NFT: current stumbling blocks and challenges may lead to its democratization
In 2021 the NFT industry was a complete bomb, capturing the attention of the entire world as a rising wave of the next great revolution of internet commerce, but little by little it has begun to decline.
This article was translated from our Spanish edition.
Opinions expressed by Entrepreneur contributors are their own.
Surely at this point you will have at least heard the term NFT , but before analyzing what has been happening and the future that this industry could have, it is worth reviewing what it is about as an introduction for those who for the first time. they are reporting on it.
NFTs (non-fungible tokens in Spanish) are basically a digital asset that guarantees authenticity and ownership to its original owner thanks to blockchain technology and smart contracts. Despite being digital pieces that can possibly be copied —images, GIFs, videos, digital arts, virtual houses, among many other digital assets that are marketed—, it is important to note that each NFT is a unique and unrepeatable object, so that each piece has only one certified original owner (that owner can be an individual, a consortium or an investment group).
High prices limited the interest of a wider public and caught the attention of hackers
Commonly traded through the Ethereum cryptocurrency, $40.9 billion worth of NTFs were invested by investors and fans of digital art in 2021. Artists, celebrities, soccer players from the major leagues in Europe, and anonymous millionaires, carried out numerous transactions for this type of piece, setting off the alarm of the most skeptical due to the high prices that were being paid for this type of piece.
With records of up to US$69.3 million for an NFT , alarm bells began to sound. Critics began to speculate about a dangerous industry that could collapse at any moment and, although this has not happened, the slowdown has begun to be felt in the market, while the interest of the general public begins to be considerably reduced due to the high cost of NFTs, something that has caused the industry to be seen as a sector that only wealthy people can access.
Many have argued that it doesn't make sense to pay big bucks for a JPEG with metadata that looks like any other image you can find on the web, something that has been heavily debated because of the value that collectors and enthusiasts place on these pieces that combine the best of art with modern technology. The truth of the matter is that the high cost of these pieces also ended up attracting the attention of hackers, who have tried in various ways to violate the security of NFTs and steal works from their original owners, which translates into millionaire losses. OpenSea, a benchmark platform for buying and selling NFTs, recently suffered a phishing attack that ended in hundreds of stolen pieces valued at $1.7 million dollars, while Axie Infinity, a game that involves NFTs and is quite popular in Latin America, $625 million dollars was stolen by hackers who took advantage of a security breach.
The fall in prices
Were NFT Skeptics Right? At the moment we can assure you that this industry has not suffered a dramatic collapse, however, little by little the number of transactions and the value of the works have begun to decrease.
While in January the average selling price of an NFT was above $6,800, at the end of the first quarter the figure was below $2,000, according to market tracker NonFungible . During the first months of the year, accumulated daily sales also fell from $160 million to $26 million, entering a volatility that is certainly not a good sign for investors.
Furthermore, a recent report indicates that only 1% of NFTs were traded for more than $1,500, while 75% were sold for less than $15.
For many the situation is worrying, especially those who have invested large sums of money in NFTs, but in my opinion the industry has begun to move towards the equilibrium point that it must reach before becoming a new global market, affordable and present in practically any application or internet platform.
NFT continues to be a fundamental part of the future of the web
The democratization of NFTs is just around the corner. With the arrival of Web3 and the constant efforts of giants like Meta, which has announced plans so that creators can market NFT objects on their different platforms, in a few years we could be talking about these types of pieces in our day to day, opening gave way to a market of millions of users willing to pay reasonable prices to acquire things like clothes for their avatars, virtual objects, accessories in games, and anything else you can imagine.
So, what some see as the potential collapse of the industry may actually lead to the democratization of a market with potential, although the current methods based on blockchain and cryptocurrencies will possibly evolve to this end.
(About the author: Sergio Ramos Montoya is an editor at Social Geek )