The recent and ongoing major correction of the global financial markets, including crypto and crypto-based products, has ignited a debate about the future of non-fungible tokens (NFTs), those digital artworks, sports memorabilia, and motivational quotes stored on the blockchain to be sold and traded between willing parties. One side of the debate claims that NFTs are dead—or nearly so—while the other insists that NFTs still have an important role to play in both the culture and the economy. Which side is right? And importantly, what does this mean for businesses looking to use NFTs to connect with consumers?
Those foretelling the imminent death knell for NFTs point to the fact that prices have plummeted from the dizzying heights of the past few years. Perhaps the most (in)famous example is the NFT of Jack Dorsey’s first tweet, which sold in 2021 for a whopping $29 million, yet now is worth only $29. Additionally, celebrities have begun to delete their NFT avatars from sites like Twitter, and the popular Bored Ape Yacht Club is struggling with an influx of scammers stealing users’ NFTs through phishing schemes, an event likely to drive current and potential customers from the platform.
However, others assert that the demise of NFTs is being greatly exaggerated. Proponents, such as ARK Invest CEO Cathie Wood, see continued and even increased future utility for NFTs. Two examples are via gaming and the metaverse, the latter of which could rely heavily on NFTs to establish ownership rights in digital spaces. Furthermore, some companies are still bullish on the technology despite the turmoil, including Napster, which is leaning heavily upon NFTs and cryptocurrencies to revamp itself.
So which side is right? While it’s obvious that the outlook for NFTs is not as rosy as it was six months ago, we think it’s a bit too soon to write the eulogy. For one thing, a big reason many have soured on NFTs (and cryptocurrencies in general) is the beating they’re taking pricewise. Since the beginning of the year, bitcoin has lost 52% of its value while Ethereum—whose cryptocurrency ether is most commonly used to purchase NFTs—is down 55%. This tremendous decrease has shocked some (mostly younger) investors, who bought crypto products to hedge against the equities market downturn. However, media theorist Douglas Rushkoff rightly pointed out that crypto was never intended for this purpose.
For now, we’re continuing to watch how this volatility shakes out before declaring whether NFTs are a fad whose hype has waned or are morphing into something with more staying power and even greater marketing opportunities. It could be that while the collecting of and investing in NFTs was a fad, the evolving use of the technology is the real trend worth watching. Brands looking to get into the action should ensure any forays into the NFT space are driven by clear business objectives and needs rather than a fear of missing out.