrities raced to cash in on the mania ultimately fizzled out. Still, the NFT obituaries that started circulating the crypto press were premature, just like the frequent talk of Bitcoin’s imminent demise.
The ecosystem has witnessed both hype and market adjustments, from the burning of the Banksy painting and Beeple pocketing $69 million in the now-famous Christie’s auction to celebs, influencers, athletes, musicians and artists issuing their own collectibles. All of this has further cemented NFTs as a relevant sector in the blockchain universe.
New NFT marketplaces, dApps, and supporting blockchain solutions keep joining the ecosystem, and the market is being flooded with thousands of new digital collectibles every week. NFTs are back.
The stunning growth trajectory of NFTs
NFTs first entered the limelight way before you might think, with the launch of CryptoPunks, the world’s first “rare digital art” marketplace, in October 2017. Back then, they were just nonfungible tokens, with very little name recognition outside the hardcore blockchain crowd.
Fast-forward to 2020 when 30,000 to 80,000 NFTs change hands weekly.
But it was in 2021 that boom times truly commenced. A recent report by nonfungible.com states that more than $2 billion was spent on NFTs during the first three months of 2021—marking a 2,100 percent increase from the fourth quarter of 2020.
And, daily trading volume on the OpenSea NFT marketplace surpassed $49 million on Aug. 1.
The catalysts behind the growth
One of the major reasons the NFT trend is so spectacular is because it transforms the value proposition for creators. Instead of enlisting a publisher, gallery, or record label to monetize creative works, artists can carve out a larger slice of the total pie. This paradigm shift also breaks down the traditional stratification between consumers and creators.
The rise of crypto-rich billionaires and deep-pocketed investors plays a significant role as well, given that owning a piece of digital art is gradually becoming more mainstream culture, even a status symbol to some extent. Take the ascent of bored ape avatars on Twitter accounts of The Bored Ape Yacht Club; nothing says status symbol like an article in The New Yorker.
As the demand for NFTs surged, marketplaces flooded the market, contributing significantly to adoption and accessibility for collectors—but less so for the artists.
Until recently, the Ethereum network was the only blockchain supporting minting NFTs (the process of creating an NFT), but the network started facing throughput and fee issues, and the cost of minting NFTs surged.
Development on newer chains such as Binance Smart Chain (BSC), Cosmos, EOS, Polkadot and others led to lower costs, but they still fell short of addressing the real elephant in the room: user-friendliness for the blockchain uninitiated.
The process of minting and trading NFTs offers a complicated onramp for artists. But as the cryptoverse always does, it took care of the problem. Solutions like Unifty have answered the call by enabling less tech-savvy artists (or anyone for that matter) to design, create, manage and trade NFTs without code. Bluzelle addressed other pressing needs within the NFT community via its decentralized database–creating a hosting platform for NFT files that demand security, availability and censorship resistance.
Celebrity influence propels NFT adoption momentum
The NFT market is driven by rarity to an extent. With the influx of celebrities and influencers jumping in, platforms like Ethernity started producing limited-edition NFTs by artists and “personalities.”
Ethernity’s conceptualization accelerated the celebrity-NFT culture, a trend that continues to grow by leaps and bounds. The platform recently introduced a new acronym into the mix–aNFTs–limited-edition authenticated NFTs, which are endorsed by prominent celebrities but created by real artists.
The beauty of NFTs shine by limitless ideation. For instance, a series of NFTs minted by the Lithuanian street-art collective KIWIE transformed street art into NFTs linked to the geo-coordinates of the actual art. Owners of the NFT also own the actual street art.
Another important factor behind the surge in demand is that NFTs are no longer limited to art. The horizons of NFTs have expanded to cover music, videos, sports and especially gaming.
The play-to-earn gaming revolution’s footprint
Back in 2017, decentralized gaming company Enjin was one of the first mainstream gaming companies to understand (and leverage) the intersection of gaming and blockchain. It merged blockchain technology to its infrastructure and issued a gaming cryptocurrency, ENJ, which is officially whitelisted for use in Japan.
Another major piece of the NFT adoption puzzle: P2E, or play-to-earn. Games like Axie Infinity and Splinterlands enable users to mint rare in-game assets into NFTs; players can buy, sell and trade these items–and these gaming related transactions pile up. Data on DappRadar shows that Splinterlands alone generated more than 4 million transactions a day on Aug. 7, 8, and 9—while the entire Ethereum network generates an average of 1.2 million transactions daily.
Now gamers are able to generate revenue through their in-game assets in NFT form. As a result, the play-to-earn blockchain gaming model has established itself as an immense growth opportunity for NFTs.
For gamers from third-world countries, these blockchain-based games can serve as more than just games. According to Forbes, Axie Infinity witnessed a surge in user growth in the Philippines when it offered players an alternative source of income during the pandemic.
The gleaming outlook for NFTs is already materializing
The first wave of NFTs was a testing ground for Ethereum’s tech, primarily centered on the digital possibilities for art. Now, we are entering a second, roaring-20s phase for NFT adaptation as new use cases are unveiled, signaling additional room for expansion.
Fueled by the pandemic and the influx of easy-to-use and cost-efficient NFT minting platforms, protocols, marketplaces and the rising demand of the gaming industry, the NFT market is undeniably here to stay as it adapts to the creative preferences of a new digital generation.
Reuben Jackson is a blockchain security consultant, helping organizations with data structures. Outside his nonexistent office hours, Jackson reports and writes opinions on the blockchain/crypto space. He previously wrote about CBDCs for Crunchbase News.