NFTs Growing Despite Market Woes
|By Jurica Dujmovic
Earlier this week we learned that the U.S. GDP dropped yet again in the second quarter. That's two in a row — generally seen as a sign of recession.
While there's some debate about whether we're currently in a recession or headed toward one, there's no denying that asset prices have been dropping.
One sector we don't talk about as often — non-fungible tokens — is no exception. The volume of daily NFT sales is at the lowest level since January, and many wonder whether the end of the NFT dream is near.
In this environment, you're likely to hear talking heads brush off NFTs as the latest fad and presume they'll bite the dust before the next bull market runs.
Don't listen to them.
These are the same naysayers who continuously claim that Bitcoin's (BTC, Tech/Adoption Grade "A-") death is "just around the corner," as well.
Since BTC's inception, 461 such "obituaries" have been made, with many more to follow as markets soar and plummet during their usual bear and bull cycles.
Obviously, they're wrong about the No. 1 crypto by market cap.
And they're wrong about NFTs as well. Mainly because NFTs have reached a maturation threshold.
See, the NFT market kicked off with a bang. The initial hype generated by profile picture NFTs — like Bored Ape and CryptoPunks — fueled unsustainable growth. These projects were interesting to investors, traders and collectors alike due to their insane valuation and surge in pricing.
However, as it happens in economic downturns and the bear markets that follow, investors realized that putting their money elsewhere was a more viable option toward growing their wealth in more challenging markets.
The impulse was reflected in +80% decline in daily sales volume since January 2022 and was a clear signal that things needed to change.
And change they have.
Both NFT marketplaces and NFTs themselves have matured and proliferated. NFTs, in particular, went through a gradual yet substantial change by becoming much more than yet another collector's item or a piece of art.
A good example of this evolution is what Ted Leonsis, the owner of the Washington Wizards basketball team, has in store for the existing NBA Top Shot NFT series.
Currently, you can buy NBA NFTs featuring various highlights from plays and players, but Leonsis plans to expand the usefulness of these digital collectibles by providing the owners with tickets to upcoming matches. For example, you can not only buy a memento commemorating the greatest moments of your favorite team, but also get a seat for its next game.
This approach is known as token gating: Using an NFT token to provide owners with access to an exclusive set of benefits, be it a product, discount, service or more.
That's possible because NFTs are essentially smart contracts aimed at proving ownership. And due to their flexibility and programmability, they can be automated and customized for different use cases.
Another common feature of NFTs is to assign royalties to the issuer every time the NFT changes hands. This is a smart way to incentivize continued creativity and growth in the space as creators get income even after the initial sale.
It's not just retail. Governments are also embracing the technology.
According to the article from Yahoo Finance, "The High Court of England and Wales has allowed Fabrizio D'Aloia, the founder of [the] Italy-based online gambling company Microgame, to file a lawsuit against anonymous people through an NFT drop."
Basically, by using their wallet addresses, D'Aloia is able to file a suit against the holders of two wallets that defrauded him. The blockchain will confirm receipt of the legal documents, in the form of NFTs, by those wallets.
That's the beauty of an open-source code.
The importance of this ruling is best highlighted by Joanna Bailey, an associate lawyer from Giambrone Law who worked on the case:
"This ... shows the court's willingness to adapt to new technologies, embrace the blockchain and actually step in to help consumers where previous legislation and regulators simply could not do that."
A similar move was also taken by the U.S. court in June.
These methods of informing potential lawsuit participants are incredibly useful in scenarios where individual's whereabouts are unknown and only a digital wallet related to the lawsuit in question exists.
NFTs are evolving and becoming an integral part of the fiat world. While the current market conditions are bearish and might present a challenge for the industry in the short term, these technologies are here to stay in the long run.
If you're worried about the future of NFTs, don't be. The industry is just getting started.
And if you're looking to gain more exposure to NFTs, you may want to look into my colleague Joel Kruger's NFT Wealth Builder service.
You can read up on it here, or call our team at 855-278-9191 for more information.