It is hardly a debate that the phrase ‘non-fungible token’ wins it as 2021’s buzzword – at least a tie with ‘metaverse’ and ‘web 3.0’ If you haven’t come across it, it is safe to say you barely lurk through the internet.
NFTs have had their biggest year, yet, in 2021 – four years after making their entry into the blockchain scene. A look at the sales, trading volume, and even adoption rate figures shows that these digital items have become more desirable over the last dozen months.
With about a week to go, it is time to reflect on the year NFTs have had and what we can expect for them in 2022.
NFTs aren’t a fad
There have been concerns around NFTs, particularly if they are but a passing cloud, but it is pretty evident by now that these tokens are here to stay – at least in 2022.
Though the hype around them waned a couple of times this year, there is no doubt interest in them remained high. The NFT sector attracted some of the biggest brands around the world, including media outlets, social media platforms, sports leagues and teams, music and entertainment companies, fashion houses – the list goes on.
Prominent persons from award-winning artists to TV personalities to iconic athletes also got into the mix. With more popular names and institutions still looking to get a piece of the NFT cake, it doesn’t seem like these virtual items are losing any ground soon. The record figures being posted on NFT marketplaces also speak to the value of these artworks. Further, the rising popularity underpins the surging interest of netizens in digital art and memorabilia.
The industry will mature, and NFTs will be more about utility
Beyond the skepticism on the sustainability of NFTs lies the sixty-four million dollar question, ‘Where are NFTs headed?’ The answer is pretty much simple – they are headed for maturity and more collective presence.
A few months ago, social media company Facebook announced its interest in creating a metaverse. Many may not have wrapped their heads around the metaverse quite yet, but this is understandable considering the term only became prevalent this quarter. NFTs so happen to be a crucial underlying element of the metaverse.
This implies that as the concept of metaverse continues to take root, so will these virtual tokens as they’ll get more mainstream thanks to applications like video games and Web3.0. Sure, this is an existing use case, but the next couple of months will see NFTs morph from a subject in daily conversations to a generally-accepted bridge between entertainment, art and technology.
Environmental concerns will push more NFT creators to energy-efficient options
The blockchain technology behind NFTs has come under heavy criticism, with many finding flaws with its carbon footprint. The Ethereum blockchain, which hosts most of these tokens, has been censured because of its high energy consumption.
This can, however, be viewed as a transitory problem as the upcoming Ethereum upgrade promises to fix this issue. Notwithstanding, a solution that most creators will opt for is eco-friendly platforms. We have already seen NFT companies and creators base their work on better blockchains like Tezos and Polygon. Though the latter is technically built on top of Ethereum, it adopts a much more efficient system in terms of energy consumption.
Unique rewards for NFT holders
This is not exactly new in the NFT scene. We have already seen NFT creators offer holders of their digital arts or collectibles rewards on account of being part of their community. Industry experts believe that more reward systems will come up in 2022, with rewards offered getting bigger.
At present, owners of some NFTs in the music or entertainment sub-niches can enjoy unique perks like one-on-one interactions with artists and similar real-life engagements. This will be amplified in the new year as more creators will look to interact with their communities. The perks cut across as artists will also be able to benefit through fan funding from holders of their NFTs.
More celebrities will flock into NFTs to either sell or buy
There are already innumerable celebrities in NFTs in 2021, and this trend is expected to go on next year. Prominent persons in NFTs can be grouped into three categories. The first, those looking to purchase digital collectibles, those intending to sell their NFT projects, and those that fall on both sides – having launched their collections and still purchased some tokens. The second and third groups typically partner with creators or NFT-invested companies to mint NFTs and put them up for sale.
Some renowned people who own NFTs include Jimmy Fallon, Stephen Curry, Post Malone, and Shaquille O’Neal. The second group features names like The Weeknd, Tom Brady, Simon Biles, Wayne Gretzky (all three using the Autograph platform) and even Melanie Trump, who recently announced her NFT collection. Mark Cuban, Rich the Kid, Steve Aoki, Timbaland, Lil Baby, Mike Shinoda and The Chainsmokers are invested in NFT in both ways.
The future of NFT is not cast in stone – they could enter the decline phase
Despite NFT evangelists’ belief in the future of NFTs, there is a possibility that they could altogether see a crash. The cryptocurrency sector has witnessed occasional tumbles in the face of its huge potential and valuation. Several factors in and around its ecosystem have repeatedly forced the market to crash.
The NFT space is neither an exception nor invulnerable to such plunges. Perhaps, the most important point is for the NFT community to brace for such an outcome and be equipped to survive bear cycles. In such an outcome, some projects may become doomed or unfeasible. For this reason, NFT creators should also be prepared to revive the sector in the event of such an eventuality.
Will 2022 be better for the NFT industry?
There are strong signs that next year will be a good year for the NFT community. For starters, traditional auction houses like Christie’s and Sotheby’s have now fully embraced NFTs – a pointer of their belief in these digital assets. The concept of the metaverse, although still nascent, is another major boost.
There are also many reputable brands that have either made their way or are making their way into NFTs. Combined, these and other promising factors form the basis of a positive forecast, i.e., an even bigger NFT run next year. That said, unforeseen factors could shift the winds and dim the future of these tokens.