Non-Fungible Tokens (NFTs) They’ve been making headlines for the last few years. While sections of the population have tried to understand why NFTs exist, demand has skyrocketed, institutions have been created, and jargon has entered our collective consciousness.
However, there is an elephant in the room: NFTs are hard to use and most of them are digital snake oil. But these problems create the opportunity to give answers. The accessibility and legitimacy of NFTs are ripe for change. As funding pours into the space, the market is beginning to mature and that change is gathering momentum. We are entering a new era of NFTs, NFT 2.0, where the technology will be more easily accessible to the mainstream and the underlying value proposition of NFTs will be more transparent and trustworthy.
Reflecting on the rise of NFTs
In their short existence, NFTs have exploded onto the crypto scene, surpassing $17 billion in trading volume in 2021. This number is expected swell to $147 billion by 2026. Even more impressive is the fact that this volume is property for less than 400,000 cardholders, adding up to a massive transaction volume of $47,000 per user.
Along with the meteoric rise of the industry, NFTs themselves have gone through enormous changes since their inception. For example, CryptoPunks, which minted for free in 2017, rose to top-tier status, peaking at $11.8 million sale at Sotheby’s last year. A few years later, Larva Labs, the company responsible for creating the Punks, was acquired by Bored Ape Yacht Club’s parent company, Yuga Labs, for an undisclosed amount.
The evolution of NFTs
Discarded as a fad early on, NFTs have shown a great deal of staying power, garnering the attention of major celebrities and brands and even appearing in Super Bowl commercials. Companies like Budweiser, McDonald’s, and Adidas have released their own collections, while Nike has entered the space by acquiring RTFKT Studios.
While organizations determine their NFT strategy, the overall space has mirrored the last few decades of technology innovation, just below a significantly accelerated timeline. While it took about 10 years for the iPhone to reach its current incarnation, NFTs have gone from 8-bit pixelated images and Pong-like blockchain games to high-fidelity 3D animations and complex play-to-win game mechanics. massive multiplayer experiences in just a couple of years.
While actual NFTs are evolving, the ecosystem of pick and shovel solutions is also rapidly advancing. The onslaught of NFT minting tools and platforms has dramatically lowered the barrier to entry, creating deep saturation in the market. As of March 2022, there were more NFTs than public websitescreating a significant amount of noise that many have found difficult to remove.
1/ There are now more NFTs on OpenSea than websites on the Internet in 2010.
Very soon, NFTs will outnumber websites, maybe even web pages. This growth has important implications for how we should index NFTs…
— Alex Atallah (@xanderatallah) March 9, 2022
The staying power of the asset class and gigantic transaction volumes have changed the way creators approach the space. Many have rushed their Web3 strategy or treated their fans like a source of liquidity, leaving a mess of missteps, rug pulls, and abandoned projects. Simply put, most businesses and creators aren’t ready to jump into Web3, requiring more manual, white-collar services than tools.
just like email
Ultimately, NFTs appear to be addressed in the same way as email. There was a time in the 1990s when companies needed to hire specialists to encrypt emails for them. Early adopters founded for-profit agencies that were able to service Fortune 500 companies and execute early digital strategies. The information gap gave these agencies tremendous influence until technological advancement (and education) made it easier for brands to do it themselves.
Similarly, we are currently in the age where brands are looking for experts to educate and prepare them for a Web3 future, and it is only a matter of time before they disintermediate completely and manage their Web3 strategy entirely in-house. Incorporating NFTs and crypto in general is quite a complex process that many simply cannot handle. However, some companies are finding ways to abstract away the more difficult aspects of cryptocurrencies and creating avenues for deeper engagement with their fans.
Built for the mainstream: NFT 2.0
The current iteration of NFT is not designed for general consumption. The onboarding system is not easy for consumers; volatility is hurting true fans; cast bias the artist-fan relationship. There is too much dissonance between the sticker price of an NFT and the value it can provide to consumers, and many collections are experiencing strong demand shocks as they fail to deliver on their action plans.
The core buyer of NFTs is getting smarter to carpet pulls and scams, meaning new collections are less likely to be minted. And while it’s easy to see declining volumes and see the doom, the reality is that NFTs need considerable washing to knock out those looking to get rich quick and more adequately incentivize the real builders in the space. As vaporware is phased out during a bear cycle, anti-fragile companies that can weather the storm by switching from Web2 to Web3 will prosper. Agencies and platforms, if programmed incorrectly, will be eliminated, but those prepared for an email-like shift will maximize high-margin, high-touch projects while capturing long-tail revenue streams.
This has important implications whether you’re building in the space, a potential user, or an investor. This space is going to grow rapidly and evolve rapidly. Don’t blink or you’ll miss it.
This article was written in collaboration with Mark Peter Davis Y sterling campbell.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research when making a decision.
The views, thoughts, and opinions expressed here are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Mark Peter Davis is a venture capitalist, serial entrepreneur, author, and community organizer. He is the managing partner of Interplay, a high-yield venture capital firm based in New York City. He is also an active podcaster, the author of fundraising rules and the founder of the Columbia Venture Community and the Duke Venture Community.
sterling campbell is the CEO of Minotaur, a Web3 company serving top-tier creators and brands as they develop NFT projects, decentralized autonomous organizations, and tokens. He spent most of his career focusing on consumer-centric technology for Blockchain Capital, Lerer Hippeau, Grishin Robotics, and William Morris Endeavor, where he also developed talent. Sterling earned his Bachelor of Science in Music Industry and Business Administration from the University of Southern California and his MBA from Columbia Business School.