NFT Market Future: Where is the NFT Market Headed?
The Potential Longevity of NFTs Amidst Cryptocurrency Volatility
Occasionally, within the often-unpredictable world of cryptocurrencies, innovations emerge that demonstrate potential for lasting impact.
While the current enthusiasm surrounding crypto art may appear excessive and costly, it simultaneously presents opportunities. It could empower artists originating from developing nations and marginalized communities to participate in the global art market in unprecedented ways.
The Rise of Non-Fungible Tokens
On March 5th, Jack Dorsey, the CEO of Twitter, auctioned a blockchain-based receipt – a non-fungible token (NFT) – representing a screenshot of his inaugural tweet from 2006. The bidding rapidly surpassed $2.5 million.
Since 2018, approximately $237 million has been invested in NFTs, with the majority of this expenditure occurring after the trend’s significant surge in January 2021.
Enjin's Growth and User Base
Bryana Kortendick, VP of operations and communications at the NFT platform Enjin, reports that the platform currently boasts over 47,426 registered users.
The growth of the associated NFT wallet has increased by 100% since December 2020.
Enjin secured funding through a token sale in 2017, raising 75,041 ether (ETH), which currently holds a value exceeding $130 million.
Kortendick refrained from detailing the management of the cryptocurrency treasury, but affirmed that sufficient funds are available to support the startup’s ongoing expansion, stating that “Enjin has retained a portion of the funds raised through our ICO in ETH.”
Expanding Global Markets and Accessibility
As of 2021, the fastest-growing markets for the wallet application include the United States, Korea, the United Kingdom, Iran, Germany, Canada, India, Indonesia, Turkey, and Australia.
In countries subject to sanctions, such as Cuba, Iran, and Venezuela, NFTs offer a viable avenue for emerging artists to engage in transactions with international art collectors.
Furthermore, NFTs can provide income opportunities for dancers through the sale of GIFs depicting unique movements, or for creating NFTs that enable specific dance moves within video games.
Localization Efforts for Increased Accessibility
“We’ve observed a significant increase in new app users from countries like Iran, and are actively working to localize the application to enhance accessibility for these expanding markets,” Kortendick explained.
“A recent surge in web users from Cuba prompted us to translate our entire website into Spanish.”
The Evolving Landscape of Regulatory Compliance
Whether the current level of market engagement can be sustained, particularly in light of varying compliance requirements across different legal systems, is yet to be determined.
In 2020, BitGo, a cryptocurrency firm, faced penalties from the U.S. Treasury for facilitating transactions involving individuals and entities located in sanctioned nations. Enforcement of financial sanctions is demonstrably a key focus for regulators as of 2021. Furthermore, platforms possess the capability to remove artists and their works, potentially restricting access for users unfamiliar with advanced Ethereum functionalities.
Although NFTs may remain recorded on the blockchain, their designation as “permissionless” art, frequently asserted by blockchain proponents, becomes questionable under such circumstances.
Currently, artists in developing markets are experiencing income increases, sometimes earning several hundred or a few thousand dollars monthly – a significant improvement, though modest compared to high-profile NFT sales. As Bloomberg’s Tracy Alloway observed, NFTs often function more as “digital bragging rights” than genuine collectibles, mirroring the dynamics of traditional high-value art and collectibles.
By March, when Jack Dorsey entered the NFT space, a substantial number of individuals were already actively trading Ethereum-based NBA trading cards, in-game items, and access passes to crowdfunding initiatives for independent authors. The breadth of NFT applications is extensive; virtually any asset can now be tokenized and traded.
Accumulating Financial Success
A significant number of high-value celebrity sales are currently being facilitated through Nifty Gateway, the NFT marketplace established by the Winklevoss twins.
As stated by Carolyn Vadino, a representative for Nifty Gateway, the platform currently supports over 150 NFT artists and boasts a user base exceeding 24,000 NFT enthusiasts. Individuals are acquiring NFTs for both collecting purposes and for trading activities within the platform's secondary marketplace.
Nifty Gateway levies a fee of slightly over 5% on each secondary sale, and also permits artists to receive up to 50% of the revenue generated from these subsequent transactions.
Among the prominent artists gaining recognition through the NFT surge are Trevor Jones, a painter; Marguerite deCourcelle, a video game developer; and Mike Winkelmann, known professionally as Beeple, a seasoned digital artist.
Beeple began creating NFTs in October 2020, strategically converting readily available Instagram content into Ethereum-based digital assets to generate income from his existing audience.
“Often, purchasing the NFT grants access to a corresponding physical item. Furthermore, while the original Instagram post is a static image, the NFT can be a dynamic video, offering a detailed exploration of the artwork,” Beeple explained. “This represents a straightforward method of enhancing the value of previously released work.”
For almost two decades, he has been dedicated to digital art creation, primarily undertaking commissioned projects for major corporations such as Louis Vuitton and Apple. Prior to earning approximately $6 million through NFT sales in recent months, Beeple noted a lack of dedicated fans or collectors.
His previous sales were limited to a small number of prints sold through his personal website, and he utilized platforms like Instagram to showcase personal projects in order to secure freelance advertising opportunities. Beeple asserts that NFTs have transformed his career trajectory, elevating him from a designer to an independent artist.
His artwork is now featured in virtual exhibitions and is included in museum collections. “The personal projects I undertook weren’t previously marketable. They were instrumental in securing prestigious freelance assignments with companies like Louis Vuitton and Apple,” he stated, highlighting the transformative impact of NFTs on his life. “I am no longer actively seeking client work unless it involves exceptionally compelling projects.”
The Impact of Influencers on the Growing NFT Economy
The surge in popularity of Non-Fungible Tokens (NFTs) represents a potentially beneficial shift within North American art markets, which have historically been dominated by collections featuring works primarily from white male artists.
Micah Johnson, a former Major League Baseball player who now creates art, highlights that Black artists, specifically, are finding a thriving NFT community with reduced obstacles compared to the conventional art landscape. Johnson notes he receives approximately 10% in royalties each time his NFTs are resold on platforms like Nifty Gateway.
“A strong and engaged community frequently supports NFT artists,” Johnson explained. “Furthermore, NFTs offer greater liquidity in the secondary market than is typically found with physical artwork.”
These NFTs are far more than simple digital images. Johnson’s creation, Aku – a Black astronaut character – is a comprehensive storytelling project developed by a team of artists. Consequently, the collectible NFTs illustrate key moments within the character’s narrative arc.
He intends to release ten Aku NFTs this year, having already generated over $2 million from this collection. “We are utilizing NFTs to allow collectors to acquire segments of a larger narrative,” Johnson stated. “An Aku social media presence will be established for followers to enjoy over the next few years, though I won’t personally manage it, as social media isn’t my strength.”
Conversely, numerous artists proficient in social media have successfully leveraged the NFT economy to achieve financial independence. Vector Meldrew, a London-based street artist, exemplifies this trend, creating NFTs that complement his multimedia artwork.
Scanning a QR code on Meldrew’s street art through the Instagram app activates an augmented reality experience, causing the artwork’s character to animate. “Street art is fundamentally about disseminating a message and contributing to the community,” Meldrew said. “This was particularly relevant during the London lockdown, providing engaging AR experiences when art galleries were closed.”
Meldrew launched his first NFT in October 2020 and was able to sustain himself through NFT sales full-time by January 2021. He envisions developing a multiplatform story featuring these characters, incorporating mediums such as film and video games.
He plans to employ a decentralized storytelling approach, initiating this by distributing over 120 NFTs through Rarible, a platform favored by Lindsay Lohan. “The collectibles serve as a means to broaden engagement with the stories and the community I aim to cultivate,” Meldrew explained. “This, in turn, drives sales of the larger, more exclusive pieces at higher price points.”
“Rather than seeking substantial funding from studios, the NFT model allows for organic growth,” he continued. “It functions similarly to Patreon, but with subscribers holding tokens instead.”
The Expanding Universe of Blockchains and Non-Fungible Tokens
Independent artists are demonstrably capable of generating revenue through the sale of creative NFTs, even independent of short-term market speculation.
Similarly, public figures are able to market and sell a wide range of digital goods, including even simple captures of their publicly available social media posts. For example, Jack Dorsey announced the conclusion of his NFT auction on March 21st, with all proceeds designated for charitable contributions.
The longevity of the current NFT surge remains uncertain, particularly given the reliance of the majority of NFT participants on platforms such as Rarible and Nifty Gateway. A smaller segment of users is exploring methods to directly administer these blockchain-based assets, bypassing centralized platforms.
Historical Parallels and Platform Dependence
Throughout history, mirroring the evolution of technologies like HTML and blogging, both creators and consumers have generally favored platforms that streamline distribution and facilitate discovery.
Currently, the NFT marketplace is heavily reliant on Ethereum-based companies like Infura and MetaMask, both under the ownership of Ethereum co-founder Joe Lubin. However, the dominant corporate entities in the NFT space in the future may not necessarily originate within the Ethereum ecosystem.
Cross-Chain Compatibility and Emerging Blockchains
Numerous developers are actively constructing bridges to enable NFT users to migrate their assets across diverse blockchains, extending beyond the confines of Ethereum.
NFTs built on the Bitcoin blockchain already exist, though they have not yet achieved the same level of financial success as those on Ethereum, largely due to the concentration of celebrity and influencer activity on the latter in 2021.
Flow represents another emerging blockchain gaining traction within the NFT economy.
Flow Blockchain and Kraken's Involvement
Jesse Powell, CEO of Kraken and co-founder of the Verge Center for the Arts, highlighted Kraken’s substantial trading volume for the Flow token, exceeding $514 million since its listing in January 2021.
Furthermore, Kraken clients have collectively staked 20 million Flow tokens, representing a value of over $715 million.
The future landscape of NFTs could potentially be shaped by a Bitcoin-centric ecosystem or a multi-blockchain environment characterized by competition.
Ultimately, the definitive trajectory remains to be seen.
The Future of NFTs: Sustainability and Growth
This Extra Crunch series delves into the long-term viability of Non-Fungible Tokens (NFTs). We will examine the challenges related to regulatory compliance and technical hurdles, as well as identify sectors within the currently crowded market that still offer opportunities for both brands and creators to expand.
Beeple drew a parallel between the current NFT surge and the dot-com bubble of the late 1990s.
According to Beeple, the bursting of the dot-com bubble did not halt the progression of internet usage. He stated, “If you provided a website with actual utility, real value, it survived … eventually you won’t need to know anything about crypto. That will just be the back end.”
Beeple believes there is significant potential for NFTs to become integrated across various creative fields. These include film, music, fashion, and visual arts. As an example, the band Kings of Leon recently generated substantial revenue through the sale of NFTs redeemable for lifetime front-row concert access.
“Each of these categories has huge room for growth, a lot of them we haven’t seen really play out yet because of COVID,” Beeple explained. “When you’re able to have big events, with ticketing and things like that, you’re going to see even more use cases for NFTs.” He further likened the possibilities to the vast applications of the internet itself.
Next week’s installment will focus on the intersection of NFTs and the fashion industry. Significant financial gains are achievable within the NFT space, extending beyond short-term market peaks. This represents merely the initial phase of development.
Kortendick emphasized the importance of interoperability. Fashion brands are discovering innovative methods to connect with their consumer base. Discussions are also underway with professionals in the entertainment sector, including dancers and performers, with the aim of establishing a standard for dance-related NFTs.
Updated March 17, 2021: Language concerning Enjin’s expansion has been clarified.
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