Non-fungible tokens (NFTs) took the world by storm in 2021 with buyers spending millions of dollars on digital collectibles in the art, entertainment, music and sports industries. As NFTs grew in popularity, the space gained the attention of celebrities like Logan Paul, Justin Bieber and Serena Williams, catapulting digital collectibles into the mainstream. We saw a new generation of collectors, investors, and fans move away from collecting physical items like baseball cards or Beanie Babies to spending more than a million dollars on a single Bored Ape.
In January 2022, NFTs were experiencing an all-time high trading volume of US$5.8 billion. But, in just a few short months, the market would come to a screeching halt. After the collapse of Terra USD and Luna, Bitcoin’s price nose dive, and the industry-shaking meltdown of FTX, the NFT market became one of the many victims of the “Crypto Winter,” with the trading volume plummeting to US$395 million in August, a 30-month low, and traders are bracing for a further dip this month. This drastic decline is having artists, collectors and traders wondering if the industry is dying for good.
While it’s true that picture-for-profile (PFP) NFTs are not booming, the value of NFTs has evolved to transcend price, and their uses are expanding far beyond a static image in someone’s wallet.
NFTs have the ability to tokenize real-world assets and can offer exclusive physical and digital experiences for holders. We’re already seeing this concept of tokenization play out at scale.
Earlier this year, the European Commission released its Strategy for Sustainable and Circular Textiles, a new and innovative solution “to frame the future of Europe’s textiles and fashion industry with Digital Product Passports.” Digital product passports will be utilized as a tool to share details regarding the product’s environmental sustainability, including data on the product’s composition and environmental impact. By putting this measure in place, the industry will be able to better understand global sustainability goals and bolster clarity for consumers while advocating for environmentally conscious choices. This form of digital assets — while it’s not a traditional NFT — is where the future is headed.
As the business landscape of digital assets continues to expand from traditional use cases for NFTs to the tokenization of real-world assets, mainstream and luxury brands are also taking advantage of this technology. NFTs offer brands a new way to engage with consumers and provide additional real-world benefits, rewards, and experiences. ASICS, a renowned athletic shoe brand, launched a large-scale brand loyalty program on the Solana blockchain, leveraging NFT technology to excite and energize the company’s core audience. Nike, Doritos and hundreds of other brands are finding ways to leverage Web3 and NFT technology to appeal to a new generation of consumers driven not by speculation but utility.
In a rapidly evolving digital landscape, picture-for-profile NFTs still have a place, but they are not going to be the product driving mainstream adoption of Web3. Public financial interest in NFTs as we used to know them has slowed down, but the desire and creativity from brands to leverage digital assets is increasing. Loyalty programs, exclusive experience, digital content and rewards, our own digital identity and data ownership will define the next generation of NFTs and might actually be the killer use case that onboards the next billion people to Web3.