The need for reimagining digital arts value proposition

Investors in non-fungible tokens (NFTs) and other sub-ecosystems are also in a bear market this year as cryptocurrency prices fluctuate.

However, looking beyond the trading value of Ether (ETH), NFTs were primarily created to represent assets and ownership in the real and virtual worlds. As a result, the bear market has reignited debate about how NFTs can backtrack and turn attention to use cases while the market recovers.

In a conversation with Cointelegraph, Tony Lin, co-founder of analytics platform NFTGo, shared his insights into the NFT ecosystem and revealed the expected trajectory of the ecosystem.

Cointelegraph: The mainstream popularity of NFTs is often attributed to the variety of real-world use cases that NFTs can solve. What are your thoughts on the declining NFT market? Do you think the market is heading for recovery?

Tony Lynn: To answer this question, we first need to explain the value base of NFTs. Currently, the NFT market is mainly driven by four categories: Art, PFP (Profile Picture), Land and Membership. At present, PFP is the most dominant. The value base of PFP NFT mainly includes three parts: financial products, collectibles/luxury goods, and membership. Financial instruments are currently dominant among them, but NFT derivative models are still in a very early stage. Therefore, as the overall bubble bursts in the cryptocurrency market, the illiquid derivative of the Alternative Token (FT), the NFT, will drop accordingly. This is expected.

However, as the crypto market recovers in 2023-2024, I believe the value of NFTs has room to grow several times larger than the larger crypto market. That value growth comes from at least two sides.

One is that with the development of NFTs and meta-universe related technologies, the usage scenarios of NFTs will become more abundant, and the consumption characteristics of NFTs will grow. is to create scenarios that do not exist in the real world.

For example, all assets in the Otherdeed metaverse are NFTs, and these NFTs themselves generate different scenarios of economic interaction, enabling new consumption so that people can better meet their needs and even helps evolve into new productivity tools and business models.

The second is the development of various NFT derivatives such as NFT fragmentation, NFTFI, NFT mortgage and NFT bond products. These new financial instruments will allow investors to participate in NFT-related investments in a more flexible format, attracting both institutional and retail capital to this market.

CT: Despite the reduction in losses and hype, many projects are still considered viable investments. What do you think is driving this trend? How important is it for NFTs to address their use cases, or are they just investors looking to make a quick buck?

TL: The driving force behind the trend is Stories created by speculators and Real value. I believe that bubbles are a reaction to uncertainty, especially in the early days of the industry, and it’s mostly builders like us who embrace the uncertainty that drives trends. , In addition to builders, large funds, including funds in the crypto space, mega funds, and even funds that were focused on traditional areas are also very important drivers. Sure, some of them want to make quick money, but from a capital efficiency perspective, now is not the right time to make quick money in the cryptocurrency market. I do not think.

CT: Regardless of price volatility, what trends are still relevant from the early days of NFTs, and what new trends do you think will become more popular in the future?

TL: First of all, more and more people are looking at NFTs, and there will be orders of magnitude more in the future. There are now over 2.96 million Ethereum wallets holding NFTs, up from just over 200,000 in August 2020, according to NFTGo data. Despite the current cooling market sentiment, there are 20-30,000 addresses trading NFTs every day. Of course, this number still has room to grow. Second, builders continue to build. Recently, you can see that many NFT-related companies have obtained loans. Additionally, while the market has been bearish lately, successful new projects such as goblintown and Memeland are popping up on the market.

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The various PFP projects of last summer’s NFT had their own peculiarities, but many followed the paradigm set by the Bored Ape Yacht Club (BAYC). New megatrends will undoubtedly emerge as the NFT industry develops further. I think this new trend will be the emergence of the content ecology of the metaverse. The definition of “content” here is broad, and Metaverse games can also be defined as “content”. As mentioned earlier, NFTs’ enhanced consumer attributes will help the industry recover, and consumer attributes mean that NFTs will generate non-investment income cash flows for their holders. One of the key ways to do this is by building “content” in the metaverse and letting the builder own the content and generate revenue. People who enjoy content receive intrinsic rewards and appear willing to pay.

CT: What are your thoughts on the current investor sentiment? How do you think it will affect the NFT market as a whole? What can NFT projects and companies do to improve engagement?

TL: NFT market sentiment has cooled for two main reasons. Second, the story and growth pattern of PFP is coming to an end, and the emergence of recent projects has yet to bring new patterns, making it difficult to bring new expectations to the market.

The crypto industry is cyclical in nature. Personally, I recommend continuing to explore new directions in the industry while maintaining enough capital to wait for the next cycle of the crypto industry and seize opportunities.

CT: As you said, the scope of the NFT market is limited to the imagination of entrepreneurs. What are some use cases NFTs can and should serve as they become more mainstream?

TL: In this regard, I would like to point out three major subsets of use cases where NFTs are well-positioned to cause mainstream disruption.

new art form: Digitization has enabled richer forms of artistic expression, and the emergence of NFTs and related eco-products will help solve the ownership problem of digital art and help art creators make a profit. As the digital world merges with the physical world, the infiltration of digital art into human society will become more widespread, creating a huge new market for collectibles and luxury goods.

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PFP, self-expression and new forms of organization: I think one of the main reasons for the popularity of PFP projects is to better meet the human need for self-expression. The ability to tell others who you are is an important human spiritual need, and the PFP NFT project and related ecology create a good way to meet this need. The PFP NFT project and its extended community not only provided users with a medium for self-expression, but also facilitated community formation with other users sharing similar expressions. Similarly, as communities evolve, these similar people may create new forms of organization, such as distributed autonomous organizations (DAOs), to influence societies outside their niche communities.

New public blockchain-like carriers: Current land-based projects such as Otherdeed, Sandbox, and Decentraland may evolve into something akin to public blockchains in the future. All new NFT projects, games, and applications may work within the ecosystem of these land-based projects.