In this article, I explore why the future of NFTS is bright and explain what a bullish case looks like.
NFTs or non-fungible tokens remind me of Bitcoin circa 2013-14. They look like weirdly overpriced JPEGs to the outsider, but those active in the community evangelize their purchases and holdings.
In 2013-4, Bitcoin looked like a weird internet currency that was difficult to buy, let alone hold. But those who bought the currency early become long-term holders or hodlers and evangelists.
In this article, I’ll explain some reasons why we’re early for NFTs, or non-fungible tokens and some ways this new asset class could succeed over the long term.
I also explore why it’s still incredibly early for those interested in getting involved in this space. In short: if you haven’t heard of NFTs, you’re not too late.
Remember, I’m not a financial advisor, and NFTs are incredibly risk. This content is for informational purposes only, so do your research.
Trading Volume is Explosive
OpenSea, the premier NFT marketplace, crossed at 10 billion in all-time trading volume in November 2021. For context, trading volume stood at one billion in August of this year, and OpenSea also exceeded its trading volume for all previous years combined in three months.
After reading this news story, I spent a few hours digging into NFT trading stats over the past few months on Dune Analytics. Traders bought and sold the bulk of NFTs on OpenSea in August, September, and October of 2021, i.e., during a mini NFT bull-run.
The rapid increase in the cost of gas or Gwei (a fee for using the Ethereum blockchain) and all-time highs for Bitcoin and Ethereum contributed to a subsequent decline in NFT trading volume. The rise of memes coins didn’t help either.
But, it’ll be interesting how quickly sales increases in 2022, once the cost of gas or Gwei drops and people lose interest in flipping shit or meme coins like DogeCoin and Shiba.
Coinbase is Launching an NFT Marketplace
Coinbase is planning on rolling out an NFT marketplace later in 2021 or 2022. CEO Brian Armstrong said:
“We are very excited about NFTs, this is going to be a very large area for crypto in the future, and it already is today. It could be as big or bigger than the company’s cryptocurrency business.”
That’s good news for mainstream adoption. Unfortunately, buying NFTs for the first time isn’t easy today. First, I transferred Ethereum from my hardware wallet to my MetaMask wallet. Then, I spent an afternoon searching for the right NFT before paying for it. Along the way, I incurred gas or Gwei fees for using the Ethereum blockchain.
I’ve followed the cryptocurrency space for a few years, so I was familiar with the process. But if you’re new to NFTs, the process can take a few hours, and that’s assuming you have an account on a cryptocurrency exchange already.
If the Coinbase NFT marketplace succeeds, it should become more accessible for end-users to click “Buy” when they see an appealing NFT. Hopefully, a Coinbase NFT marketplace also mitigates the risks of buying an NFT and subsequently losing it to a scammer.
Big Tech Is Placing Big Bets on the Metaverse
Big tech companies, and not only Facebook, are embracing the potential of Metaverse. As a result, we’ll potentially interact with each other in 3-d environments for workplaces, social connections, gaming, exercise, education, commerce, and more.
NFTs represent a tool for communicating and doing business in the Metaverse. In theory, an NFT is usable throughout the Metaverse.
Twitter also recently previewed how NFTs could work on its platform. For example, users can potentially connect a Twitter profile to a MetaMask wallet and see all their collectibles on Twitter.
According to this preview, users can verify they’re holders or hodlers of NFTs or picture-for-profiles NFTs (like the CryptoPunks) and use them for a verified profile pic. Like it or not, that’s a means of flexing online.
NFTs Have Real-World Use Cases
In Ireland, like many countries, it’s cumbersome to get a driving license. You’ll spend hours filling out paperwork, getting photographs taken, traveling to the local government office, waiting for it to arrive via post, and generally navigating administrative bureaucracy,
Lose that driving license, and you’ll go through this painful process again. But a driving license is connected to its owner. Like a non-fungible token, it’s unique and indivisible.
Similarly, if you’re the verified owner of an NFT, no one can dispute that. So in a few years, we may see everyday goods and items, like a driving license, being distributed as NFTs, via blockchain technology. This could be a fascinating, real-world use case for NFTs, that makes people’s lives easier.
Future NFTs projects may have other real-world use cases like property deeds and tickets for exclusive events.
Bluechip NFT Projects Are Only a Few Years Old
Some bluechip NFT projects have become big successes in a few short years.
CryptoPunks is one of the most popular and well-known NFT projects. You could have bought or minted one of the CryptoPunks when they first came out for a couple of hundred dollars or less in Eth.
Today, it’s all but impossible to acquire a CryptoPunk NFT unless you’re prepared to spend millions of dollars.
Many NFT projects will go to zero, and it’s a precarious investment. But if the CryptoPunks can become this successful in three short years, it’s fair to say some NFT projects emerging today could experience similar successes. Early adopters will be rewarded, assuming they don’t go broke acquiring losers.
To learn more, check out this guide to popular NFT examples.
NFTs Enable Digital Artists To Connect With Fans and Collectors
American digital artist Mike Winkelmann aka Beeple is changing the relationship between the artists, creators, collectors, and fans.
Bepple made headlines in 2021 after selling his non-fungible token, Everydays: The First 5000 Days for $69 million, via Christie’s Auction House. Then, in November, Beeple sold his Human One NFT sculpture for $29 million.
Beeple is an example of a pioneering digital artist in the NFT space. But his success demonstrates a path for emerging NFT creators who want to create digital art and experiences for fans or collectors. In this Guardian article, Trevor Jones (a regarded and successful NFT creator in his own right) says:
I look at life as pre-Beeple and post-Beeple – like the world thinks about before Jesus Christ and after. Beeple is kind of my JesusTrevor Jones
Hyperbole? Perhaps. But the success of Beeple is encouraging for many artists and creators to learn more about the space.
NFTs Will Power the Creator Economy
Spend an hour or two on OpenSea, and you’ll predominantly discover a JPEG factory of NFTs. Mostly though, the space is full of untapped opportunities for other types of creators and those working with popular media. Consider the following:
- NFTs for musicians
- NFTs for writers and authors
- NFTs for filmmakers and documentarians
- NFTs for public speakers
- NFTs for content creators
- NFTS for influencers
- NFTs for digital product creators, e.g., courses
A few notable exceptions include randomized adventure gear or Loot and audiovisual art by Deaf Beef. Still, practitioners of these other formats have yet to encounter the same types of creative success as Beeple. It’s fair to say other innovative formats and media will catch up.
NFTs also eliminate the middleman between creators and their fans. Traditionally, a creator earns once if they sell a book, album, or piece of art. They also must pay a cut to a publisher, agent, or their platform of choice.
Now, creators don’t need to earn millions to succeed with an NFT. Instead, thanks to the underlying smart contracts, they can earn residuals on the secondary market without paying an intermediary.
Learn why NFTs are valuable.
The Future of NFTS: The Final Word
Based on trading volume, investments by big tech companies, and the success of pioneering digital creators, the future of NFTs looks bright. You can get involved by learning how to create NFTs, creating content about NFTs, and exploring how other creators are succeeding with this new format.
That said, many projects will fail, and the space will experience complex teethings problems long before mainstream adoption. I’ve also published a companion article explaining why NFTs could fail and what the bearish case for NFTs looks like.