NFT technology lives a fast and high-profile life. Nobody knew what NFT was two years ago. Then suddenly it was in the news and captivated many business people. By mid-2022, the technology was experiencing more ups and downs than any traditional technology would experience in a decade.
It started with digitizing art and proving ownership. This is still the case and is considered “classic use”.
It consisted of collections of images that you could use instead of your photo in your profiles. This idea went mainstream so quickly that profile picture collections aren’t a sexy trend these days. Too many collections out there, too much noise, even the psychological value gets diluted.
But you can still prove you own something cool. Combine it with a need to belong and you get the newer trend for NFT usage: proof of being part of a VIP community. The NFT Pass opens the doors to a world-class restaurant, luxury services, or an expensive resort. You need different NFTs for each business, and you still have to pay a good price for the services, and the NFTs are still expensive – but hey, you’re part of a privileged group now!
The good thing about the current state of NFT is that we are moving from digital imaginary values to real world values. And the move is fast, like everything in the blockchain/NFT space. The typical technology adoption cycle is between 10 and 20 years; for NFT it could be more like 5-6 years.
The early adopters of NFTs are well aware that the technology is still in its infancy, and they know that sometimes it’s easier to take the leap of faith and buy something rather than delving into project details and understanding what is the true value of an NFT. Many NFT owners refer to themselves as “NFT rapiers,” meaning they buy too much too quickly because it’s more fun. Fun is a big part of NFT culture, with a lot of it based on memes and internal jokes.
If you’re a gamer, you’ve probably heard of the play-to-earn concept. The pioneer in this area, a game called Axie Infinity, made a splash in the digital world. It was possible to make good money playing the game 5/8, comparable to what you would make from a “normal” day job in some countries.
A number of games followed this model and raised a lot of money in the funding rounds. Interestingly, while some games were funded by VCs, some of them were community funded where people would buy an NFT that would allow them to be more successful in the game at a later stage when the game would actually be developed.
In this context, many people who invested in NFT games were not gamers at all. They just wanted to make money. Even if the NFT games were fun to play (in most cases they aren’t), investors would only care about how much their digital property is worth in a optimistic future. The games promise high returns, much more lucrative than traditional investment vehicles.
NFT used to be a way to have fun and make money. However, the recent bearish crypto market is making it increasingly difficult to make money while the NFTs are resold at a higher price. While that’s bad for traders entering a declining market, it’s also good for the technology as people move from pure trading to useful applications. And as I mentioned before, this process is happening very quickly, so we will definitely see new NFT-based projects in the near future.
This is what the NFT evolution will look like.
The digital you
- In the past, you needed a login and password to prove you were you.
- Now you need a wallet to prove you are in the crypto space.
- Going forward, your wallet will need to have an NFT to prove you have enough privileges.
- In the past, your login and password could have been stolen (and this often happened).
- Now it’s much harder to steal your wallet. The number of successful hacks is much lower.
- In the future, the NFT would be a reliable authentication token as nobody can snatch the NFT from your wallet (although you can still sell it if you want).
- In the past, you bought an NFT for a profile picture because everyone else did.
- Now only do this if there is a larger purpose behind the NFT project, such as charity or empowerment.
- In the future, pure art NFT will be treated similarly to how classical art is treated now. The artist or the project manager defines the value of the NFT media.
- Historically, people have invested in blockchain projects (including NFTs) because they were promised an APY of 30% or more.
- Now people are investing in projects with clear and sustainable tokenomics after carefully analyzing the project details.
- Going forward, the APY promise doesn’t matter as the NFT price is only defined by the crypto market. The crypto market will grow in a similar way to traditional stock markets, with periods of bull and bear.
A good example of “healthy” NFT use is when investing and real estate are combined. You buy part of a house and get a share of the profits made by renting out that house. With the traditional ownership model, if you need to cash out urgently, you cannot do so due to the mandatory paperwork. With the NFT-based model, you simply sell your NFT at the specialist market. If the price is right, you’ll get your investment back in less than an hour.
There are three pillars of future NFT projects:
- title deed
- Financial Incentive
- Connections to the real world
Whoever manages to combine all three has a good chance of building the next big thing. The market and the public are ready.
Roman Korzh is Vice President for Development at Zfort Group. Zfort Group is a leading global software development agency specializing in complex projects and cutting-edge technologies including NFT, blockchain, artificial intelligence and machine learning. The company was founded in 2000 and has been working on blockchain projects since 2016. If you have a project idea or need help developing web/mobile apps, contact Zfort Group at email@example.com.