With crypto prices reeling this year, non-fungible tokens (NFTs) and other sub-ecosystem investors have also found themselves in the grip of a bear market.
However, looking beyond the trading value of Ether (ETH), NFTs were primarily created to represent assets and property in the real and virtual world. The bear market, as a result, has reignited discussions about how NFTs can pull back and focus on serving use cases as the market recovers.
In a conversation with Cointelegraph, Tony Ling, co-founder of analytics platform NFTGo, shared his thoughts on the NFT ecosystem, revealing the ecosystem’s expected trajectory.
Cointelegraph: The rise in popularity of NFTs is often attributed to the various real-world use cases they can and have solved. What is your opinion on the NFT market crash? Do you think the market will recover?
Tony Ling: To answer this question we must first explain the value basis of NFTs. Nowadays, The NFT market is primarily driven by four categories: art, PFPs (profile photos), terrain, and affiliation. At the moment, the most dominant is that of profile photos. The value base of PFV NFTs mainly includes three parts: financial products, luxury goods/collectors, and affiliations, among which financial products are currently dominant, while the NFT derivatives model is still in a very early stage. early. Therefore, with the general downturn in the cryptocurrency market, NFTs, as illiquid derivatives of fungible tokens (FTs), are bound to fall accordingly. This is to be expected.
However, I believe that as the cryptocurrency market recovers in 2023-2024, the value of NFTs has room to grow several times larger than the larger cryptocurrency market. Your value growth will come from at least two aspects:
One, with the development of NFTs and related technology in the meta-universe, the usage scenarios of NFTs will become more abundant, and the consumption property of NFTs will grow, and this consumption property is not only to solve problems of the real world, but also to create new scenarios that do not exist in the real world.
For example, all the assets of the Otherdeed metaverse are NFTs, and these NFTs will themselves generate various scenarios of economic interaction, thus realizing new consumption to help people better meet their needs and even develop into new productivity tools and forms of business .
Second, the development of various NFT derivatives, such as the fragmentation of NFTs, NFTFIs, NFT mortgage loans, and NFT fixed income products. These new financial products will allow investors to participate in NFT-related investments in a more flexible format, thus attracting more capital, both institutional and individual, to this market.
CT: Despite the losses and reduced publicity, many projects are still considered viable investments. What do you think is driving this trend? To what extent is it important for NFTs to serve use cases, or are they just investors looking to make a quick buck?
TL: The driver of any trend is both the “speculator-created story” and the “true value.” Especially in the early days of an industry, a bubble is more of a reaction to uncertainty, and I think it’s mainly builders like us who embrace uncertainty that are driving the trend. Of course, in addition to builders, large funds, including funds in the crypto space, mega funds, and even funds that used to focus on traditional areas are also very important drivers. In fact, some of them want to make a quick buck, but from a capital efficiency perspective, I don’t think now is a good time to make a quick buck in the cryptocurrency market.
CT: What trends are still relevant from the early days of NFTs, regardless of price fluctuations? And what are the new trends that you think will become popular in the near future?
TL: First of all, more and more people are paying attention to NFTs and there will surely be orders of magnitude more in the future. NFTGo data shows that there are currently more than 2.96 million Ethereum wallets holding an NFT, compared to just over 200,000 in August 2020. Despite the current market sentiment being cold, there are still 20-30,000 addresses trading NFTs each day. Of course, this figure still has a huge room for growth. Second, the builders keep building. It can be seen that many NFT-related companies have recently acquired funding. Also, although the market has recently been bearish, new blockbuster projects like goblintown and Memeland continue to emerge on the market.
Although the various PFP projects of the last summer of the NFTs had their own characteristics, many followed the paradigm established by the Bored Ape Yacht Club (BAYC). With the further development of the NFT industry, it is inevitable that a new megatrend will emerge. This new trend, I suppose, will be the explosion of the content ecology of the metaverse. The definition of “content” here is broad, and metaverse games can be defined as “content” as well. As it mentioned above, the enhanced consumption attributes of NFTs will help the industry recover, and the consumption attributes mean that NFTs will generate a cash flow of non-investment income for their holders. One important way to do this is to build “content” in the Metaverse and let the builders own the content and generate revenue. Those who enjoy the content receive intrinsic rewards and seem willing to pay for them.
CT: What is your opinion on current investor sentiment? How do you think it affects the NFT market in general? What can NFT projects and companies do to improve engagement?
TL: NFT market sentiment is cold for two main reasons: One, the price of Ether is in a volatile period and a large number of investors are in a wait-and-see phase; two, the narrative and growth pattern of PFP is coming to an end, and the recent emergence of projects has not yet brought a new pattern, making it difficult for new expectations to emerge in the market.
The cryptocurrency industry is cyclical by nature. I personally recommend that new directions in the industry continue to be explored while maintaining enough capital to await the next cycle of the cryptocurrency industry and seize the opportunity.
CT: As you mentioned, the scope of the NFT market is only limited to the imagination of entrepreneurs. What are some of the use cases that NFTs can and should serve as they move into the mainstream?
TL: In this regard, I want to point out three broad subsets of use cases where NFTs are well positioned to disrupt the mainstream.
New forms of art: Digitization enables richer forms of artistic expression, and the emergence of NFTs and related green products solves the problem of digital art ownership and better helps art creators make a profit. As the digital world merges with the real world, the penetration of digital art into human society will become more and more extensive, thus becoming a huge new market for collectibles as well as luxury consumer goods.
PFP, self-expression and new forms of organization: I believe that one of the main reasons for the popularity of PFP projects is that they better respond to the human need for self-expression. The ability to tell others “who I am” is an important human spiritual need, and NFP projects and related ecologies create a good way to meet this need. The PFP NFT projects and their expanded community have not only provided users with a means of self-expression, but have also made it easier to form communities with others who share similar expressions. Also, as the community evolves, these similar people can create new forms of organization, such as decentralized autonomous organizations (DAO), to influence society outside of their community niche.
New “public blockchain” bearer: Current land-based projects such as Otherdeed, Sandbox, and Decentraland may evolve into something similar to public blockchains in the future. New NFT projects, games, and apps can operate within the ecosystems of these land-based projects.