Original title: The Current State of NFT 2023
Original author: Francesco
Original compilation: Luccy, BlockBeats
Editors note: Many people have firmly declared that NFTs are dead, but ever since Blur released its airdrop, NFTs have never been the same.
Encryption researcher Francesco conducted an in-depth analysis of the current status of NFTs, using BAYC and DeGods as examples to illustrate the many challenges NFTs face, and discussed them with support from analysis and market trends. Francesco believes that if we judge the entire industry based solely on the current wave, it is equivalent to declaring the death of cryptocurrencies during the 2018 bear market. The future of NFTs will depend on the ability of creators and platforms to evolve to provide real value and utility that goes far beyond mere speculation.
In the dynamic and often unpredictable world of digital assets, non-fungible tokens (NFTs) have been hotly debated. Once highly expected to become the next major revolution in the art and collectibles markets, NFTs have now undergone a dramatic shift in their status in the public mind.
Many people insist that NFT is dead. This article will delve into the current status of NFT and discuss it based on data analysis and market trends.
Hopefully no one here is using them as the only basis for NFT news. To me, this seems to be a sign of a bottom.
While the crypto market appears to have rebounded recently, driven by Bitcoin ETFs and expectations of the Bitcoin halving, the NFT market appears to be lagging due to the lack of strong catalysts.
Perhaps the only catalyst necessary is to ensure that NFTs are no longer dormant and will eventually return to hype.
NFT = not fun times
I mean, are NFT transaction volumes drastically reduced compared to 2022? Yes.
So are they dead? This may be a bit premature.
By definition, NFTs are on-chain and therefore will exist forever.
Anyway, you just cant kill them.
However, it would be disingenuous not to mention the fact that we are far from the glory days of NFTs. We must acknowledge the significant decline in sales and public interest over the past year.
The decline of NFTs is undeniable: high-profile NFT sales have declined during this time, and market saturation (with countless new NFT projects being deployed) has led to consumer fatigue.
What are the main issues with NFTs?
There are several core issues with the NFT downturn:
False promises of new projects: 99% of new projects in the market are deployed to chase the NFT hype. Similar to the “garbage coins” of 2018, many NFT projects are built on hype and lack substance or long-term vision, leading to their inevitable decline.
Blue-chip projects struggle to re-brand themselves as global brands: After the success of their NFT collections, some blue-chip projects are now facing the dilemma of re-branding themselves and providing value to holders.
It is not unreasonable to compare NFTs to the “garbage coin craze” of 2018. Many NFT projects lack clear purpose or utility and function more like speculative assets than sustainable digital commodities.
This leads to the creation of a bubble that, when it bursts, leaves many investors with assets worthless.
another group
Although the lines are often blurred, the NFT crowd is a different breed compared to crypto degens. They have different ethics and different reasons for getting into the field.
Generally speaking, the NFT crowd is less involved in the ideological aspects of this field and focuses more on the artistic and economic aspects.
Additionally, many scammers have discovered that NFTs have become the hype of the moment, and just like previous trends (multi-level marketing, cross-border e-commerce, etc.), they have jumped on the bandwagon.
This is also proven by countless celebrities starting to promote scams or start scams themselves to make money quickly, especially Kim Kardashian, Mayweather, Paul Logan, etc.
Therefore, the position is that we cannot consider the NFT crowd to be part of the crypto community, but rather an external subset with different reasons for participation.
Nonetheless, we must also admit that NFT has indeed empowered artists globally, which is a positive aspect.
Challenges facing blue chip projects
Even so-called “blue chip” NFT projects are facing difficulties. Once at the forefront of the NFT boom, these projects are now struggling with an uncertain future.
The challenges they face are manifold:
Uncharted Territory: Many of these projects are in uncharted territory, trying to navigate a market that is constantly evolving and whose future is difficult to predict.
Evolutionary Challenges: Evolving from a simple NFT project to something more substantial, such as integrating games or other practical features, has proven difficult. Where should the focus be?
Complexity and Decline in Interest: Some projects, such as Otherside and DeGods, made the entire process overly complex, resulting in a decrease in public interest.
We can use Bored Ape Yacht Club (BAYC) and DeGods as examples to illustrate this dilemma.
BAYC
BAYC needs no introduction, like Cryptopunks, Apes are one of the most iconic and representative NFT collectibles.
BAYC started with a collection of 10,000 boring apes.
The project then airdropped a mutant ape (MAYC) and a puppy companion to BAYC holders—essentially giving holders thousands of dollars in airdrops.
However, the airdrop strategy doesn’t always work. In fact, by launching new collectibles, you are actually diluting the total supply of the entire collection.
While BAYC was once a collection of only 10,000 NFTs, there are now 10,000 dogs and 20,000 MAYC. Additionally, each Dog and MAYC is currently airdropped with an Otherside plot (total supply exceeds 100k). Each Otherside tile now also creates shards, and dont forget the HV-MTL collectibles (there are 30,000 of them).
The post-NFT direction taken by BAYC is mainly focused on two main vertical areas:
· game
· Lifestyle (as a global lifestyle brand, such as BAPE, Supreme)
However, with this differentiation, holders need to put in more and more effort and energy to stay updated and pay attention to everything.
For example, users are expected to develop their Otherside plots through daily efforts. As a holder, Ive given up, simply because I havent been paying attention.
What was once a simple community is now evolving into an increasingly complex and fragmented ecosystem.
Additionally, the question surrounding BAYCs creation of gaming competitions is: if they expect us to only hire professional gamers to win these internal competitions, is this really community focused? What about ordinary people who don’t succeed with NFTs and have normal lives? Will they ever be excluded from any victory?
It feels like the project is moving away from its origins and neglecting its core community.
Another example is Legends of Mara, another standalone experience related to Otherside.
Additionally, users have been waiting for news about Otherside for over a year, with many eventually giving up and leaving the community.
Is it too much? When will it stop?
Expanding their cinematic universe is, on the one hand, a powerful tool for wider public engagement. However, it could also have the opposite effect, diluting the core values of BAYCs original and major collection, thereby threatening the projects community foundation.
With the project unclear on how to move forward, and with significant investment from venture capital firms (a16z invested $1 billion in BAYC), many have expressed concerns that BAYC will never go back to what it was and will eventually become Mr. Hyde, a Web2 giant.
DeGods
Its even worse for DeGods, which is largely due to the teams strategic decisions rather than the expansion of the ecosystem.
What was once one of the best and most promising projects on Solana is now synonymous with chaos and incompetence.
Heres a summary of what happened:
DeGods has released their second series of y00ts, promising a revolutionary points system, referencing Steve Jobs, and positioning themselves as the new Apple of NFTs;
After the collapse of FTX, DeGods eventually left Solana (their headquarters) and moved DeGods to Ethereum and y 00 t to Polygon (because they received a grant);
This was actually a major betrayal of the community that had supported them throughout and drove their price from 3 SOL to over 10 ETH;
This is the peak of DeGods and everyone is talking about how they are the new BAYC and how their token DUST and the company behind it will become precious in the future;
Fast forward a few months and Dust Labs isnt offering anything of value at all, and the DUST price reflects that.
DeGods has announced an aesthetic revamp: DeGods Season 3, scheduled to launch on August 9, 2023.
As part of their marketing, the DeGods employed their preferred strategy: overpromise, delay delivery, and then underdeliver.
The highly anticipated third season has driven DeGods volume to new highs.
However, things quickly turned serious.
What will season three contain?
y00ts moves back to Ethereum from Polygon (admitting a major failure, who will host their NFTs on Polygon unless they get a grant?)
DeGods art downgrade: more simplified, removing unnecessary features. However, in a twist, users had to pay 333 DUST (about $450 at the time) to downgrade their DeGods (finally giving the DUST token some utility, one might say).
In reality, however, its like saying: This is our third attempt at making DeGods art because we failed to convince our community with our previous attempts.
They also launched a “Point Parlor” where users can stake their Season 3 DeGods to earn points and win rewards and prizes.
Here are some of the prizes for Point Parlor: Sure these are nice, but Im not sure 10,000 DeGods holders would be satisfied with a few dozen good prizes.
Like many other collectibles, DeGods owners elevate their founder, Frank, into a mysterious figure with business acumen and Steve Jobs-like branding potential.
This can also be seen in the way Frank speaks of Messiah.
However, we have seen that over-reliance on god-like founders never brings any benefits.
Season three sparked a lot of debate and controversy.
What the team promised never actually materialized, leaving a huge gap between promise and execution.
As a result, they ended up losing over 50% of their value in just over a week.
Regardless, the DeGods example teaches us the importance of promising less and delivering more, rather than the other way around.
If you act like the Messiah and then fail to deliver, the tables will eventually turn. The DeGods team has shown multiple times that they are a mess when it comes to their roadmap and plans. They were artistically inconsistent and never really mapped out a long-term path forward.
Each new update touches on the artistic dynamics of the collection in some way. Additionally, they failed to fully leverage Dust Labs and DUST, which is a huge missed opportunity.
Last but not least, this was exacerbated by the behavior of their founder, who reluctantly admitted their mistakes.
While I may sound biased, Im actually not. I had high hopes for DeGods and even held some DUST, and I was personally very disappointed with what happened during the execution.
Both of these blue-chip examples show that sometimes, simplicity is the best way to go.
Complex ways often make things too complex.
NFT market
After discussing how blue-chip projects are working to create the next wave of development for their projects, let’s dive into the market data.
Is NFT trading volume declining?
Is anyone currently buying NFTs?
We do this by analyzing the Ethereum and Solana NFT markets.
Starting from the monopoly of OpenSea, the leading platform for NFTs, Ethereum has faced a series of challenges when it comes to issues and developments involving NFTs.
Markets on Ethereum are adapting to changing consumer preferences and the evolving nature of NFTs. These platforms are working hard to address accessibility, scalability, and environmental concerns.
In particular, the market has tapped into two major trends:
· From OpenSea’s monopoly to Blur’s dominance
· The Royalty vs. Non-Royalty Debate: Should users who buy and sell NFTs pay royalties to artists or the NFT marketplace? More and more markets are finally moving to royalty-free. This article provides a brief overview.
Ever since Blur announced its launch and released its airdrop, NFTs have never been the same. Many have accused the platform of unilaterally driving down the NFT market, as whales farm Blur points by offering and listing NFTs.
Currently, more than 78% of total NFT trading volume occurs on Blur, while OpenSea accounts for less than 18% of the total volume.
Still, even if its far-fetched to think that Blur is responsible for the decline of NFTs, they introduced new dynamics that affected buyers and sellers.
What about royalties?
Initially, the NFT market enforced royalties, either to compensate the artist or the team behind the NFT. This ultimately sparked an industry-wide debate involving major markets.
As shown in the chart below, March 2023 marks a critical moment when the market begins to introduce optional royalties.
Currently, just over 45% of total NFT transactions pay royalties.
So what about Solana’s NFT?
Solana has become a compelling contender in the NFT space, praised for its high transaction speeds and low costs. Solana-based NFT projects offer an alternative to Ethereums high gas fees, but they also face the general challenge of maintaining relevance and public interest.
Particularly over the past few weeks, with the most-hated Solana skyrocketing to $60, there has been an increase in on-chain NFT activity, particularly an increase in transaction volume from Ethereum and Arbitrum to Solana.
As is clear from the chart above, Solana’s daily trading volume has been rising since early November 2023.
But more than that, NFT trading volume and active traders have grown by 300% since September.
But is this the only trend for Solana?
The Current State of NFTs
NFT numbers are increasing across the board.
In fact, the NFT space has experienced a small resurgence in transaction volume since October.
Of course, if we consider this jump in a larger context, more arguments are needed to explain whether NFTs have returned. Nonetheless, we can observe that sales are slowly returning from oblivion, and at the same time, buyers and sellers are also returning (probably happy to see the NFT they once owned during the bull market, that thing that is now almost worthless, Now there is some demand).
Here are last week’s top NFT sales:
Here are the top 11 NFT collectibles ranked by sales volume (surviv 000 rs):
Interestingly, Mad Lads (from Solana) came to prominence and are now worth over 4 ETH (170 SOL).
Last but not least, we are finally seeing some big bids again (perhaps from some guys making money off memecoins?).
More original technology: NFT perpetual contract
Another very important development that will drive the next step (if any) of NFT development is the development of more original NFT-based technologies. In 2021, there is almost nothing you can do with your NFTs. Things are about to change with the development of new raw technologies, like NFTperp V2, which allows users to go long or short on their favorite NFTs.
Related Reading:How to make NFT liquid and tradable through NFTperp V2》
Provoke thinking
The world of NFTs is facing a choice. While the current state may seem bleak, the potential for innovation and adaptation remains.
The future of NFTs will depend on the ability of creators and platforms to evolve to provide real value and utility that goes far beyond mere speculation. Whether NFTs will make a triumphant comeback or fade into the background of digital history is a question only time will answer.
In particular, we expect the most successful companies to ultimately emerge from the PFP collection with a clear path forward.
Although we live in a 3-year bear market, the size of the NFT market is expected to expand at an average rate of 30% between 2023 and 2030.
In particular, the next wave of developments will have the opportunity to decentralize the industry geographically, as the United States (which also includes Canada and Mexico) currently accounts for more than 30% of total revenue.
Another foreseeable trend in the future is that more and more NFTs will be designed for commercial use, not just personal use.
Judging the entire industry based on this initial wave is the equivalent of declaring the death of cryptocurrencies during the 2018 bear market.
We all know what that is about.
Unfortunately, due to the scope of this article, I cannot focus on touching on Ordinals and xNFTs, two very interesting developments in the space, especially given the recent volume increase in Bitcoin NFTs.
