Is the NFT hype over?

Web 2.0 platforms moving away from NFTs may signal a decline, writes Helen Femi Williams.

Image source: Pexels/Jonathan Borba

In May 2022, Meta entered the NFT market, signaling the company’s intention to move more significantly into Web3. From showcasing to selling, creators can produce their digital collectibles on Instagram and sell them to fans on and off the platform.

Users supported their favorite creators by purchasing their digital collectibles directly on Instagram, including videos, and adding support for Solana blockchain and Phantom wallet and other blockchains and wallets.

Ten months later, Meta announced that they would no longer support digital collectibles and that the project would be “discontinued”.

“We are no longer offering digital collectibles on Instagram and Facebook. Any collectibles you have already shared will remain as posts, but no blockchain information will be displayed,” wrote Meta.

In addition, other companies, such as Disney, have also shut down their NFT projects. Disney shut down its metaverse division and let go of all 50 team members responsible for developing new ways to tell interactive stories using technology.

Gary Nuttall, the founder of Distlytics, a blockchain consultancy, said: “There has been a gradual realization that NFTs are no longer a get-rich-quick scheme/scam. NFT art has died out and firms are exploring now how to tokenize real-world assets using NFTs.”

Kieron Carledge, head of sales at Baanx Group, a provider of API-driven financial services, said: “It seems that technology companies are becoming increasingly disillusioned with the metaverse, as slow growth and waning user interest in new entertainment formats have left many feeling frustrated. Even large metaverse platforms such as Decentraland and The Sandbox have seen a sharp decline in virtual land sales.”

This article discusses why attitudes have changed toward NFTs, mainstream adoption, and what’s next for companies trying to transition from Web 2.0 to Web 3.0.

Changing attitudes

At the top of the NFT market attracted staggering sums, with a sign of Jack Dorsey’s first tweet fetching $2.9 million and the primary token for Axie Infinity, a game to make money, selling for $9.75 billion. Coca-Cola also raised more than $575,000 from selling a custom jacket for metaverse use, to name a few examples.

In recent months, however, companies such as Meta, Disney and Microsoft have shut down their NFT projects.

In November, Meta’s AR and VR division, Reality Labs, lost $13.7 billion, and about 13,000 Meta workers were laid off. They also announced in April that 10,000 more employees would be laid off over the coming months, 5,000 positions would be eliminated, and restructuring plans were also in the works.

Similarly, Disney cut its NFT unit as part of a wider restructuring program to reduce its workforce by 7,000 over two years.

Microsoft disbanded its Industrial Metaverse Core team, a project that was only four months old and aimed to encourage the use of metaverse in industrial settings.

Carledge said the underlying problem with these Web 2.0 adoption projects is a need for more understanding and adaptation to the principles of Web3. Web 2.0 companies may have different motivations for adopting blockchain technologies.

“Web3 companies are focused on creating more utility for NFTs, which include uses beyond art such as games, music and even virtual real estate. Web3 companies see NFTs as a way to disrupt traditional systems and unlock new opportunities. For example, gaming companies are creating blockchain-based economies where players can earn and trade NFTs for in-game assets or even real-world currency,” he said.”

The volatility of the market

Ivan Tan, co-founder of Sgnal, a Web3 platform for consumer intelligence, believes that changing attitudes towards NFT projects are causing market conditions that are pushing companies to adapt.

There were a number of market crashes throughout 2022, including the crashes of major cryptocurrency exchanges and coins such as Luna in August and, more explosively, FTX in November.

This led to a sharp drop in NFT prices linked to these currencies.

Since then, there has been a downward trend in NFT prices, even beyond the immediate fallout of the crashes. In October 2022, almost all NFT sales targets, including volume and price, were lower than the previous year.

Global sales of NFTs grew in 2022 compared to 2021, following a sharp increase in 2021. Sales of NFT collections grew by around 15 percent year-on-year to US$11.8 billion in 2022. However, NFT- transactions related to art down in the same period period, generating approximately 1.47 billion US dollars.

By the end of 2022, NFT trading volume had plunged 90 percent across sectors.

NFT tools

Although NFT integration with Meta only lasted a few months, it is difficult to predict what might have occurred if the integration had continued beyond displaying collectibles.

As an example of a successful Web2 company using blockchain technology, Tan cited Starbucks Odyssey as evidence that NFTs are still relevant and evolving.

Starbucks Odyssey does not use crypto or wallets, but members can access the technology behind it. Members can purchase limited-edition stamps (NFTs) through a built-in marketplace within the Starbucks Odyssey web app experience.

“By leveraging Web3 technology, our members can access experiences and ownership that were not possible before. Starbucks Odyssey will exceed the core benefits that our Starbucks Rewards members have come to love and unlock digital, physical and experiential benefits that are uniquely Starbucks.” Starbucks said.

Other use cases of Web 2.0 NFT tools include the collaboration between Coach and Shxpir to launch an NFT collection based on the Coach bag, Gucci’s collaboration with the SuperRare NFT gallery, and D&G’s collaboration with UNXD which resulted in the airdrop of unique wearables.

According to Nuttall, linking Real World Assets (RWAs) to tokens will be a significant growth area for mainstream adoption.

“I see these teams have transitioned into marketing/creative agencies. Effectively, it’s a reminder that any NFT/Web3 enablement must have an underlying use case and solve an actual problem. The consumer has matured beyond the hype/PR-based mindset ,” Ivan said.

What will be next?

While the NFT market has seen a slowdown in recent months, it is still too early to say whether this represents a permanent setback for the technology.

As the market continues to evolve, it is likely that we will see new use cases emerge that take advantage of the unique features of NFTs.

As companies continue to explore the possibilities of Web 3.0, it will be interesting to see how they incorporate NFTs into their strategies and if they can find a way to make them a truly valuable asset to their users.