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NFTs & a Second Chance: Will NFTs Become Mainstream?
In 2022, many crypto enthusiasts see NFTs as the next market bubble. Is it true or is there a chance to overcome challenges and become mainstream?
The non-fungible token popularity skyrocketed last year, breaking crypto-involved people into two parts: those who believed NFT as the future and those who thought it was just another market bubble. There is a third group: those who believe NFT has a future, but not without a burst bubble.
Insane NFTs boom led to mass implementation of the technology, along with noble NFTs prices and a lot of projects that implemented the technology but had failed to consider its utility for the long term.
Has the short-time NFT phase passed or does the technology have all the chances to become mainstream and overcome all the ups and downs? And, finally, will NFTs come back after the crazy 2021? OneArt has something to share.
Quick Take:
- In the Q2 2022 NFT net income was $460 million (Q1 2022 was $2.3 billion).
- NFT is considered another market bubble.
- Starbucks, Instagram, YouTube and other well-known brands and names continue to contribute to NFTs.
- NFT loans and tickets as the most common use cases of the technology (now and expected thereafter).
A stormy NFT year 2021 gives way to an uncertain 2022
Remember the crazy 2021 year with NFT sales rising to $10.7 billion in Q3, buzzing news headlines, and crypto projects rushing to find ways to incorporate the technology into their products?
The NFT market does not give up in early 2022, but eventually crypto winter catches up with it and the bubble bursts… In the second quarter of 2022, net income was $460 million, down significantly from $2.3 billion in the first quarter of 2022. More specifically, the NFT boom lasted from about mid-2021 until May 2022. At that time there was an explosion in the secondary NFT market when prices for popular NFTs reached sky-high levels.
Since May, the NFT market, like the entire crypto market, has fallen into decline for several reasons:
- High gas fees.
- The decline in ether (ETH) prices.
- Lack of demand on the secondary market.
- Cryptocurrency prices fall amid the Terra collapse.
- The likely bankruptcy of influential lenders such as Celsius Network, Babel Finance, and Three Arrows Capital. The fall of such lenders has forced many investors to suspend their activity concerning crypto projects.
Even the purchase of the NFT trading platform KnownOrigin by eBay and the acquisition of the NFT marketplace aggregator Genie by Uniswap Labs have not revived investors’ activity.
NFT sales have been falling and the prices of the best-selling NFTs have also crashed. For example, some NFT Otherdeed, which were in high demand in May, have fallen in price by about 30%.
Dark times have also befallen premium NFT collections. Thus, the price of the Bored Ape Yacht Club (BAYC) has dropped nearly 33% since May of this year, according to NFT Price Floor.
Amid the general crypto winter, NFT has gone into oblivion. Along with it, the volume of NFT's largest market — OpenSea — fell to a one-year low at the end of the summer. However, despite the clear downward trend, the NFT market has only been subjected to the ripple effect of a general bear market, but it has not (and is unlikely to) finally collapse. The industry seems to have entered a phase of rebuilding, but this time away from the spotlight.
The main reason NFTs stay afloat is their utility. Add to this some time for large-scale step-by-step adoption + gradual price equalization for the average user = NFTs have all odds of becoming mainstream.
“In 2032, NFTs will also be more accessible than they are now so that most internet users can afford them”, says Stephen Young, CEO of the NFT marketplace NFTfi.
Why do NFTs have all the chances to become mainstream?
We've already mentioned NFT future use cases, but where does the technology promise to be useful and prove its right to be widely used in the future?
Its utility extends far beyond art and games, where it is already best adapted. When it comes to applying the technology in the real world, the chances of widespread use increase significantly. Today, the technology is used in finance, the ticket system, and continues to be adopted by many well-known brands and names.
Some of the projects and brands that have integrated NFTs:
- Starbucks has provided members with the opportunity to earn and purchase NFTs that give access to new, exciting coffee experiences.
- YouTube has announced the introduction of NFTs as one of its priorities for 2022 to help strengthen and improve the connection between creators and fans.
- TIME Magazine presented TIMEPieces, an NFT initiative aimed at bringing the community together by connecting artists, collectors, and fans.
- Following the initial test launch of NFTs in May, Meta expanded NFT support to more than 100 countries in August 2022 and integrated with Coinbase and Dapper.
By the way, given the fact that Meta (and Instagram accordingly) is considered the main shark of the social networking market, the launch of the NFT marketplace on Instagram can reduce the hesitancy to buy tokens. This could lower the barrier to entry for ordinary users into the Web3 world (and become an additional source of revenue for social network governance).
💡Deutsche Bank estimated that a broader rollout of the NFT marketplace on Instagram could generate up to $8 billion in net annual revenue.
The deployment of technology in the field of social networks, mainly focused on Influencers, may become the core driver of user engagement growth and, as a consequence, the widespread use of NFTs. Thus, the NFT market is projected to grow 4.5x in 5 years.
Film industry — another direction of NFT adoption
The NFT market is becoming even more extensive, dipping into yet another global segment with an average user — the movie industry.
For example, the first tokenized series GenZeroes has been released this year. However, only those users who have purchased the NFTs can watch the series.
Stoner Cats is another example of the successful interweaving of movies and NFTs with Mila Kunis as the main producer. By purchasing themed NFTs, the viewer thus becomes the owner of a lifetime ticket to this show.
Replicants (The Next Evolution of Dominion X) is an unusual Steve Aoki animated show. The NFTs here are the fragments of the episode itself.
Are there any “The Lord of the Rings" fans here? Warner Bros. released their iconic film “The Lord of the Rings: the Fellowship of the Ring'' in the NFT format.
NFT loans — the technology's utility in finance
NFT lending involves a process in which borrowers put NFT assets as collateral to obtain a loan, usually financed by another person. Basically, like cryptocurrency lending, with NFT lending, borrowers use cryptocurrencies as collateral, but only in the form of their NFTs. This allows token holders to borrow funds without having to sell tokens. This use of technology has a significant impact on its utility.
Decentralized finance platforms (DeFi) are in this case intermediaries between the borrower and the lender, offering different rates and terms. Such platforms use smart contracts mainly in the Ethereum network, facilitating loan agreements and contract enforcement.
MetaStreet, Arcade, Zharta, NFTfi, and Drops are examples of such platforms that allow you to act as both borrower and a lender with NFTs as collateral.
E-tickets are a promising option for NFT utility
NFT tickets are considered to be one of the main benefits of technology utilization. These tickets are essentially the same as digital assets, but with your identity preserved, allowing you to validate your right to enter the event. Moreover, the "functionality" of such tickets provides a more exciting experience for their owners than just “entrance”. For example, some projects give NFT-powered ticket holders backstage access and the purchase of a limited collection.
Given the blockchain-based nature, anyone can trace a transaction regarding the purchase/sale of an NFT ticket. This makes it easier to determine when and where a ticket was bought/sold. Moreover, being tied to smart contracts allows tickets to have a fixed price, which means it is not possible to buy such a ticket at an inflated price on the secondary market. This way, the NFT ticket market is expected to be worth $68 billion by 2025.
To summarize
Introducing NFTs into many areas of life is only half the battle. What's more essential is to provide a seamless experience to those who will then interact with it, i.e. users. The value doubles if the use of technology is not burdensome in itself. The purchase of tokens at affordable prices, the storage of all NFTs in one safe and convenient place, as well as access to the market for the average user can significantly affect the fast-track NFTs adoption.
There are already dozens of NFT use cases. All that remains is to adapt the technology into everyday practice, where user-friendly and secure digital solutions can help.
