Why NFTs are not a fad

by James · February 24, 2023

Gabby Jones—Bloomberg/Getty Images

Spotify is using NFTs to curate playlists, a liquidator is selling NFTs to recover losses at a bankrupt hedge fund, and a new NFT marketplace called Blur has come out of nowhere to take the crown from longtime top dog OpenSea. All of this happened in the last week or so.

I could go on – including about how big gaming executives raise huge sums of money for NFT-based video games – but I think you get the point. Far from disappearing like a fad, as many predicted, non-fungible tokens are becoming more ubiquitous than ever. As Axios noted in a smart newsletter last week, “When headlines declare death, it pays to check the data.”

What Axios found is that NFTs are still racking up $500 million in monthly sales volume — a far cry from the $4 billion figure that occurred at the height of the early 2022 bubble, but still nothing to sneeze at. And for a longer perspective, I recall the reporting that an earlier NFT bubble popped in 2018, where a primitive collectible called a Crypto Kitty had sold for the then unimaginable amount of $100,000. Today, that figure is below the so-called floor price for some of the 10,000 animals in the Bored Apes collection.

While all of this is a testament to the continued interest in NFTs—whose value derives from the fact that they prove unique ownership of a digital artifact stamped on a blockchain—I’m more intrigued by what comes next. I predict we are headed for a design breakthrough as companies and crypto wallet manufacturers develop an interface that makes using NFTs as intuitive as picking up an airline boarding pass with your phone. Meanwhile, the speculative market for NFTs has been turbocharged thanks to a new tactic popularized by Blur called “floor sweeping” which involves buying lots of the lowest NFT in a given pool.

All of this is to say that despite the hype and uncomfortable culture associated with certain elements of the NFT world, the underlying token technology is here to stay. If you want to stay abreast of the latest developments with NFTs and the larger digital worlds being built around them, I recommend reading my colleague Marco Quiroz-Gutierrez’s weekly column, This Week in the Metaverse. And if any of you have thoughts on the future of NFTs – or want to claim that they really are a fad – I’m always happy to hear your opinion. Have a nice weekend.

Jeff John Roberts
[email protected]
@jeffjohnroberts

DECENTRALIZED NEWS

Coin base launched a Layer 2 blockchain called Base using open source code from Optimism, winning applause from crypto purists. (Fortune)

Dapper Labs, best known for NBA Top Shot NFTs, laid off 20% of its staff for the second time in four months. (The block)

An updated one DOJ the indictment shows how Sam Bankman-Fried used straw donors to make tens of millions in illegal political contributions. (Fortune)

Binance introduces a “semi-automated” system to manage its reserves after repeated episodes of collateral commingling. (Bloomberg)

An employee stole $18,000 worth of electricity to mine crypto in the crawlspace of a Massachusetts Middle School. (Boston Globe)