There is no denying that nonfungible tokens (NFTs) have taken a hit in recent months. Market conditions have plunged, scams and hacks are frequent, and there is an increasing number of low-quality projects, pushing many to question the value of NFTs and their place in Web3 altogether.
Over the last crypto cycle, NFT market conditions have been largely correlated to and reliant upon the general crypto market. As technology and digital assets soared in valuation, it became easier for individuals and investors to justify speculating on the nascent NFT asset class — often paying exorbitant premiums with the conviction that some tangible utility and value might be derived at a point in the future. Combined with the fact that NFTs, by nature, are relatively scarce and illiquid, it set up the perfect storm for dramatic price appreciation that fell even more dramatically back to earth.
Market conditions are also tied to developments in the ecosystem, which include rampant fraud and oversaturation in content, causing increased concern for parties already involved within the space, and hesitation for consumers and businesses that were looking to enter the space.
What is important for us to realize is that this is a natural part of the NFT space’s evolution. Over-speculation followed by reality-striking struggle is not only to be expected, but necessary for us to take action and remedy the current issues to ensure these digital assets can continue to grow and flourish.
Related: Anonymous hacker served with restraining order via NFT
Scams and hacks are, of course, harmful to projects and users participating in the NFT space. No creator should have their work duplicated and sold under someone else’s name, just as no buyer should unwittingly fall prey to a scam or theft. Projects should not need to worry that a hacker can take advantage of infrastructure vulnerabilities and steal massive sums of money. Moreover, early supporters do not need to fear that project leaders will either run out of working capital or simply abandon the product in early stages of the roadmap.
But what these security breaches do reveal is where the points of failure are in the system, allowing us to work harder towards fixing them and preventing them from happening in the future. They also prove an important point to blockchain projects: that they need to prioritize infrastructure and security partners in order to be successful in the long term and prevent future financial losses. Additionally, companies and projects need to look internally on how best to protect users. They need to leverage open-source technology and develop features of their own that help to bolster security — OpenSea and MetaMask are taking steps to do just that.
Where scams and hacks cause distrust and unease, the increasing number of low-quality projects has led to a general oversaturation in the NFT market. People are tired of hearing about NFTs that have either no artistic value or no tangible utility. In an over-crowded market, it becomes difficult to gauge which projects or collections are worth any money at all.
My view on the NFT market action today… pic.twitter.com/iDjrJeQdMt
— Peter Smith (@OneMorePeter) August 22, 2022
The silver lining here is that the market’s downturn is weeding out some of the lower-quality NFT projects. Projects will be forced to execute on their promises, pivot their strategies to remain competitive, and better cater to their audiences.
For starters, marketplaces will need to start curating artwork to ensure the highest quality pieces are not drowned out by the massive number of NFTs and duplicates being listed. They’ll also need to better align with evolving copyright and IP standards. Projects that are not purely focused on digital art will need to deliver real utility to consumers or other businesses in order to be successful in the long term. Utility can come in the form of ownership privileges, exclusive memberships, redeemable rewards, or entrance to communities of like-minded individuals.
And what’s perhaps most important is that we have only begun to touch the tip of the iceberg with respect to the full potential of and number of use cases for NFTs. This highly disruptive token standard can and will support efficient and secure digital ownership rights of valuable assets. Ticketing for events and travel, immutable forms of identification, and digital domain standards are among other exciting possibilities which also include financial products, medical records, real estate and intellectual property.
Related: Targeted phishing scam nets $438K in crypto and NFTs from hacked Beeple account
The challenges we’re facing will be overcome and will result in a healthier ecosystem of sturdy projects that reshape our lives in new and unimaginable ways. Moreover, McKinsey & Company predicted the Metaverse would likely reach a valuation of $5 trillion by 2030. Guess what the building blocks to the Web3 metaverse are? NFTs. Little surprise, then, that another study predicted the NFT market would reach $230 billion in value by 2030.
Because NFTs represent digital ownership that is both immutable and easily transferable, they will serve as digital identification or tickets for events in the Metaverse, provide proof of attendance or payment, and act as proof of ownership for games, wearables, or digital real estate. NFTs will underlie all activities in the new digital economy within the Metaverse.
NFTs are laying the foundation for the next generation of innovative products and services. As we continue to get through these growing pains of this nascent industry, one thing abundantly clear is that NFTs are here to stay.
Anthony Georgiades is a co-founder and president of Pastel Network, a Layer 1 blockchain for NFTs and Web3 technology. He’s also a general partner at Innovating Capital, a technology fund focused on disruptive companies and digital assets. He previously spent time on the investment team at First Round Capital and on the operations teams of various startups. He studied finance, management, and computer science at the University of Pennsylvania’s Wharton and engineering schools.
The opinions expressed are the author’s alone and do not necessarily reflect the views of Cointelegraph. This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice.
ShibaSwap is a DeFi platform featuring decentralized exchange (DEX) and passive income-generating services like staking, liquidity pools, and yield farming in its ecosystem.Launched in July 2021, ShibaSwap is a fork of SushiSwap, a popular DEX tweaked from Uniswap (UNI), the world's leading DEX by volume. But unlike its rivals, ShibaSwap's core purpose has been mostly…
Malta has joined France and other EU nations in revising its existing crypto regulatory policies to align with MiCA, which comes into effect in December 2024. 291 Total views 2 Total shares Malta’s Financial Services Authority (MFSA) has begun public consultation over changes in its crypto regulations in order to align with Europe’s Markets in
California’s campaign regulator has recently banned Bitcoin (BTC) from political donations, the Associated Press reports Friday, September 21.In August, the Fair Political Practices Commission (FPPC) had considered allowing donations in cryptocurrencies. The watchdog planned to discuss the use of Bitcoin and other cryptocurrencies for political contributions and discuss their adoption.The FPPC then held a vote…
Ripple issued a statement on Tuesday urging market participants to hear its side of the story amid the ongoing SEC saga. 5448 Total views 27 Total shares With XRP plunging in value following a wave of exchange delistings and trading suspensions, Ripple Labs issued a statement Tuesday vowing to respond to the United States Securities…
South Korea announced Digital Assets Committee, launched an investigation and met with Asia-Pacific financial authorities. On Friday, June 3, South Korea’s Financial Supervisory Service (FSS) began an investigation into payment gateway services that work with digital assets. The FSS is South Korea’s financial regulator that operates under the Financial Services Commission (FSC), both of which…
Blockchain development firm LiquidApps has introduced a new blockchain scalability solution for decentralized application (DApps) developers.The new service called vCPU aims to scale blockchain processing power horizontally, which provides more computing power per action than native blockchains, according to a press release shared with Cointelegraph on Oct. 14. LiquidApps states that vertical blockchain scaling creates a…
The use of blockchain to cement ownership rights for real estate and business has been ongoing since 2016, when the technology was first used to organize new forms of registries and registration of transactions. The blocks are used to record information onto the blockchain system, which can then certify the process of transfer of ownership…
Crypto lending firm BlockFi had roughly $1.2 billion in assets tied to FTX and Alameda Research when the firm filed for bankruptcy in November 2022. 297 Total views 1 Total shares Zac Prince, the CEO of bankrupt cryptocurrency lending firm BlockFi, allegedly disregarded recommendations from the company’s risk management team over lending assets to Alameda…
The developers of Dogecoin (DOGE) have denied rumors that the network is immediately switching to proof-of-stake (PoS), saying that they are merely planning to release a proposal on the topic. The repudiation came on Dec. 29, from the Twitter account of Michi Lumin, Principal Engineer for the Dogecoin Foundation.More info for ya. Influencers, even if…