Beyond the NFT hype: the need to reshape the value proposition of digital art

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With cryptocurrency prices faltering this year, non-replaceable tokens (NFTs) and other investors in the sub-ecosystem are also in the throes of a bear market.

However, if we look beyond the trading value of Ether (ETH), NFTs were created primarily to represent assets and property in the real and virtual world. As a result, the bear market has reignited discussions about how NFTs can step back and focus on attending use cases as the market recovers.

Speaking to TBEN, Tony Ling, the co-founder of analytics platform NFTGo, shared insights into the NFT ecosystem and revealed the ecosystem’s expected trajectory.

coin telegraph: The rise of NFTs to mainstream popularity is often attributed to the various real-world use cases it can and has solved. What is your take on the declining NFT market? Do you think the market will recover?

Tony Ling: To answer this question, the value basis of NFTs must first be explained. Currently, the NFT market is mainly driven by four categories: art, PFP (profile pictures), land and membership. At present, PFP is the most dominant. The value base of PFP NFTs mainly consists of three parts: financial products, collectibles/luxury goods and memberships, among which financial products are currently dominant, while the derivatives model of NFTs is still at a very early stage. Therefore, as a derivative of fungible tokens (FT) with low liquidity, with the overall venting of the crypto market, NFTs will fall accordingly. This is to be expected.

However, I believe that as the crypto market picks up in 2023-2024, the value of NFTs could become several times greater than that of the larger Crypto market. The growth in value will come from at least two aspects:

First, with the development of NFTs and meta-universe related technology, NFT usage scenarios will be more abundant, and the consumption property of NFTs will grow, and this consumption property is not just for solving real-world problems. , but also about new scenarios that do not exist in the real world.

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For example, all the assets in the Otherdeed metaverse are NFTs, and these NFTs themselves will generate different economic interaction scenarios, realizing new consumption to help people better fulfill their needs and even evolve into new productivity tools and business forms.

Second, the development of various NFT derivatives, including Fragmentation NFT, NFTFI, NFT Mortgage Loans and NFT Fixed Income Products. These new financial products will enable investors to participate in NFT related investments in a more flexible format, attracting more capital, both institutional and individual investors, to this market.

CT: Despite the losses and diminished hype, many projects are still considered viable investments. What do you think is the driving force behind this trend? How important is it for NFTs to serve use cases, or are they just investors looking to make a quick buck?

TL: The driving force behind each trend is both the ‘story created by the speculator’ and the ‘true value’. Especially in the early days of an industry, a bubble is more of a response to uncertainty, and I believe it’s mostly builders like us embracing 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 very important drivers. Indeed, some of them want to make quick money, but from a capital efficiency point of view, I don’t think now is a good time to make quick money in the crypto market.

CT: What trends are still relevant from the early NFT days, regardless of price swings? And what are new trends that you think will become popular in the coming future?

TL: First of all, more and more people are paying attention to NFTs and more will undoubtedly follow in the future. Data from NFTGo shows that there are currently more than 2.96 million wallets on Ethereum that contain 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 that are out there. trade NFTs on a daily basis. Of course, this figure still has huge room for growth. Second, builders continue to build. You can see that many NFT related companies have recently acquired financing. In addition, although the market has been bearish recently, there are still successful new projects such as goblintown and Memeland in the market.

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While the various PFP projects of this past NFT summer had their own unique features, many still followed the Bored Ape Yacht Club (BAYC) paradigm. With the further development of the NFT industry, a new megatrend will undoubtedly emerge. This new trend will, I think, be the breakout of the content ecology of the metaverse. The definition of ‘content’ here is broad and games in the Metaverse can also be defined as ‘content’. As mentioned earlier, the improved consumer attributes of NFTs will help the industry recover, and the consumer attributes mean that NFTs will generate non-investment income cash flow for their holders. An important way to do this is to build “content” in the Metaverse and let the builders take ownership of the content and monetize it. The content enjoyers receive intrinsic rewards and are apparently willing to pay for them.

CT: What is your take on current investor sentiment? How do you think it affects the overall NFT market? What can NFT projects and companies do to increase engagement?

TL: Sentiment in the NFT market is cold for two main reasons: first, the price of Ether is in a volatile period and a large number of investors are in a wait and see phase; two, the PBB story and the growth pattern is nearing its end, and the recent emergence of projects has not yet set a new pattern, making it difficult to bring new expectations to the market.

The crypto industry is cyclical in nature. Personally, I recommend that you continue to explore new directions in the industry while keeping enough capital to wait for the next cycle of the crypto industry and seize the opportunity.

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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 it moves further into the mainstream?

TL: In this regard, I would like to point out three major subsets of use cases in which NFTs are well positioned to cause mainstream disruption.

New art form: Digitization is enabling richer forms of artistic expression, and the emergence of NFT and related eco-products is solving the problem of digital art ownership and better helping art makers to make a profit. As the digital world merges with the real world, the penetration of digital art into human society will widen, making it a huge new market for collectibles and luxury consumer goods.

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PBB, self-expression and new organizational forms: I think one of the main reasons for the popularity of PBB 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 the PFP NFT projects and related ecologies create a good way to meet this need. The PFP NFT projects and their extensive community have not only given users a medium for self-expression, but have also made it easier for people to form communities with others who share similar expressions. Likewise, as the community evolves, these similar people can create new forms of organizations, such as decentralized autonomous organizations (DAOs), to influence society beyond their niche community.

New “public-blockchain-like” bearer: Current land-based projects, such as Otherdeed, Sandbox, and Decentraland, could evolve into something akin to public blockchains in the future. New NFT projects, games and applications can all operate within the ecosystems of these land-based projects.