Non-Fungible Tokens (NFTs) have been in the news for a few years. As swaths of the population have tried to figure out why NFTs exist, demand has skyrocketed, institutions have been built, and jargon has entered our collective consciousness.
There is an elephant in the room, however: NFTs are difficult to use and the majority of them are digital snake oil. But these problems create the opportunity to provide answers. The accessibility and legitimacy of NFTs are both ripe for change. As funding pours into the space, the market is beginning to mature and this shift is gaining momentum. We are entering a new era of NFT – NFT 2.0 – where technology will be more readily available to the general public, and the underlying value proposition of NFTs will be more transparent and trusted.
Reflection 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 to reach $147 billion by 2026. Even more impressive is the fact that this volume belongs to less than 400,000 holders. , which has a huge trading volume of $47,000 per user.
Along with the meteoric rise of the industry, NFTs themselves have undergone huge changes since their inception. For example, CryptoPunks, which hit for free in 2017, rose to blue chip status, culminating in an $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 the Bored Ape Yacht Club’s parent company, Yuga Labs, for an undisclosed sum.
The evolution of NFTs
Dismissed as a fad from the start, NFTs have shown tremendous staying power, catching the attention of major celebrities and brands and even being featured in Super Bowl commercials. Companies such as Budweiser, McDonald’s and Adidas dropped their own collections, while Nike entered the space by acquiring RTFKT Studios.
Related: Why are major global brands experimenting with NFTs in the metaverse?
As organizations determine their NFT strategy, the global space has reflected the past decades of technological innovation, just under a dramatically accelerated timeline. While the iPhone took about 10 years to reach its current version, NFTs have evolved from pixelated 8-bit images and Pong-like blockchain games to high-fidelity 3D animations and complex game mechanics with multiplayer experiences. massive in no time. a few years.
As real NFTs evolve, the ecosystem of pick-and-shovel solutions is also advancing rapidly. The onslaught of NFT-minting platforms and tools has dramatically lowered the barrier to entry, which has created deep market saturation. In March 2022, there were more NFTs than audiences websitescreating a significant amount of noise that many struggled to eliminate.
1/ There are now more NFTs on OpenSea than there were sites on the internet in 2010.
Very soon, NFTs will outnumber websites, maybe even web pages. This growth has major implications for how we should index NFTs…
— Alex Atallah (@xanderatallah) March 9, 2022
The stamina of the asset class and gargantuan trading volumes have changed the way creators approach the space. Many rushed their Web3 strategy or treated their fans as a source of cash, leaving a mess of missteps, sweepstakes, and abandoned projects. Simply put, most businesses and creators aren’t ready to enter Web3, and they need more manpower and white glove services than tools.
Just like email
Ultimately, NFTs seem to follow the same path as emails. There was a time, back in the 1990s, when companies needed to hire specialists to code emails for them. Early adopters founded lucrative agencies capable of serving Fortune 500 companies and executing early digital strategies. The lack of information gave these agencies enormous leverage until advances in technology (and education) made it easier for brands to do it themselves.
Related: We haven’t even begun to exploit the potential of NFTs
Likewise, we’re currently in an era where brands are looking for experts to educate and prepare them for a Web3 future, and it’s only a matter of time before they completely disintermediate and manage their Web3 strategy. entirely in-house. Onboarding NFTs, and crypto in general, is quite a complex process that many simply cannot handle. Some companies, however, are finding ways to abstract away the tougher aspects of crypto and create pathways for deeper engagement with their fans.
Designed for the general public: NFT 2.0
The current iteration of NFTs is not designed for mainstream consumption. The onboarding system is not smooth for consumers; volatility is damaging to true fans; and it distorts the artist-fan relationship. There is too much dissonance between the listed price of an NFT and the value it is capable of delivering to consumers, and many collections are experiencing brutal demand shocks as they fail to execute on their roadmaps.
NFT’s primary buyer is increasingly savvy about rug draws and scams, which means they’re less likely to create new collections. And while it’s easy to look at declining volumes and see the disaster, the reality is that NFTs need a major wash in order to weed out the get-rich-quick seekers and incentivize more properly. the real builders in space. As vaporware is wiped out in a bear cycle, antifragile companies that can weather the storm in the move from Web2 to Web3 will thrive. Agencies and platforms, if not timed correctly, will be wiped out, but those primed for an email shift will maximize high-margin, high-interaction projects while capturing long-tail revenue streams. .
This has important implications whether you are building in the space, a potential user, or an investor. This space will grow and evolve rapidly. Don’t blink or you might miss it.
This article was co-authored by Marc Peter Davis and Sterling Campbell.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Marc Peter Davis is a venture capitalist, serial entrepreneur, author and community organizer. He is the managing partner of Interplay, a top performing venture capital firm based in New York. 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 creators and leading brands developing NFT projects, decentralized autonomous organizations and tokens. He has spent most of his career focusing on consumer-driven technology for Blockchain Capital, Lerer Hippeau, Grishin Robotics and William Morris Endeavour, where he has also developed talent. Sterling received his Bachelor of Science in Music Industry and Business Administration from the University of Southern California and his Masters of Business Administration from Columbia Business School.