In 1848, gold was found on the West Coast of North America, bringing hundreds of thousands of people to places like California, Portland, British Columbia, and the Yukon. People came from as far away as China, Australia, and Europe in the hopes of striking it rich. The influx of gold into the economy created significant industrial development, and while the gold rush had both positive and negative impacts, one thing cannot be debated: it helped shape western North America into what it is today.
Today we are seeing the tail end of the NFT gold rush, which is shaping the digital landscape. Last year went down in history as the year of the NFT. They have captured the imagination of anyone with an internet connection and an opinion. In the past two years, we have seen a flurry of activity in connection or related to NFTs and blockchain technology. From record-breaking and jaw-dropping digital art sales to the hype surrounding seemingly ordinary things, i.e., trading cards, tweets, collectables and gaming items. There is little doubt NFTs have had a significant cultural and technological impact.
The sudden rise in popularity was a surprise, even for many early adopters. Beeple's sale kicked off this domino effect of people becoming interested and then seeing that there was real value behind these things.
But the digital art world isn't new. It's been around for some time, and NFTs are just a new way to collect, own, and trade these pieces. While the concept may be new to some, it is not entirely alien. The difference now is that there is a way to monetize these creations in a way that wasn't possible before.
Speculative Assets Turn to Gold
By far, the most preferred use case for NFTs has been in the form of speculative assets. These digital items are bought and sold with the hopes that their value will appreciate over time. The most common examples are in-game items, virtual land, and digital art.
People are willing to speculate on these assets because they offer a level of rarity and uniqueness not found in the physical world. For example, there is only one Beeple art piece, and even if someone makes a replica, there'll never be another artwork entry in the blockchain. It's definitely a very attractive investment for those looking to get in on the ground floor of something with the potential to grow exponentially.
Athletes, celebrities and corporate brands are seeing the potential of NFTs. The NBA has its official digital collectible platform "Top Shot," model and actress Emily Ratajkowski sold an NFT of herself for $140,000, and Gucci has this project called "Grail," which is a personalized collection of NFTs related to the brand's products, just a few examples.
But like all things related to investing, a certain level of risk is involved. The value of these assets is entirely dependent on the demand, which can be fickle and ever-changing. What's hot today might not be worth anything tomorrow.
Well, it's also when we get to truly see the resilience of NFTs as an industry. Nothing lasts forever, and we have gradually seen a decline in the hype surrounding NFTs. The question is whether the industry can weather this storm and continue to grow or if it will fade away like so many other things that have come before it?
When Iranian entrepreneur Sina Estavi tried to auction off Jack Dorsey's first tweet early this year for a whopping price of $2.9 million, a few people thought it was misguided. After all, there will always be one "first-ever" tweet in history, right? It means the digital collectible is unique and, therefore, highly valued. But when Estavi tried to resell it, the top bid was just $6,800. Unsurprisingly, he decided to pull it out.
What does this all mean? That NFTs are in a serious decline. Hardly. The industry is still in its early stages, with much more room for growth and areas of opportunity. The truth is the end of the gold rush could very well usher in a new and more sustainable era for NFTs. And since the hype has died down, we are seeing more projects using NFTs for their intended purpose - to create unique and valuable practical solutions.
Thriving NFT Projects Prove Legitimacy
Even with the NFT gold rush closing, the fact that many NFT projects are thriving is a testament that the industry has legs. The Bored Ape Yacht Club managed to rake in a total of $1 billion in sales since its launch last year.
And in February, NBA Top Shot had a record-breaking week with $30 million worth of sales. Meanwhile, CryptoPunks' Human Punks continue to attract investors and collectors with over 10,000 collectibles.
Remember that many successful NFT projects came from scratch without solid industry backing. It just shows that legitimacy is no longer an issue for NFTs. Everyone has an equal opportunity to make money.
And we're also seeing platforms like OpenSea that use NFTs to create unique gaming experiences. The platform enables its members to buy, sell, and trade in-game items stored on the Ethereum blockchain. This means the items you acquire in your favourite game can have value outside the game itself.
Where Do We Go From Here?
As much as we love the thought of the gold rush and prices endlessly going up, it's not sustainable in the long run. No longer blinded by dollar signs, we're hoping the average person will finally be able to use – and see – the different utilities of NFTs.
Right now, the industry is catering to a niche group of people willing to speculate on digital assets. Digital collectables will always be a main use for NFTs, but if more people are going to adopt NFTs into their lives, we must find ways to make them more accessible and useful for everyday people. Thankfully, we're already seeing projects that are using NFTs in new and creative ways.
More projects are using NFTs for practical, real-world applications, not just digital artwork. We've already seen a real estate property minted as an NFT and sold in the real world and Ethereum Name Service domains can be purchased using Non-fungible tokens. NFTs have many benefits. One of the main ones, of course, is they are easily traceable on the blockchain. So how could you use this technology? Some other real-world uses of NFTs could be securing medical records without compromising confidentiality, speeding up real estate transactions, or even solving supply chain issues. This is just the beginning, and we can only imagine the possibilities of this technology. Now that the get-rich-quick creators have moved on, it’s time the industry focuses on what NFTs can do for society. From here on out, it'll be exciting to see how NFTs will shape the digital world and the entirety of our lives.