We may be ditching the art and replica assets for new blockchain-based ideas in music, subscriptions and events
No, NFTs aren’t dead. But anyone looking at the sharp downturn in prices — with the floor price of the popular Bored Ape Yacht Club NFTs cratering as much as 25% in the last week — might be led to think that the hype bubble has burst around non-fungible tokens.
“For the majority of people who have collected, created or traded NFTs over the past 12 months, this will be their first bear market,” Ben Beath, founder of the NFT game BattleFly, said, referring to a down period in the market. “Even the bluest of blue-chip NFT projects haven’t been immune from the market downturn.”
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But don’t write off NFTs as a passing fad just yet. While most NFT sales so far have come in collectibles, art and replicas of physical goods, experts say there is far greater potential in the future to leverage the blockchain technology behind NFTs to revamp the media and entertainment sectors, from real estate and subscriptions to events and music.
Some of the fanfare is dying down due to the overall economic downturn, which analysts believe could lead us to a recession, as well as the overall volatility in the cryptocurrency market. NFTs are tied to cryptos and can be created as physical or digital goods, and regulators are still trying to figure out how to tax these transactions.
Why NFT fever is fading
Over the last quarter, social media mentions of NFT fell by more than 48% between January and March, according to GlobalData. Additionally, a market downturn has been crushing much of the tech industry as a recession looms and revenue bumps during the pandemic year have slowed down. During a recession, investment fads, such as NFTs and meme stocks, tend to lose appeal in the short term.
“There are concerns that the NFT hype is over, with Google searches for NFT more than halving since January 2022,” Amrit Dhami, analyst at GlobalData, said. “However, excitement around NFTs was renewed by Meta’s recent announcement that NFTs would be brought to Instagram.”
Dhami is referring to the NFT launch by Meta’s Instagram in May, which allows users to add NFTs to their profiles and supports several blockchain networks. Twitter recently added a feature to allow an NFT profile picture and the ability to mint NFTs on the platform. Some believe these experiments by social giants might make NFTs more mainstream and push other companies to follow suit.
“The more adoption from tech giants, the better,” Mark Basa, director at crypto company HOKK Finance, told TheWrap. “Facebook was the first company to really crack your internet identity, and now identity [in Web3 and who you are] is going to be a key area of growth.”
But in the short term, crypto expert and former analyst at Mauldin Economics Robert Ross predicts that the NFT market will continue plummeting, with many prices falling before its next rising period coinciding with the crypto market.
“NFTs proved resilient at the beginning of this crash, but floor prices are now starting to collapse,” Ross said. “Now that the initial mania has faded, there will likely be a major washout with the vast majority of NFT prices falling 95% or more. Most will never see new all-time highs, however this is the time to begin speculating for the next big move higher.”
What is NFT 2.0?
In general, experts think that NFTs of original art or replicas of sneakers that have garnered so much attention haven’t really been useful or valuable, beyond serving as collector items or providing some nostalgia. In the future, they see NFTs being used in more practical ways, whether through streaming subscriptions, album releases or even purchasing property shares — taking greater advantage of smart contracts — or programs for executing agreements — stored on a blockchain.
The possibilities for future applications of NFTs could impact not just media businesses but everyday consumers since blockchain creates a digitally distributed, decentralized, public ledger of every update to a piece of content — from a sale to the addition of new material (like a new song on an album).
Shahid Khan, partner at consulting firm Arthur D. Little, predicts that wills, home deeds, car titles and passports could all become NFTs. “Coming out on the other side will be robust blockchain technology and real-life use cases for NFTs,” Khan said. “Many companies are starting, which will create practical applications of NFTs.”
Within the media industry, companies are considering selling streaming subscriptions as NFTs or releasing albums that can be updated with new songs or videos after the purchase. For example, the new decentralized streaming platform Rewarded TV is providing access to premium content with NFTs in place of advertising or traditional subscriptions. The limited supply of NFTs will give viewers lifetime access as the site keeps adding more movies and shows.
“As this technology becomes more accessible and mainstream … I believe it will eventually overtake traditional media platforms,” Robert Powers, head of growth strategy at Vivid Labs, said. “NFT technology has the potential to infiltrate everyday life through programmatic capabilities, allowing the creator to continually share content with the purchasers and create ongoing social interactions.”
And because virtually anyone can create an NFT, it’s also appealing for content creators seeking to build a following. Many have produced NFTs of their art and photography, tweets and videos. Creators can also sell NFTs of movie releases, tickets for events or turn other types of content into a digital asset.
NFTs are assets that are programmable, which means their ultimate use is up to us — the businesses, creators and consumers. For Mark Fidelman, founder of crypto firm SmartBlocks, the next generation of NFTs will open the door to easier transactions, whether that be software access or real estate investments.
“Real estate projects or business projects, like building shares, could be broken into NFTs,” Fidelman told TheWrap. “If you own a share in a building, it is not easy to sell. NFTs are easy to deal with transactions, and it’s really easy to see who owns it with the blockchain ledger.”
Powers added that we have yet to unlock the potential of the blockchain. “The first iteration of NFTs may be slowing down in popularity,” he said, “but we have barely scratched the surface of what this technology can do.”