NFTs really exploded into the public consciousness in 2021. They remained there through 2022, even as crypto as a whole began to take some hits, and experts began talking about what they increasingly called the “crypto winter.”
Before we talk about what comes next for NFTs, first let’s take a look at what they are and how things got here.
The Non-Fungible Token
NFT stands for non-fungible token, and it essentially describes a digital asset that is backed by blockchain technology to distinguish it as an original, unique artefact. So for example, let’s say you draw a picture in Microsoft Paint. You save it as a jpeg, and you can then duplicate that jpeg an unlimited number of times. Each version will be identical to the last, and there isn’t really much value in being able to say that the version you’re holding is the original – you might not even be able to prove that.
Compared to traditional art, where originals are worth infinitely more than duplicates, this has always put digital artists at a disadvantage. The moment they released their work into the wild on the WWW, they immediately lost the value of the original.
NFTs change all that however, by using blockchain technology to record the identity of the original works on a digital ledger, thus maintaining their value as compared to duplicates. This small innovation had massive implications. The art world was quick to pay attention too, and in fact, even traditional auction houses like Christies were soon putting NFT artworks up for sale in their auction houses.
You Paid… How Much?
Most of us saw the news stories about NFTs selling for eye-watering sums of money in 2021 and 2022. In case you missed it though, works from collections such as Bored Ape Yacht Club and CryptoPunks were amongst the most expensive pieces of art sold in recent memory. The CryptoPunk collection really cleaned up, with 5 of the top 10 most expensive NFTs ever sold, which had price tabs ranging from $7.6 million to $23.7 million. Additionally, established digital artists like Pak and Beeple got in on the act too. Beeple’s work tilted ‘Crossroad’ – a 10-second short movie – sold for $6.6 million. Beeple’s ‘HUMAN ONE’ sold for almost $30 million, while his ‘Everydays: the First 5000 Days,’ sold for a staggering $69.3 million.
However, even that figure has since been beaten. In December 2021, Pak’s ‘The Merge’ was bought by a consortium of almost 30,000 collectors who pooled together for a total figure of $91.8 million.
Look, we know what you’re thinking. We’ve all thought the same. More money than sense? It can be hard for a lot of people to understand why these kinds of figures are being paid for pixel art profile pictures and short looping video files. In a world rife with economic inequality, and where poverty and hunger remain major issues for many regions, some critics take particular and political offence at the business of NFT auctions. Such criticisms and doubts are further no doubt compounded when you consider that numerous NFTs have sold for sky-high price tags, only to massively drop in value since as a result of the crypto winter.
We would make the case however, that this kind of buzz and excitement is just phase one of the NFT phenomenon. Of course, once art collectors and auction houses started getting their heads around the technology, we saw a period of excitement, rapid growth, and some rather eyebrow-raising news headlines. But this has only been the first upward step in the NFT trajectory, and once that initial excitement fades into a more normal acceptance of the industry, we’re likely to start to see new and more practical long-term uses for the tech begin to emerge.
The first wave of the NFT phenomenon has already happened. In the space of just a few short years we’ve watched their trajectory from launch, to fame, to auction sales at almost $100 million in value. It has been quite a ride! But phase one is arguably now at a close, and whatever comes next for NFTs is likely to look a little different.
With crypto values at some of the lowest rates they’ve been for years, anyone who already feels confident for the future might consider this to be the perfect time to buy in. Most experts agree that crypto values are likely to hit the upward strokes again soon – we’re already seeing tentative post-winter growth across much of the industry – so you could do a lot worse than picking up a few choice NFTs now, to see what happens.
Do bear in mind though, that if you’re investing in any kind of crypto products or tokens, in the long run you would be well advised to give serious consideration to your personal crypto set-up and security. NFTs are almost exclusively bought and sold using cryptocurrencies like Ethereum, and you’ll want to make sure that you’re only buying and selling your tokens on trusted and reliable crypto platforms and use one that’s considered popular and well-liked, such as https://bitcoin-trader.app/. Of course, the risk of trading cryptos will always be there but this is the first step to reassuring yourself.
Equally important is the place you store your cryptos in. Both tokens and NFTs can be stored in crypto wallets; choosing your wallet is not something you want to leave to chance. Different services offer some very different features, so as you go into this decision you’ll want to think about security, accessibility, and also any other features you might want to integrate with your portfolio in future.
Answering the NFT Critics
There are a lot of reasons to think that NFTs are here to stay… and that in fact, they’re got potential to grow significantly more in terms of their reach and utility. For starters, they can evolve in ways which answer pretty much all of the criticisms which have been levelled at them.
Some critics point to the energy used in “minting” an NFT on the blockchain, and they therefore argue that NFTs are bad due to their impact on the environment. There are many responses that can be made to this argument (and just for starters, did you imagine that traditional banks have carbon-neutral systems?), but perhaps more effective than answering this criticism is just to render it obsolete. For example, one thing we’ve seen in the last year particularly is the appearance of carbon-offsetting programs for NFT minting.
So, take initiatives like Aerial or NFTree, for example, the latter of which pledges to plant trees to offset the carbon footprint of every NFT minted. When these costs are rolled into the buy price of the NFT, it rather neutralises the critics’ position.
Additionally, while it’s the crazy multi-million dollar NFT deals that tend to make the news, let’s not forget that most NFT sales are happening in much more relatable numbers. The media loves a good, dramatic story, but in reality, there are plenty of collections out there with a floor price in the region of 0.001 ETH ($1.30). This means this argument is rather like seeing one car sell for $20 million and thus concluding that cars are all ridiculously overpriced.
But the real factor that will either make or break the future of NFTs is that of utility – in the long run, are they actually providing anything we need?
So, What’s Next for NFTs?
Back to the million-dollar question, then. What is next for NFTs?
Well, this leads us to the one thing that folk in the crypto industry do best – innovation. Now that the initial rush and excitement of NFTs seems to have passed, we’re starting to see new ideas about exactly what uses this technology can serve.
Just recently, Square Enix – the game development company responsible for massive hits such as the Final Fantasy series – announced that their next release would be an NFT game. In the upcoming Symbiogenesisplayers can unlock thousands of different NFT characters throughout their playtime, earning real crypto assets in the process, which can then be bought and sold through crypto exchanges. That’s an exciting development, and it will be interesting to see how players get on with the concept – will this lead to more NFT games in future?
There’s also great potential for NFTs to become a kind of alternate currency within metaverse projects and other virtual worlds. Think about it… why does money have to be boring? At one point, Cameroon was using bottle tops as currency. Croatia, before introducing fiat currency, used the pelts of martens. When we escape into virtual worlds, who says we have to use currencies that resemble real life – when we could be exchanging desirable digital artefacts instead? People were collecting baseball cards as early as the 1930s. Collectable card games became a major hit in the 1990s, and let’s not even get started on the Pokémon phenomenon here. NFTs provide a completely different take on currency, as society continues to grow in virtual directions.
Another major role that NFTs can play is in the identification of copyright. Content creators of all varieties are now able to register their ownership using digital ledger technology, giving them better security over their work than ever before.
We can only say one thing for certain – NFT technology has a whole lot of still-untapped potential, and in the coming years, you can very likely expect to see a lot of fascinating new innovations in this space.