NFT Revival: Is A Comeback On The Cards?
December 4, 2023
Everyone who was around for the last crypto bull run, and even some of those who weren’t, will remember the monumental rise in Non-Fungible Tokens or NFTs. These unique tokens are built on the ERC-721 standard, making them non-interchangeable and irreplaceable, and perfect for trading art and other digital collectibles on the blockchain.
The rise of NFTs dominated the last bull run, and what a time to be in Web3 that was! From the thrill of grinding for a highly coveted whitelist spot to scouting the OpenSea market for a potentially life-changing steal; we have some fond memories of 2021-2022!
The dramatic rise of this new market came to be classified as its own “sub-industry” within the digital asset space, characterised by a few iconic moments like Beeple’s iconic USD $69 million NFT sale at a first-of-its-kind auction at Christies. Luxury brands like Gucci and Louis Vuitton ventured into NFT’s for branding and audience engagement. During 2022 celebrities like Justin Bieber bought into the hype with a USD $1.2 million Bored Ape Yacht Club (BAYC) NFT purchase.
In 2021, organic trading volume in the NFT market hit USD $25 billion, and reached a close of USD $24.7 billion in 2022. Unfortunately, multiple bankruptcies liquidated billions of dollars within the crypto space as the industry entered a bear market, causing NFT values to plummet (for example Bieber’s BAYC dropped 95%).
With valuations for NFTs far below what they were at their peak, is there scope for a comeback in 2024? Was it all a fleeting fad, or can we expect NFTs to make a triumphant comeback?
We think the latter is possible, however we believe that the use cases for NFTs will evolve far beyond digital collectibles.
Here’s what we foresee will drive growth in the space going into 2024:
1. GameFi and X-To-Earn
In November, 2023, the year-long downtrend in NFT trading was finally broken, with month on month trade volumes up 32% or USD $405 million. The blockchain gaming sector saw the most trading activity, according to a report from DappRadar, with collections from Sorare, Axie Infinity and Gods Unchained the emerging standouts.
As GameFi grows in popularity, the concept of rewarding users who participate in gaming ecosystems will play an important role. We think this will take the form of a concept known as X-To-Earn, where these virtual rewards that users earn in-game can be traded for fiat money in the real world.
2. Identity Verification and Soulbound Tokens
Ethereum co-founder Vitalik Buterin introduced the concept of Soulbound Tokens (SBTs) in a blog post in 2022, which he further expanded on in a paper titled “Decentralised Society: Finding Web3’s Soul.”
These tokens represent a different kind of NFT – one that is non-transferrable and does not have a market value ascribed to it. Instead, these tokens would serve as a way for users to prove credentials in the Web3 space, including identities and accomplishments.
Take3 sees these tokens as pivotal in the digital asset industry, and the wider economy as verifiable credentials become an important part of user interactions on the blockchain.
3. NFT Lending
There’s no denying that the NFT market rose in popularity thanks to digital collectibles, and the launch of some iconic collections that drove value. After all, OpenSea’s marketplace was a success largely because of the collections housed and the secondary market to trade these high-value items.
Like traditional art, collectors will desire to hold certain coveted NFT’s in their portfolio.
However, there is a new trend that’s taken form over the last few years – NFT lending. Platforms like Blend facilitate NFT-backed loans, allowing users to borrow money using their NFTs as collateral.
We believe that this new trend will pave the way for NFTs to play a larger role as an asset class within the DeFi ecosystem, and we’ll hear a lot more of the term “NFTFi” in 2024.
4. Ticketing and Event-Based NFTs
Once regarded as the backbone of the creator economy, Take3 forecasts NFTs will have a role to play in the event industry. The non-replicable nature of these tokens makes them a much more suited alternative to tickets, giving attendees a memento to hold on to even after the event has passed.
Aside from the unique user experience that this would provide, NFTs could also open up untapped revenue streams for brands at events and foster more collaboration in a digital economy.
Thinking About NFT Integration?
Take3 Web3 strategists can help make NFTs work for you, in a way that stays true to your vision, business plan and brand voice. We work with businesses from the beginning, to plan their NFT strategy and execute their vision with the right integration of branding and technology.
Are you looking to grow your user base with NFT engagement? Do you want to craft your own NFT collection? Are you curious on how to get started with NFT’s? Get in touch with our Take3 strategists today.