Are NFTs here to stay? A complete opinion

Even until a decade ago, if we mentioned owning land, without owning land in reality, people might have dismissed it as science fiction. But now, it has become a reality showcasing how far we have come in this digital world with Non-Fungible Tokens or NFTs.

NFTs are unique digital tokens built on blockchain technology. Each token is associated with a specific digital or physical item which represents the authenticity of ownership, that is indivisible. From digital art, tickets, tweets, music, gaming, and collectibles to even simple selfies, NFTs can be owned in various forms.

While NFTs were all the rage in 2021, it has since then declined in popularity. Even in 2023—compared to the start of the year in January which saw 7.36 million sales of NFTs, July in comparison saw only 3.7 million sales, as per a report by Coindesk.

This naturally, then, begs the question: are NFTs really here to stay? Here's a bigger look at it evolution thus far.

Going back in time

Much of the popularity around NFTs began when the first ever NFT was created named Quantum in 2014. While many other NFTs were created later on, many failed to become popularity.

The next big milestone in the NFT would come when Digital Artist Beeple’s “Everydays - The First 5000 Days” painting was sold for $69 billion dollars. Fast forward to now, we could see many large companies like Nike, Visa, Gucci, Louis Vuitton, McDonald's, and others having stepped aboard the NFT world. With these trustable pioneers entering the market and reaching proliferating success, it piqued people's interest to be a part of the NFT craze.

NFTs evolution beyond art

With the gaming Industry having more than 3.9 billion gamers across the globe, players can liberate the potential of in-game assets, accessories and collectibles that can be converted to NFTs for trading. It seems like gamers are able to monetize their time and are able to convert their achievements in the form of digital assets.

The media Industry has also taken NFTs to a level that is incredibly captivating. Some of them are charging fans for the digital collectibles while others are infusing the experience with gamification. NFTs have also extended beyond to real estate as well, with properties in the metaverse being represented as NFTs—creating a more streamlined and transparent experience between the buyer and the seller. Buyers can construct almost anything on these lands. They have a variety of use cases from brand advertising, socializing to virtual office spaces and gaming. The gathering of numerous people in an area contributes to the price hike of the property.

They also work as a powerful tool for branding and marketing. Some of the brands use it to potentially impact a brand's fan base by allowing consumers to own unique or limited edition pieces, which could opens new revenue streams for holders.

Not only digital assets but real-world assets can also be sold as NFTs which are also becoming a preferred alternative for investors. Not only art, it could also be houses, cars, companies, or gold.

What are the risks and concerns associated with NFTs?

NFTs are illiquid, making it difficult to sell. So, selling them quickly at a desired price is quite difficult unless you find a buyer. When a popular art form emerges and gains traction, others try to emulate and sell similar work. Not everything will get traction because what’s trending today has an unsure tomorrow.

Then comes cost. Gas fees must be paid while purchasing the NFTs to record the transaction on the blockchain. Independent artists and creators find it difficult to sell their work to earn profit at times of high gas prices. Typically the cost of minting ranges from $1-$500.

NFTs are also suspectible to identity theft. Fake NFTs that claim to be original but are just the replicas of existing, are created with an intent to deceive investors. Along with this, wash trading, cyber-attacks are other concern factors.

NFTs are also highly volatile in the market. Vast exposure in NFTs along with diversification and seeing them to be a long term investment could help winning a jackpot.

Just like cryptocurrencies that crawled in the beginning stages, but now have become an established mode of investment, NFTs over time will gain more popularity and attention to become mainstream.

Providing reliable information and exposure empowers people to participate confidently. They are not limited to art forms, but a gazillion other utilities that we are yet to be found.

Mr Saravanan Jaichandaran is the Co-Founder & Chief Data Scientist, bitsCrunch.