Executive Summary

NFT sales amounted to US$18.5 billion in 2021 — a 570-fold increase from 2020 as avatars and digital art gained in popularity and organizations such as the NBA issued NFT collections that attracted an overwhelming response, data from NFT industry data aggregator CryptoSlam showed.

With sales holding above US$2.5 billion in recent months and reaching as high as US$4.5 billion in January 2022, the market for new NFTs will likely surpass US$30 billion this year. “There’s over 3 million people on Coinbase’s waiting list so if the number of NFTs collectors doubles or triples this year we could see a steady rise of at least 50-75% of the current volumes,” CryptoSlam Chief Marketing Officer Yohann Calpu predicts.

Several developments will help drive the growth of NFTs from niche to mainstream in coming years.

NFTs are becoming prime uses for identities in the form of avatars. Much like passports connect individuals to a country, avatars represent memberships in communities such as the Bored Ape Yacht Club and Azuki.

Alternative blockchains optimized for gaming, digital art and other purposes are taking transactions away from Ethereum, decongesting the network and making it easier for people to get onboard.

Facebook’s move to change its corporate name to Meta in October 2021 increased public interest in the metaverse and the related technologies.

New case uses for NFTs have also emerged, which will help grow the market in coming years.

For instance, several universities and governments have started issuing NFTs to counter fraud and forgery, while experts have proposed using NFTs as vaccine certifications.

NFTs are becoming prime uses for identities in the form of avatars. Much like passports connect individuals to a country, avatars represent memberships in communities such as the Bored Ape Yacht Club and Azuki.

In Japan, banking giant Mitsubishi UFJ Financial Group has introduced a utility token to replace physical coupons and cards. MUFG’s NFT provides discounts and other benefits to shareholders and can be used to support customers.

Some companies have begun accepting NFTs as collateral for loans and derivatives deals, indicating that digital art and collectibles have found acceptance as stores of value that can be monetized when needed.

Helen Hai, head of NFT and fan token at Binance, believes traditional markets such as music, ticketing and entertainment will look to NFTs as a means of increasing revenue and improving customer experience.

Of particular interest is revenue participation via smart contracts that involve all parts of a value chain, benefitting composers, artists, musicians, producers and even collectors.

But while there are many opportunities in the NFT space, the industry needs to address concerns about speculative bubbles as well as the negative impact on the environment.

CryptoSlam’s Calpu believes the NFT industry will be able to address the various concerns and realize its potential.

“There will be challenges, including scams, fakes, forgeries, and of course bubbles. But at the end of the day, NFTs are facilitating human needs for ownership, belonging and uniqueness and that is not going away,” he said.