NFTs entered the market with a grand explosion, generating absurd amounts of hype and completely taking over social media. But a combination of factors, including oversaturation and general pessimism sprouting from the COVID-19 pandemic, caused the popularity of NFTs to tank. As a result, the potential of NFTs seems uncertain.
But where do we go from here? And can we expect that initial boom of popularity to eventually return?
The Novelty and Explosive Popularity of NFTs
Non-fungible tokens, or NFTs, exploded onto the scene in the late 2010s and early 2020s, emerging as a niche hobby and eventually finding their way onto the social media news feeds of hundreds of millions of people. Similar to cryptocurrencies, NFTs rely on blockchain technology to facilitate, track, and legitimize various transactions.
However, NFTs are not simply a different type of cryptocurrency. Unlike cryptocurrencies, NFTs are indivisible at a certain level and are not designed to function like currency. Additionally, each unit of an NFT is designed to be unique and non-replicable, making individual units hot collectors’ items. Broadly speaking, these units represent ownership of a good or commodity, often a digital commodity like a piece of digital artwork. It’s even possible to use an NFT marketplace to buy and sell NFTs – which has led to some impressively lucrative transactions.
Bored Ape and Cryptopunk were among some of the earliest popular movers in the NFT space. Unique games like CryptoKitties also saw a major surge in popularity. And entrepreneurs and innovators all over the world began to speculate about how they could use NFTs to create new, dynamic experiences and more valuable products and services for the general population.
There were several factors that increased the potential of NFTs and motivated its massive wave of popularity that the NFT world saw in the early 2020s.
Crypto Hype
NFTs entered the market riding the proverbial coattails of mainstream cryptocurrencies. Just a few years before NFTs entered the modern lexicon, investors saw cryptocurrencies like Bitcoin and Ethereum explode in growth. Countless people became overnight millionaires, and countless more wondered if investing in an NFT would bring them similar fortune. Blockchain was all the rage, and any new product or service attached to the blockchain saw instantly higher popularity as a result.
Novel Art
NFTs were most frequently associated with digital artwork in the early days. This was a novel and inventive form of expression and participation in the art community, bringing attention to new mediums and methods of collection that were never before considered. As a result, millions of people who didn’t take cryptocurrency seriously suddenly began to appreciate the intrinsic value of blockchain-based transactions.
Celebrity Endorsements
There were also many endorsements from celebrities, business owners, and spokespeople who helped to legitimize NFTs and build public trust. It was a fashionable and trendy topic that millions of people wanted to be part of.
FOMO
Along similar lines, fear of missing out (FOMO) was circulating. With NFT creators and investors proclaiming these tokens to be a gateway to wealth accumulation, some people bought NFTs simply because they were afraid of missing out on that potential upside, as they may have with more conventional cryptocurrencies.
Support from Digital Spaces
Many people slightly overestimated the impact NFTs would have because of the rise and apparent value of digital spaces like the metaverse. With the world becoming increasingly digital, it wasn’t an irrational conclusion.
Initial Growth
Adding to all these factors was the initial growth curve of NFTs in general. While we can’t track the price or value of NFTs broadly like we can with cryptocurrencies like Bitcoin, we can acknowledge NFT sales in the millions, and even tens of millions of dollars during its peak popularity. With such high stakes, people assumed there must be something to this new technology product.
What Happened to NFTs?
NFTs certainly aren’t dead, as some have suggested, but they have suffered from a significant decline in popularity and visibility.
These are just some of the reasons why:
Oversaturation
Ironically, one of the main problems associated with NFTs was their own popularity. For a time, it seemed like everyone on social media was talking about NFTs. Every company and individual influencer with an online presence was either promoting an NFT they created or talking about NFTs generally, for better or worse. The supply greatly exceeded the demand, and the topic became annoying to millions of people who weren’t especially interested in it in the first place. The combination of these unfortunate variables meant that the market became oversaturated quickly – and lots of people began to grow resentful of this novel technology.
The decline of digital spaces.
It didn’t help that digital spaces like the metaverse began to decline about as quickly as they arose. Despite being heralded as the future of communication and socialization, many people declined to participate in this new, immersive technological landscape. It certainly didn’t end the digital age, but it made technologies like NFTs less appealing in some ways.
Crypto Woes
Cryptocurrencies have been on a roller coaster since their inception. On any given day, you can find people promoting cryptocurrencies as the future of our monetary system or as a temporary fad with no real value. More broadly, the first cryptocurrency boom of the late 2010s practically imploded, with less hype circulating even among the most passionate investors. Because cryptocurrencies and NFTs are so similar, it was only natural that NFTs would suffer a similar decline.
Copyright Problems
Many NFT creators also ran into issues regarding copyright laws and copyright infringement. While sound in theory, the infrastructure provided by NFTs opened the door to replication of digital artwork and confusion about ownership rights. This gray legal area still hasn’t been fully sorted out, so many would-be NFT creators and investors are holding off until there’s a bit more certainty in official ownership structures.
Ethical Concerns
Some people have also raised ethical concerns about NFTs. Most notably, they’ve pointed out that NFTs consume a great deal of energy. This criticism is legitimate; managing blockchains means utilizing enormous computing power, which consumes a great deal of energy and therefore impacts the environment. Already, NFT innovators are finding ways to greatly reduce energy consumption associated with NFTs, so this may not remain a problem for long.
Hype Reversal
As a result of these factors and others, there was a nearly sudden reversal of hype, with millions of people loudly proclaiming their disdain for NFTs – and many digital artists abandoning the space altogether. Just as popularity begets popularity, unpopularity begets unpopularity, and NFTs began to dig a hole that they have yet to crawl out of. That said, many reasons for the reverse hype surrounding NFTs are no longer active or relevant – which means a new wave of hype could be just around the corner.
The Potential of NFTs
Overall, NFTs have been both celebrated and mocked. But no matter how you feel about them, there’s no denying that NFTs do serve an interesting purpose and have incredible potential for managing ownership rights in a variety of contexts. After solving a handful of key problems and overcoming current limitations, NFTs could easily see a resurgence in popularity – but only time will tell for sure.
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