The NFT Bubble Might be Bursting–Or Is There More to It?
Non-fungible tokens or NFTs have taken the decentralized industry by storm in the last few years, with sales of more than $40 billion dollars in 2021. Verified Market Research predicts that the value of the NFT market will swell up to as high as $231 billion by 2030. But could this be true?
Although NFTs were on everyone’s lips (and blockchain wallets) last year, 2022 saw a decline in its popularity. The Wall Street Journal reports that individual NFT sales have dropped 92%, from a daily average of 225,000 to just 19,000. There are now five NFT sellers to every buyer.
To put this into perspective, Jack Dorsey’s first tweet, which fetched $2.9 million in 2021, now only garners the highest bid of around $7,000 on NFT marketplaces.
According to the Guardian, sales reached a 12-month low in June at $1 billion, although they peaked at $12.6 billion in January. The number of people who hold active NFT wallets have also dropped a whopping 88%, from 119,000 to 14,000, since September 2021.
Much of this decline has to do with the “crypto winter”, where the value of cryptocurrency dropped by 62%, from $2.7 trillion to $1 trillion last month. Now, even the strongest cryptocurrency companies are facing financial difficulties, including bankruptcies.
But how did this come to be?
What started it all was the collapse of TerraUSD, an algorithmic stablecoin, and its sister coin, LUNA, resulting in $40 billion in investor losses. Theoretically, LUNA was supposed to keep TerraUSD’s price steady and give crypto investors a peace of mind. It didn’t turn out this way in reality, which greatly hurt investors’ confidence in cryptocurrencies. From there on, we started to see a domino effect of frozen customer accounts and crypto firm bankruptcies.
This crypto bear market (a term to describe a “hibernating” economy) has also put the NFT market in a trance. The two are closely connected as NFTs rely on blockchain to track ownership of cryptocurrencies.
As the overall prices of cryptocurrencies fell by nearly 24%, we’re also seeing price cuts for even the best NFT projects. For instance, the floor price of the recently launched Solana-based Moonbirds dropped by 10% to $38,137.
But are NFTs just a bubble?
It sure does look like the NFT bubble might be bursting, but this doesn’t change the fact that NFTs have the potential to stimulate the growth of a new economy, and profoundly define and change the norms of the Internet.
How will NFTs define and change Internet norms? Among the numerous new mathematical specifications and technologies, why does the 4-year-old NFT have the most expandable commercial potential?
We also launched Traveloggers, the first NFT social media avatar to expand private ownership with collective creation, an experiment for mutually beneficial collaboration between content creators and collectors.
In the next sections, we present a brand new perspective of NFT as more than a bubble: instead, it is a new era that redefines the relationship among content owners, creators, and digital content for a fairer and freer Internet.
NFT: ownership or collection?
When it comes to NFTs, we try not to use the word “buy” but “collect” instead.
When someone purchases NFT of a certain digital content, it doesn’t mean that others can’t see the content anymore, but it means that its ownership is simply announced to everyone through the Blockchain record. The purchaser paid real money and “collected” the digital asset.
Essentially, with NFTs, you can mark the ownership but not monopolize the circulation. The asset continues to circulate and you reap the benefits in return. This is actually a business model that wasn’t easy to implement on the Internet in the past.
How traditional Internet business models fail content creators
The basic design of the Internet determines that content is published in a homogeneous data structure without a unique ID. Therefore, the entire Internet of Value is unified, like a big river. Content producers and digital artists can either:
→ let it flow for free
→ rely on the attention that flows through their own works in exchange for advertising revenue, or
→ use various disproportionate preventive tools to do some limited interception such as signing in, typing codes, prohibiting copy and paste, or setting up a paywall.
But a very simple technology can crack the interception in batches, which is why the traditional Internet mechanism can be clumsy at times.
How NFTs revolutionize traditional online business models
In a world that is designed on blockchain, marked by NFT, and operated by digital currency, it is as if the homogeneous river and sea are split into countless water bottles. These bottles can be infinitely divided into ever small bottles that you can’t see with the naked eye. But every water bottle has a description label, and you know where it comes from, where it goes, and who owns it. Any basic change creates a cascade of fundamental changes, such as a new business model based on collection.
Collecting NFTs can be compared to shopping on an e-commerce platform. But it really is more akin to naming an asteroid that you discovered through a telescope. Certain attributes of the asteroid belong to you from the time you discovered it, but the asteroid itself will always remain in the sky.
In the traditional Internet or offline world, it’s almost impossible to claim ownership, and collections are almost meaningless. Original assets, digital or not, have lost their uniqueness, and there are no costs or penalties for replicating them.
In the world of blockchain and NFT, the uniqueness of each version of the digital original bio-item is restored, but at the same time the reproducibility is retained. You can also claim exclusive ownership of digital objects. The word “ownership” itself has a new definition in the NFT world and collecting digital assets becomes more like an “identification” rather than “owning”.
Because of the emergence of a new ownership relationship between humans and digital content, there’s more room to envision new business models.
When collection (claiming ownership) and circulation (open sharing) are not contradictory, the problems that cannot be solved on the traditional Internet can be solved theoretically in the new web3 Internet. NFT revolutionizes traditional online business models by delivering diversified value returns to public goods that are difficult to sell in an exclusive manner.
A new era of ownership and collection
Let’s consider these examples in different industries that illustrate the new ways of owning and collecting assets:
The indie band “Kings of Leon” released an NFT album containing three token types, one of which provides the owner with a “lifetime front row seat” for the band’s future performances.
Perhaps the most expensive single piece of NFT sold also stemmed from entertainment purposes. The “Everydays: The First 5,000 Days” by Beeple sold for $69 million at Christie’s New York–the first live NFT auction. The digital artwork was a collection of 5,000 digital images that the artist, Mike Winkelmann, artistically known as Beeple, created everyday as part of a project called “Everydays”.
2. News media
The 42-year-old news outlet, CNN, launched Vault by CNN: Moments That Changed Us in June 2021, which will house a selection of digital collectibles from its television archives, and mint them as NFTs using blockchain technology. However, these collections won’t include the records of these important news events disappearing from the eyes of the public.
Tim Berners-Lee, the father of the Internet who invented the World Wide Web (www), auctioned 9,555 lines of www original codes written by him between 1990 and 1991 through Sotheby’s Auction House on June 23rd.
In 7 days, these NFTS sold for more than $5.4 million. Interestingly, he has always refused to apply for a patent for the invention of www so that everyone can use the World Wide Web freely, without being restricted by the rights stipulated in the patent. But in this case, he auctioned and promoted the collection of original codes.
4. Social Media
Perhaps the most well-known form of NFT are NFT avatars, which are digitally-generated images that can be used as profile pictures on social media platforms.
The most popular NFT avatars include the Cryptopunks, which sold for millions of dollars for each. Then there’s the infamous Bored Ape Yacht Club NFT collection, which features a range of bored apes in unique clothing and accessories.
If you’re looking for uniquely-innovative NFT avatars, you’ll find Traveloggers–the first NFT avatars to expand private ownership with collective creation. On Traveloggers, you can co-create with previous owners of your NFT in a logbook. You can find Traveloggers on OpenSea, the NFT marketplace.
NFTs are more than just a bubble
We say that many problems that cannot be solved on the traditional Internet can be solved after redefining and identifying ownership. This is a theory, of course. In reality, this is quite distant from our daily habits, concepts, and inertia. Changes will shake the huge vested interests of the traditional world, and they cannot be accomplished overnight.
However, changes in the underlying architecture, reflected in one application and one economic bubble, are all pieces of a bigger puzzle. As long as this is revolutionary enough to change the current world, there is no other choice but to continue to put the puzzle together.
As Marc Andreessen, a pioneer of the Internet and co-founder of Netscape and a16z, said in an interview:
“It can sometimes feel that all the exciting things have already happened, that the frontier is closed, that we’re at the end of technological history and there’s nothing left to do but maintain what already exists. This is just a failure of imagination. In fact, the opposite is true. We’re surrounded by rotting incumbents that will all need to be replaced by new technologies. Let’s get on it.”
Interested in NFTs? Our inaugural NFT collection, Traveloggers, can be found at OpenSea here.