Not too long ago, an image like this AI-generated image would have been worth thousands purely because of the NFT hype.
Non-fungible tokens, or NFTs, have garnered much attention in recent years as a way to authenticate and sell digital art and other digital assets. While NFTs have the potential to revolutionise the way we think about ownership and authenticity in the digital world, there is also a case to be made that NFTs are a solution looking for a problem.
One of the main criticisms of NFTs is that they do not solve any problems that cannot already be solved through other means. For example, cryptographic signatures and watermarked images can already authenticate digital art. Using NFTs adds an extra layer of complexity and cost to the process without necessarily providing any additional benefits. Generally, when you buy expensive artwork, you'll receive a certificate and have the art to prove you own it. We survived for years without NFTs, and to my knowledge, they haven't improved, proving ownership of a house or artwork.
Another issue with NFTs is that they rely on blockchains like Ethereum, which can be slow and expensive. This makes it difficult for artists and collectors to buy and sell NFTs efficiently and can make creating and minting NFTs cost-prohibitive for many artists.
Additionally, the hype around NFTs has led to a proliferation of low-quality or unoriginal works sold as NFTs, diluting the value of the market as a whole. This has led to concerns about the sustainability of the NFT market, as it is unclear whether the demand for NFTs will continue to grow or is simply a fad.
Speaking of which, I have a bargain for you. Here is a Beggarspunk NFT you can own for the affordable price of $2.5 million.
You can pay me in Hive tokens, so don't stress about having to use fiat.
With the crypto winter we have been plunged into. It's hard to get a read on the cryptocurrency market overall. Did NFTs die, or did the market downturn affect them more than other facets of crypto? The only way we might get the answer to this question is when the market rebounds. Although the fall in NFT prices we have seen paints quite a bleak portrait of NFT sentiment and values.
I think it's a safe assumption that NFT digital art and collectables have been given a much-needed reality check. Look at this trading volume chart until September 2022.
As you can see, trading volumes fell an eye-watering 97% from their record high in January 2022. You will agree that a 97% drop isn't just a market correction. It's a market reset. It's a catastrophic change in a once-thriving ecosystem.
While the fundamentals of NFTs are hard to argue against because, from a technical perspective, they have a purpose. I believe that the future of NFTs is not digital art and collectables. I don't think NFTs will disappear, but the days of record multi-million dollar sales for pixel art are probably behind us, which is a good thing. There are still concerns about effectiveness and fees, but non-Ethereum blockchains have already solved some of those problems.