Are NFTs Really Dead?
Headlines predicting the death of Bitcoin are nothing new. Over the past decade, we’ve seen every permutation of why “Bitcoin is dead” imaginable, yet the current crypto winter has brought very few of these dire proclamations. It seems a little different this time. Maybe it’s hard to pen such a eulogy with Bitcoin (BTC) hovering around $28,000, and a spot Bitcoin ETF on the horizon. Doesn’t seem like Ethereum’s dead either.
But the blockchain industry and its commentators still need a corpse to poke at, and that’s what they’ve found with the putrid cadaver that is the nonfungible token (NFT) market.
The Worthlessness of Most NFTs
NFTs are dead. Deceased. Lifeless. NFTs are the “Norwegian Blue” from Monty Python’s Dead Parrot Sketch. And the grave dancing has commenced; to quote a recent Rolling Stone headline, “Your NFTs are actually — finally — totally worthless.” Rolling Stone is right — most NFTs are indeed utterly worthless.
Yet that should not be surprising to anyone who’s been in crypto for a few cycles. Most of the ICO tokens from the 2017 bull market vintage were dead by the 2018/19 winter. Likewise, the countless DeFi protocol tokens post-DeFi-summer of 2020.
Today, more than 1.8 million tokens have an aggregate market cap of a little more than $1 trillion. But the top 10 largest protocols and tokens account for over 93% of the total. Do the math. That’s a long, long tail of worthless zombie coins. The vast majority of all tokens die. So why should NFTs be any different?
The Rise and Fall of NFTs
The barrier to entry to create an NFT project in the hope of striking it rich was (and remains) low. Anyone can, and seemingly did, create an NFT collection in a few minutes with a few keystrokes. So what happened when a frenzy of trading activity and money flooded into this new corner of the crypto market in mid-2021? The free market responded exactly how it was supposed to: it provided supply. And supply ≠ quality, especially in this industry.
We’ve seen the same cycle again and again, this just happens to be the first real NFT winter. A-listers have quietly taken their NFT Twitter avatars down. Jimmy Fallon isn’t shilling apes with Paris Hilton on late-night TV. Ashton Kutcher’s Stoner Cats has settled with the Securities and Exchange Commission (SEC). A collective sense of embarrassment abounds.
NFT trading volumes have collapsed, from around $1 billion a week in mid-2021 to early-2022, to sub-$100 million today.
Signs of Life Amidst the Rubble
For those curious and open-minded enough to look beneath the surface of the “NFTs are dead” generalization prevalent today, there are signs of life amidst the rubble. In September, news emerged that PayPal filed a patent application in March surrounding an NFT purchase-and-transfer system.
Pudgy Penguins continues to expand into physical toys, first selling on Amazon in March and recently expanding to 2,000 Walmart stores across the U.S. Doodles have collaborated with casual footwear brand Crocs in a similar effort to merge the physical and digital, with a likewise similar collaboration between Gary Vee’s Veefriends and Reebok.
At a concert over the summer, Harry Styles fans could download an app featuring a self-custodial digital wallet for future NFT rewards. Meanwhile, Justin Bieber is collaborating with a blockchain music platform to turn a song into an NFT with royalty streams to the NFT holders.
The top auction houses continue to bring mainstream artists into the NFT world, Keith Haring with Christies for example, and Sotheby’s partnering with Ledger to offer a co-branded Ledger Nano X (hardware wallet) for buyers of premier digital art.
The Future of NFTs
If you keep looking you’ll find more and more signs of life, because NFTs are not “dead.” The fundamental technological primitive of what NFTs are and what they offer will not “die,” any more than blockchain will “die.” They will simply continue to evolve while the weak hands, weak teams, scams, copycats, and fast money fade into history, another footnote from another crypto cycle.
As we transition from this NFT winter into a new season, expect to see NFT projects that are more sophisticated and commercially viable, enriching the ecosystem in new and meaningful ways.
Hot Take: The Evolution of NFTs
Despite claims that NFTs are dead and worthless, there are signs of life in the market. While many NFTs may have little value or quality, this is not unique to the NFT space. In the crypto industry as a whole, most tokens die and only a few succeed. The rise and fall of NFTs is part of this cycle.
However, beneath the surface, there are indications that NFTs are evolving and finding new applications. Major companies like PayPal are exploring NFT technology, and collaborations between NFT projects and mainstream brands are taking place. Auction houses are also embracing NFTs, bringing well-known artists into the space.
While the current NFT winter may be discouraging, it is important to remember that the underlying technology and potential of NFTs will continue to exist. As the industry matures, we can expect to see more sophisticated and commercially viable NFT projects emerge, contributing to the growth of the ecosystem.
So, don’t write off NFTs just yet. They may be down, but they’re not out.
Tama Churchouse is the COO of Cumberland Labs, an early-stage Web3 incubator, and a founder of Digitali, a community-driven NFT Wiki that serves as a comprehensive database for NFT collections.
Coinan Porter stands as a notable crypto analyst, accomplished researcher, and adept editor, carving a significant niche in the realm of cryptocurrency. As a skilled crypto analyst and researcher, Coinan’s insights delve deep into the intricacies of digital assets, resonating with a wide audience. His analytical prowess is complemented by his editorial finesse, allowing him to transform complex crypto information into digestible formats.