Will NFTs Make a Comeback in 2024?

The journey of NFTs has been nothing short of a whirlwind. The NFT boom began in 2021, coinciding with the iconic rise of the Bored Ape Yacht Club (BAYC). BAYC is an exclusive collection of digital art apes, doubling as an expensive virtual yacht club membership card. When NFTs were all the rage, snagging a BAYC NFT would set you back $400,000. However, following a period of massive hype, the NFT market crashed in 2022, driven by the fall of crypto and speculative trading.

Despite the slowdown, as we look into the current year, the narrative of NFTs is evolving. We're witnessing a potential comeback but with a broader scope beyond digital art. This comeback is characterized by deeper integration with a heightened focus on the practical utility of NFTs in various domains such as gaming, virtual real estate, and even identity verification and security. These developments hint at a more mature, utility-driven future for NFTs, suggesting a phase where they become more ingrained in our digital experiences and everyday lives.

Could we see this new phase occur this year?

NFTs: past, present, and potential future

NFTs had their best year yet when the digital asset rose to prominence in 2021, with sales topping $23 billion in 2021 based on data published by DappRadar. Key drivers behind the rise were NFTs' potential to revolutionize ownership of art and digital collectibles, particularly attracting digital savvy consumers. 

Some key milestones that marked the rise of NFTs included:

• Beeple’s NFT artwork: In early 2021, the NFT world witnessed a historic moment that set the stage for the year's frenzy. Digital artist Beeple sold an NFT artwork called  “Everydays: The First 5000 Days,” for $69 million at Christie's. This sale catapulted NFTs into the limelight, attracting global attention and signaling the potential of digital art in the blockchain era. 

  
  

• CryptoPunks: Launched in 2017, CryptoPunks is known to be one of the most iconic NFT projects. The digital collection consists of 10,000 unique, hand-drawn 24×24 pixel characters. When the project gained mass popularity, a single image of a pixilated character sold for a record price of $7.6 million in March 2021. 

  
  

• Snoop Dogg's venture into NFTs: In 2021, Snoop Dogg’s debut NFT collection was a key milestone in the industry. The "A Journey with the Dogg" collection featured unique digital artworks that took inspiration from his early years and life memories. A few months later, Snoop partnered with The Sandbox to launch ‘Snoopverse,’ a mini world on the metaverse platform with exclusive land and NFT bundles up for purchase.

  
  

• Grimes NFT collection: At the peak of the NFT hype, musician Grimes also launched a series of 10 digital artworks inspired by her music. The auction of the NFT series on Nifty Gateway bagged  $6 million.

  
  

• Intense media coverage: The media played a crucial role in the NFT boom of 2021. The phenomenon captivated Major news outlets worldwide, regularly featuring stories about record-breaking sales, the technology behind NFTs, and the emerging digital millionaires. According to a study by a professor at Vanderbilt’s Owen Graduate School of Management, out of the 26,000 NFT articles in their database, 3,000 were published in the first quarter of 2021 and 12,000 in the last quarter. This extensive coverage informed the public about the burgeoning NFT market and fueled its growth, attracting new creators, investors, and enthusiasts to this novel digital frontier.

  
  

• Virtual real estate boom: Platforms like Decentraland and The Sandbox saw explosive growth, with virtual land parcel NFTs selling for millions. The sale of digital land and other projects in the metaverse reached $514 million by the end of 2021. 

In the latter part of 2021 and early 2022, the NFT market narrative took a dramatic turn, marked by a noticeable slowdown due to market oversaturation. In January 2022, the market collapsed by 97%, based on data from Dune Analytics. This period saw an overwhelming influx of new NFTs and dupes, diluting the uniqueness and quality of offerings, and making it increasingly challenging for individual pieces to shine. The market became a bustling hub of activity, with several creators and brands jumping in, shifting the focus from groundbreaking creativity to a race for quick profits. Additionally, the NFT market's fortunes were closely tied to the volatile cryptocurrency values, and with the crypto market’s slowdown, a sense of caution rose among investors. 

However, this wasn’t the end of the road for NFTs. This phase represented a crucial market recalibration, transitioning from its initial explosive growth driven by speculation to a more mature, quality-focused approach. Post-slowdown, the market began evolving towards utility-based NFTs and projects with a stronger emphasis on community and long-term value, indicating a recovery and a learning curve from its frenzied phase.

Beyond digital art

NFTs are stepping out of the digital art scene and into diverse realms like music, gaming, and sports. Their unique features of authenticity and ownership are unlocking new ways for artists, gamers, and athletes to engage with fans. From exclusive music content to digital collectibles in sports, NFTs are redefining interaction and ownership in the digital age, showcasing their versatility across various industries.

Music

NFTs are revolutionizing the music industry with their potential to open new revenue streams and ensure fair royalty distribution. 

Imagine owning a special edition of your favorite album in physical form and as a digital collectible. Artists are releasing albums as NFTs, offering exclusive content and experiences. The rock band Kings of Leon's album "When You See Yourself" made headlines when they released their album as an NFT, a first for the industry. The NFT version offered special perks for NFT holders, like limited-edition vinyl and exclusive audiovisual art. 

NFTs are also turning concert tickets into digital memorabilia. Fans can buy NFT tickets, including special perks like backstage passes or exclusive merchandise. Above all, NFTs are streamlining royalty payments, ensuring artists get their fair share every time their music is played or resold. Electronic music artist 3LAU sold NFT collections of his music, allowing him to receive royalties automatically every time a sale occurred. He later also introduced a new song, “Worst Case,” where he gave away 50% of streaming rights to 333 fans who purchased NFTs for the song’s rights. This move was a pioneering example of how NFTs can be used to ensure artists receive their royalties directly and transparently, bypassing traditional industry intermediaries while also creating ways to engage fans.

Gaming

In the gaming world, NFTs provide utility as tradable in-game assets. Players can own in-game items like skins, weapons, and characters as NFTs. These items open up monetization opportunities by allowing developers to create unique digital collectibles that players can buy or trade on an open blockchain marketplace. Unlike traditional gaming, where users license items to use within the game, NFTs create an open economy where players have sovereign ownership over their digital items. For game developers, monetization extends beyond traditional in-game purchases. They can earn royalties each time an NFT they created is traded, providing a sustainable revenue model that aligns with the interests of the gaming community.

Sports 

Sports teams leverage NFTs to deepen fan engagement, build communities, create loyalty, and open new revenue streams. Sports brands are some of the most under-monetized brands in the world. Many fans do not buy tickets for games/matches or buy merchandise. Here are some ways NFTs are being used in sports.

• Digital collectibles: Fans can own a piece of their favorite team's history with NFTs representing iconic moments, like a legendary goal or a championship win. ‘NBA Top Shot’ has become a standout example of digital sports collectibles where fans can buy, sell, and trade officially licensed NBA collectible highlights as NFTs. These moments capture iconic plays and milestones from NBA history, allowing fans to own a piece of their favorite team's legacy.

  
  

• Fan tokens: These tokens offer fans voting rights on minor team decisions, creating a sense of involvement and community. In partnership with Socios.com, FC Barcelona launched its own fan tokens, offering supporters voting rights in certain club decisions, like choosing a motivational message for the locker room or the design of the corner flag.

  
  

• Exclusive access and rewards: NFTs can provide fans exclusive access to events, merchandise, or special experiences, enhancing their connection to the team. The NBA team, Golden State Warriors, released an NFT collection that included tokenized championship ring and ticket stubs. Some of these NFTs offered holders exclusive experiences, like participation in a Warrior-for-a-Day experience or a virtual meet-and-greet with team legends.

Other Industries Benefiting from NFTs

The benefits of NFTs are not restricted to music, gaming, and sports. Here is a list of other industries that benefit from NFTs:

• Real estate: Virtual and physical real estate transactions can be tokenized, simplifying processes and adding new layers of functionality.

  
  

• Fashion: High-end brands are creating digital clothing and accessories as NFTs, blending the lines between physical and digital fashion.

  
  

• Education: NFTs can be used to verify academic credentials, making them easily verifiable and transferable.

  
  

• Advertising and marketing: NFTs offer innovative ways for brands to engage with consumers, like tokenized coupons, loyalty programs, or exclusive digital content.

Innovations and into the future

Despite recent downfall, the NFT market is expected to nearly double from $1.6 billion in 2023 to $3.2 billion by 2027, according to data published by Statista. 

Several key trends underpin this growth. Firstly, integrating NFTs with real-world assets (RWA) transforms physical, illiquid assets into highly liquid on-chain tokens, expanding NFTs' scope beyond digital realms and bridging traditional finance with blockchain. 

NFTs are also likely to see a transformation from their initial proposition whereby tokens are valued at affordable prices and produced in larger quantities for a more extensive user base to benefit from instead of focusing on a limited number of high-value assets. 

A shift towards value-based NFTs is evident as we go forward, moving away from speculative hype to focus on real utility and sustainability. This shift includes using NFTs to combat counterfeiting in various industries and ensuring transparency, accessibility, and simplicity.

Along with these trends, the market's evolution demands regulatory clarity to protect consumers and investors, fostering a more mature and stable NFT ecosystem. We can expect greater adoption with increased regulatory frameworks in the coming years. 

Several technological advancements are also accelerating the growth of NFTs. Here are some emerging projects and technologies shaping the future of the market:

• Polkadot’s commitment to interoperability: This blockchain platform is known for its interoperability features that allow different blockchains to connect and communicate with each other, enabling NFTs to move between these connected networks smoothly. This mechanism means that NFTs created on one blockchain can be transferred and used on another, increasing their reach and value.

  
  

• Verification and tokenization of 3D content with Matera Protocol: Matera is emerging as a game-changer in the NFT space, especially for creators and users. It offers a unique approach to monetizing content and protecting intellectual property. Matera enables creators and brands to monetize their 3D content directly by tokenizing it into NFTs. This process opens new revenue streams and gives creators more control over their work. It also ensures the authenticity and originality of digital content through a blockchain-enabled verification system, protecting the intellectual property rights of creators. By tokenizing content into NFTs, Matera allows users to own a piece of the internet. This ownership is not just symbolic; it carries real value and can include exclusive access, rights, or benefits associated with the digital asset.

  
  

• Artificial intelligence (AI) NFT generators like Bicasso: AI-generated NFTs are digital artwork crafted through AI algorithms capable of analyzing and assimilating extensive data sets. An example of this technology is Bicasso, an NFT image generator harnessing the capabilities of AI to empower users in crafting distinct digital art prompted by predefined inputs. Users can upload reference images for Bicasso to enhance creation. Furthermore, Bicasso incorporates an NFT minting functionality, enabling users to mint their generated images on the BNB Smart Chain, subsequently auto-storing them in their wallets.

Conclusion

In conclusion, NFTs have proven to be more than a passing trend. They have endured market fluctuations and are evolving to offer more practical and innovative applications. As we move forward, NFTs are set to play a significant role in shaping our digital experiences, offering new possibilities for creativity, ownership, and engagement in the ever-expanding digital universe.