Does the NFT Craze Actually Matter?

Reflecting on the Week: NFTs and Their Significance

Greetings, and welcome once again to Week in Review! Last time, our focus was on Apple's increasing reliance on subscription models.

This week, we're undertaking a thorough examination of the 2021 NFT boom, and attempting to discern if any lasting value or significance can be extracted from it.

For those accessing this article directly on TechCrunch, consider subscribing to the newsletter for regular updates. You can also follow my insights on Twitter @lucasmtny.

Understanding the NFT Phenomenon

The year 2021 witnessed an unprecedented surge in the popularity of Non-Fungible Tokens (NFTs). Digital assets were traded for substantial sums, capturing widespread attention.

However, a critical question remains: was this a fleeting trend, or does it represent a fundamental shift in how we perceive ownership and value in the digital realm?

Analyzing the Core Value Proposition

At its heart, an NFT provides a verifiable record of ownership for a unique digital item. This could encompass artwork, music, collectibles, or even virtual real estate.

The technology underpinning NFTs – blockchain – ensures transparency and immutability, theoretically guaranteeing the authenticity and provenance of these assets.

Examining the Market Dynamics of 2021

The NFT market in 2021 was characterized by speculative trading and rapid price fluctuations. Many projects experienced exponential growth, followed by significant corrections.

This volatility raises concerns about the long-term sustainability of the market and the potential for financial risk for investors.

Potential Applications Beyond Speculation

Despite the speculative frenzy, NFTs possess potential applications extending beyond simple collectibles. They could revolutionize areas like digital identity, supply chain management, and intellectual property rights.

For example, NFTs could be used to create secure and verifiable digital credentials, or to track the origin and authenticity of goods.

The Future Outlook for NFTs

Determining the ultimate legacy of the 2021 NFT craze requires careful consideration. While the initial hype has subsided, the underlying technology continues to evolve.

Whether NFTs will become a mainstream component of the digital economy remains to be seen, but their potential impact warrants continued observation and analysis.

The Enigmatic NFT Landscape

The non-fungible token (NFT) market continues to present an anomaly, defying conventional expectations. However, a central question arises amidst the ongoing multi-million dollar sales of digital assets: does this phenomenon truly hold significance?

Over the past year, I’ve extensively analyzed the NFT market, often finding myself deeply engrossed in its dynamics. Despite not personally participating in buying or trading these digital items, I’ve dedicated considerable time to monitoring price fluctuations and exploring various online communities to understand prevailing trends. I’ve participated in numerous Twitter Spaces and observed discussions on subreddits, all in an effort to decipher the underlying mechanisms.

In the last month alone, investors have channeled billions of dollars into NFTs. OpenSea recorded over $3 billion in transaction volume during the preceding 30 days, although this figure represents a decrease from August, illustrating the substantial capital still flowing into the NFT space.

This influx of capital has been directed towards a diverse range of projects. CrypToadz, for example, attracted $100 million in investment. A newer project, MekaVerse, generated $130 million in transaction volume within a couple of weeks.

The NFT ecosystem comprises two distinct segments: large-scale projects, such as Axie Infinity and NBA Top Shot, boasting tens or hundreds of thousands of users, and smaller-scale projects, like CryptoPunks and Art Blocks, with a limited number of owners. Larger projects often resemble traditional gaming titles with intricate in-game economies, while smaller projects function more like exclusive social clubs centered around digital art.

During the last 30 days, Axie Infinity facilitated over $500 million in sales, encompassing nearly 2 million transactions and exceeding 350,000 buyers. Conversely, CryptoPunks recorded $200 million in sales, completed through 484 transactions involving 309 buyers.

Frequently, when discussing these substantial sales from smaller projects, the suggestion of money laundering is raised. While this possibility cannot be dismissed, I believe a more plausible explanation is that a collective of investors have independently justified seemingly irrational investment decisions, choosing to express this through the acquisition of pixel art and digital animal depictions.

Although some argue that early NFTs possess inherent historical value, numerous new projects achieve multi-million dollar valuations on their launch day with minimal effort or creativity.

This appears to be driven by momentum, as retail investors, captivated by the wealth generated and reinvested by Ethereum millionaires, are willing to overpay for assets. This, in turn, elevates the perceived value of the objects, the projects, the entire NFT market, and the price of Ethereum itself. Many of these investors, having held Ethereum through its volatility, are reluctant to cash out, preferring to reinvest in more expensive NFTs or accept exceptionally favorable offers.

Consequently, smaller, high-value projects maintain liquidity at the lower end, while infrequent sales of rarer items support the overall valuations. Occasional large purchases further contribute to price increases.

In essence, the current situation is unusual and characterized by significant activity originating from a relatively small group of buyers.

However, when considering mainstream adoption and potential applications, attention shifts towards larger-scale projects like Axie and Top Shot, which integrate complex crypto-economic principles into user-friendly platforms. The concept of NFTs driving more sophisticated virtual economies is genuinely compelling, but the billions flowing into digital art and smaller projects may not offer the insights that some crypto investors and venture capitalists believe they do.

Only three NFT platforms demonstrated over 10,000 active unique buyers in their communities during the past 30 days. While the success of platforms like Axie Infinity warrants analysis, it’s evident that we are currently experiencing a speculative bubble, making it challenging to draw definitive conclusions about the future of the web.

Recent Tech Industry Developments

Several noteworthy stories emerged this week warranting further consideration within the technology sector.

Apple is likely to postpone supporting alternative App Store payment methods. Despite Apple’s initial portrayal of the court ruling in its dispute with Epic Games as a complete victory, the company has since quietly filed an appeal. This appeal seeks to temporarily halt the implementation of changes mandating the acceptance of alternative payment options within iOS applications.

Although Apple projected an image of composure following the ruling, the potential financial implications are substantial. Delaying the rollout of these changes preserves billions of dollars, preventing them from being directed to other payment processors or developer accounts. Epic Games has also lodged an appeal, aiming for a more advantageous outcome. Consequently, a swift resolution appears unlikely, a common occurrence in complex corporate legal battles.

Nintendo's Evolving SaaS Strategy

Nintendo consistently demonstrates a unique corporate approach. The company has often shown reluctance towards embracing new gaming trends, and when it does, capitalizing on them isn’t always successful. However, its extensive portfolio of popular intellectual property provides repeated opportunities for improvement. This week, Nintendo unveiled further details regarding its new annual membership, Nintendo Switch Online+, priced at $50 per year.

This new tier offers subscribers a more comprehensive content selection. It represents a significant increase compared to the $20 annual fee for the standard Nintendo Switch Online subscription. Beyond expanded virtual console support, including an unconfirmed selection of N64 games, the value proposition for consumers remains somewhat unclear.

Notably, the service launches alongside complimentary access to a major update for Animal Crossing: New Horizons. This strategy is uniquely viable for Nintendo, given the exceptionally high penetration of its first-party titles among device owners – and particularly among potential subscribers. Global sales of the latest Animal Crossing title have surpassed 3.4 million units.

Microsoft Discontinues LinkedIn in China

Microsoft has decided to withdraw LinkedIn from the Chinese market. This decision comes amid a period of increased regulatory scrutiny and a deteriorating outlook for major technology platforms operating within China. Microsoft cited a “significantly more challenging operating environment and greater compliance requirements” as the reason for this withdrawal.

While LinkedIn’s presence in China was relatively modest, this move serves as another indicator of the cooling relationship between China and Western nations, as other American tech companies are compelled to adjust their strategies for the region.

The impact of this regulatory shift on companies like Apple, which wields considerable influence in China, is a key concern. Although authorities may be hesitant to target Apple directly, recent events demonstrate the unpredictable nature of Chinese regulatory actions.

Recent Insights from TechCrunch+

Here are some noteworthy articles from the recently rebranded TechCrunch+ subscription service this week.

A closer look at Plaid reveals substantial growth despite a terminated acquisition. Plaid reports a 60% increase in its customer base during 2020, with comparable expansion observed in the current year.

The application of predictive modeling is presented as a valuable tool for founders seeking funding. An influx of capital is occurring at earlier stages, and at an accelerated pace.

Despite the increased availability of larger equity investments, founders now have the opportunity to rethink their company capitalization strategies.

Boosting Productivity Through Focused Work

One startup implemented a “Get S*** Done Day” (GSDD) to enhance employee productivity. This initiative involves employees setting defined objectives and completing assigned tasks with minimal interruption.

The aim of GSDD is to maximize time spent in deep work by reducing distractions for one day every two weeks. While social media use is discouraged, employees are not subjected to excessive monitoring.

Thank you for your time. Subscribers can receive this directly in their inbox via the newsletter page. You can also follow updates on Twitter @lucasmtny.

Lucas Matney