The apocalyptic crash in NFT prices and market activity has caused some doubt over the longevity of non-fungible tokens. Even the art world, where non-fungible tokens have made the biggest splash, seems to be growing wary of NFTs.
Ben Reynolds, the chief executive and founder of Sure Dividend, told Finance Magnates that “to create a sustainable artist economy long-term, several changes need to occur.”
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“With the lack of high-end identity and creation verifications, NFTs aren’t really supporting artists long-term. It has potential as a way for artists to earn money and royalties. Still, there’s a lot of issues to overcome to put more protections in place for artists,” he said, specifically pointing to instances of fraud and plagiarism within the NFT space.
Just last week, Coinbase co-founder Fred Ehrsam said on Bloomberg TV that “90% of NFTs produced…probably will have little to no value in three to five years.”
“You could say the same thing about early internet companies in the late ’90s,” he added.
Ehrsam drew a parallel between NFTs and crypto markets at large: “People are going to try all sorts of things. There’ll be millions and millions of cryptocurrencies and crypto-assets, just like there were millions and millions of websites. Most of them won’t work.”
However, even if 90 per cent of NFTs will lose their value in the next several years, some of them will retain it–and as non-fungible token technology continues to develop, some analysts believe that new use cases will bring new verticals value to non-fungible token markets.
“NFTs will continue to adjust organically into a wide variety of use-cases.”
So, are NFTs over and done with?
Mango Dogwood, the Community Manager at Charged Particles, told Finance magnates that the answer is “Absolutely not.’ Charged Particles is a platform that allows users to Interest-bearing Non-Fungible Tokens (DeFi NFTs).
“What we’re seeing is really just the beginning of what NFTs will be used for,” Mango said. “Art turned out to be an incredibly successful vehicle for teaching a huge new group of people about the underlying technology that is the blockchain, and a lot of these people are very creative thinkers who are bringing completely new innovation to the space.”
In other words, the boom-and-bust cycle that NFT markets saw at the beginning of this year may not have a meaningful impact on the future of non-fungible tokens: “I don’t think that NFTs have lost their relevance at all. In fact, I don’t think they’ve even seen the threshold of the relevance that’s coming in the next few years.”
“I think NFTs will continue to adjust organically into a wide variety of use-cases beyond what we’ve seen this year in the art world,” Mango said.
“Core NFT developments are happening at a deeper level.”
Les Borsai, who is both the chief strategy officer of Waves and a renowned NFT collector, has a different perspective: “I would say the hype has been increasing,” though “I suppose it depends where you are looking,” he told Finance Magnates.
“NFTs can be viewed in many ways. I think the basic understanding was that it was a collectable piece of art sold in a marketplace. The mainstream centralized outlets became interested, and everyone was launching an NFT. Today we have Television Stations, Shoe Brands, Sports Franchises and Gaming companies looking at them,” he said. “But for those outlets, the demand may have gone down.”
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Borsai pointed out that even in their current iterations, NFTs already have many use cases. “For me, the core NFT developments are happening at a deeper level, not unlike altcoins that launched in 2014 on the back of the Ethereum launch. An NFT, unlike a piece of art that hangs on my wall, can be so many things.”
For example, “It can be a financial instrument that pays out like an annuity; it can be something I borrow and lend money on instantly. It can be used for yield farming based on Rarity. It can be an artefact in augmented reality or an avatar in VR. It can represent my identity the way a CryptoPunk can be a profile pic, which I have.”
“So for me, the hype is far from done,” Borsai said. “You don’t have to look far to find a Bored Ape or Wicked Cranium creating an economy…supported by the [NFT] community.”
“The ‘metaverse’ component and gamification of NFTs will continue to keep them relevant.”
However, Borsai, like many others, believes that the non-fungible token space is undergoing a major shift in focus: a move away from collectables and toward tokens that have a wider set of applications.
For example, “the ‘metaverse’ component and gamification of NFTs will continue to keep them relevant,” Borsai said. ‘If you look at Aavegotchi, Bored Apes and Alien Boys as examples–they have robust offerings where the NFT is part of their structure.”
At the same time, non-fungible token technology has been improving behind the scenes over the past several years. “In 2017, when I bought a CryptoKitty, I had to wait hours (if not days),” he said. “That was a technology problem. Today, we are not seeing that with NFT drops–as a matter of fact, the drops are blowing out in a matter of hours. We also have great new scaling solutions emerging.”
The “democratization of art.”
Borsai, Dogwood, and many others believe that the next frontier for non-fungible tokens is decentralized finance.
“I think we’ll start to see more and more intersection between NFTs and DeFi (Decentralized Finance),” Charged Particles’ Mango Dogwood said, adding that “this is what we’re exploring at Charged Particles.”
“Bringing together the implicit value from the financial side of crypto and the speculative value from the art side, we start to see some fascinating new doors open in the future of the NFT space.”
Similarly, Borsai added that decentralized finance could enable NFT market-making and “[building] an economy around collectables” in similar ways that DeFi innovators have “created new markets that bring superior returns”–for example, practices like Yield Farming.
But the principles of decentralized finance can be used to create new use cases for non-fungible tokens, even within the art world.
“[DeFi innovators] look at traditional gallery systems and the approach to valuations in art and have better ideas,” Borsai said–”Ideas that support the community creating art so that a major collector or gallery isn’t the final say on what art deserves to be seen. It’s the democratization of art.”
Borsai also pointed out that the intersection between DeFi and art could lead to the creation of new kinds of artistic work: for example, “sharing music is super interesting: taking a song and having many pieces create a different experience as a whole piece. It’s not unlike buying a series of pieces that make up one bigger piece.”
“I am excited to see my NFTs on my Samsung Frame,” he said.”If we have any doubt that we are headed in this direction, take a look at the Christies and Sotheby’s launches. I could go on and on.”
What do you think about the future of NFTs in art and beyond? Let us know in the comments below.