Non-fungible tokens (NFTs) were all the rage a few years ago when a handful of people made millions selling pieces of digital art. But like Beanie Babies, the wave has crested, and now the vast majority of these collectibles are virtually worthless.
To some, this is a sign that the technology itself is done for — destined for obsolescence and obscurity, like cassette tapes and rotary phones.
But a closer look at NTFs reveals a few green shoots sprouting from the ashes, and some of them show great promise in a world where digitized assets are not only still valuable but can be made more so under a tokenized ownership system.
A New Era for NFTs
We all saw the rush of Bored Ape variants, celebrity doodling, and cute kitty images that were issued as NFTs in the pre-Covid era and had traded up to million-dollar status by 2021. Well, those days are over. A recent NFT trading platform Block survey showed that over 95 percent of NFTs today are worth nothing, and nearly 80 percent of available collections are unsold.
This is why the overall NFT market, valued at more than $2 billion at the beginning of 2022, is now estimated at only about $80 million today. There is always a chance that demand will rise again, but it is hard to see the re-emergence of the kind of frenzied buying that drove the market to its initial heights just a few years ago.
However, issuing collectibles is not the only application for NFTs. While the corporate world may not have jumped on the NFT bandwagon entirely, there are several ways the technology can benefit branding and marketing efforts and give a shot in the arm to increasingly complex customer retention programs.
The events industry, for one, which stages concerts, sporting contests, exhibitions, and other productions, is looking at NFTs as a way to add value to tickets, even after the event has concluded. For one thing, an ongoing digital connection to a used ticket can help promote future events directly to the most likely buyers.
They can also provide discounts and special offers not available to the general public, and they can even be used for feedback on performances, venues, and other factors so as to refine the user experience as tours or seasons progress.
For the ticker-holder, NFTs can add value to their used ticket, perhaps helping to defray the cost of attendance either on its own or by combining it with other NFTs. Sports fans, for example, can trade their NFT stub for other rewards or sell them for digital or even traditional currency. A music fan with an NFT for a show by a little-known performer might be sitting on a goldmine a few years later if that artist suddenly shoots to the top of the charts.
Broader Potential for NFTs
This kind of extended engagement with consumers can also benefit a wide range of products and industries – everything from shoes to financial services. As our interconnected world enters the Web3 era, the potential for digitized assets of all kinds is expected to surge. Tying NFTs to smart contracts, for example, could deliver a wide range of benefits, including monetary ones, if the holders become brand ambassadors or influencers.
We can already see this taking shape in the gaming industry, where tokens, skins, and upgrades are created and traded by throngs of enthusiastic players. If the metaverse takes off, there is no limit to what can be done in an NFT-fueled virtual economy.
NFT’s Home in Blockchain
In the fast-growing world of blockchain, of course, NFTs are still critical elements to smooth transactional relationships. According to NFTCulture, tokens can be used to represent not just currencies but stocks, bonds, real estate, and other tangible assets. At the same time, they provide safer, more secure means of identity verification and can even streamline supply chains by tracking the movement of goods from source to destination.
We can expect these and other NFT applications to grow as blockchain becomes more ingrained in the business model. NFTs are also seeing greater regulatory clarity, particularly around critical issues like taxation, ownership, and intellectual property. And the technology itself is evolving rapidly, which will likely make it easier to create, transfer, and integrate NFTs with other tools to develop entirely new use cases.
As a technology, NFTs are barely out of the toddler stage. With the initial growth spurt winding down, there is every reason to look forward to a long period of advancing maturity and sophistication as it finds its place in the digital universe.
And with that universe becoming increasingly intelligent and automated, a ready means of turning both real and virtual assets into easily tradeable tokens can only help the world economy to not just build and manage wealth but distribute it more broadly and equitably as well.