Two months ago, I shared my thoughts about the nascent NFT market for the first time. But those days, even analysts didn’t expect such a surge. However, I’m sure nothing interesting is ever completely one-sided. In this article, I’ll try to think about the other side of hype as a lot of questions and concerns about NFT-future are buzzing around, making the community and investors puzzled.
On the brink of hype
The NFT space is booming with innovations ranging from decentralized marketplaces like Rarible to blending with DeFi technology (e.g., NIFTEX and others). The total volume of NFT transactions has tripled recently.
Since the beginning of the year, the market has passed two major milestones. First, you can discover an ever-expanding list of celebrities. And this is not only extremes in the form of Elon Musk or little-known artists. I was especially thrilled by the audiovisual NFT by Aphex Twin. Moreover, Sotheby's, the most famous auction house, has become one of the NFT-marketplaces now.
The second milestone is price. Over the past month, it's become mundane to hear about NFT tokens selling for millions of dollars. Jack Dorsey's tweet is $2.91 million; Cryptopunks is about $7.5 million; Beeple painting is $69 million. The third most expensive work by a living author in art history was sold literally before our eyes as an NFT token.
The dichotomy of development
Beyond these two milestones opens up the dichotomy of new industry frontiers and the fear of a market bubble. The intense focus on the NFT industry and the significant capital flow has only exacerbated the questions of finding profitable investments and the future development of the NFT industry itself.
Among the new prospects, I see the development and complication of the market itself. Soon, it will not be enough to write and develop a smart contract for an NFT-token - it will take 1-2 hours. Moreover, it won't be enough to upload an image and mint a new token via Rarible or Opensea marketplaces (unless you are a celebrity, of course).
Also, our analysts expect the rise of new projects and NFT-collections with rare features, thoughtful concepts, and token features. There are more and more examples of such shifts: this approach contributed to the success of Cryptopunks, Non-Fungible Pepe, and Bastard Gan Punks.
Another important segment of NFT is sports-related tokens. According to DappRadar, NBA TopShot, the marketplace for NFT tokens from the NBA, ranks first in sales volume. This marketplace's success and enormous popularity come from the vast NBA fan base, the speed and cheapness of Flow blockchain transactions, and the influx of significant capital into the industry. The emergence of similar platforms for soccer, baseball, UFC, or tennis fans is just a matter of time.
Also, the hunt for NFT rarities is now beginning. The recent Wrapped MoonCats boom will lead the market to search for tokens and projects that enthusiasts released before 2020. Such projects may have additional experimental features and other rarity signs, which will significantly distinguish them from the same-type NFT tokens' current flow.
On the other hand, we should not forget about the risks to the NFT-sphere. First of all, it is a question of a bubble. Such a critique of NFT suddenly came from the artist Mike Winkelmann aka Beeple (his work was sold for $69 million).
“I absolutely think it’s a bubble, to be quite honest. I go back to the analogy of the beginning of the internet. There was a bubble. And the bubble burst,” Beeple said on “Fox News Sunday.” “But it didn’t wipe out the internet. And so the technology itself is strong enough where I think it’s going to outlive that.”
We should not forget about the other NFT concerns: is it possible to sell the same work twice but as different tokens? How to identify and react to the fake NFT tokens' trading history? What forms will the interaction between the NFT and DeFi spheres take shortly? How will the security NFT tokens be provided in case of fraudulent events or their loss?
Furthermore, the question remains open about the possible implementation of NFT technology into the existing art field: how can modern museums and galleries incorporate NFT into their activities? A potential first attempt at synthesis would be Lazy, Mark Cuban's new NFT-marketplace. Lazy will be an online gallery, bringing together users' work with the ability to display it on social media.
The NFT boom is far from being over. The year 2021 will see further growth in the NFT sphere due to the ever-growing interest. It is the NFT segment that is easiest to understand and closest to celebrity and sports fans. In February 2021 alone, NFT transaction volume reached $340 mln, more than the entire 2020 transaction volume (March transaction volume is already approaching the $600 mln mark).
Developers continue to research and develop NFT as a unique asset and with new use cases ranging from fractionalized ownership to independent music distribution. Moreover, as digital identity and digital ownership grow, NFTs will change the very way we perceive and share value online.