NFTs: No Future Tokens
In the least surprising news ever, it turns out 95% of NFT projects are worthless
At the height of the boom, NFTs were everywhere. They were splashed across socials. They were seeping on to talk shows. They were in music videos. They were launched by every and any brand and creator, regardless of what business sense it made. They made a few individuals filthy rich. One guy even burned a $10 million Frida Kahlo artwork because he was convinced that it would be worth more in the Metaverse.
But now… 95% of those NFT projects are worthless.
*pretends to be shocked*
Of the 73,257 NFT collections identified, 69,795 have a market cap of 0 ETH.
Only 21% of the collection had 100%+ ownership, meaning 4 out of every 5 NFT projects have remained unsold.
Of course, it's unfair to draw conclusions based on an entire industry — after all, every industry is full of bad actors and duds galore. The NFT marketplace has been filled with worthless projects, shameless cash grabs and scams galore. If you need proof of that, check out Web3 Is Going Great, a site that keeps a running tally of scams, most of which are NFT projects. The current total? $68 billion.
Those projects undoubtedly skew the findings. Instead, it's best to study the Blue Chip NFTs, the few projects that held value and *shock* actually built some form of community as promised. Those Blue Chips are CryptoPunks, Bored Apes, Azuki, Mutant Apes, Clone X and Doodles.
And those chips are down badly.
Everything is down. The flagship project, Bored Ape Yacht Club, saw its price floor drop to $38,702, down over 80% from the all time high of over $220,000 in May 2022.
The dappGambl researchers found that 18% of these ‘top’ collections have a floor price of zero. Ouch. Even the most prominent collections are struggling to maintain demand. Those that have got some demand, if we could call it that, are hardly commanding huge prices. 41% of the NFTs included in this top category are priced between $5 and $100. Less than 1% of these NFTs boast a price tag of over $6,000 — a far cry from the boom times the industry enjoyed in 2021.
When we boil it down, it means 95% of those pixelated JPEGs wouldn’t fetch a dime today. It’s a breathtaking fall for assets that reached a trading volume of $17 billion during the frenzied bull market in 2021.
Destined to fail
I’ve said it from day one, but this iteration of the NFT was destined to be a failure. When it exploded in popularity, it was a perfect storm of conditions;
lockdowns keeping us at home,
stimulus checks filling our wallets,
Wall Street Bets turning the public toward less conventional investments,
the Metaverse was going to change the world
cryptocurrency — the currency used to buy and exchange NFTs — was booming.
But then the dominos started to fall. Lockdowns ended. Stimulus checks ended, replaced with the threat of recession. Wall Street Bets had its laugh, but actual Wall Street won in the end. Cryptocurrency suffered a huge crash. Despite billions of dollars invested, the Metaverse has failed to materialize, meaning the digital landscape that might have offered NFTs some form of utility doesn't exist. It’s was a perfect storm for collapse.
As I’ve written time and time again, what the technology needed wasn’t more collections, or brands making anything and everything an NFT because reasons; it needed real, tangible use cases that the general public could both understand and get on board with, and they needed to appear when NFTs were peaking. Instead, we got lots of shouting, bold claims, and scams. In the end, nothing substantial ever emerged. Before anyone argues that two years is an acceptable bedding period, look at A.I. - it has already produced some pretty amazing use cases, several of which could be revolutionary. (Important note: much of it is a complete grift, just like the NFT space.)
And it’s about time.
But from the pixelated ashes is the chance for something meaningful to arise. As the hype cycle ends, we enter the Trough of Disillusionment. Here only the truly dedicated builders (and a few of the downright deluded) remain, moving underground to keep on building. The technology finally has a chance to redefine itself and how it fits into society. The creators have an opportunity to stop chasing money and clout and instead think about the problems it can solve and the solutions it can provide (so far, it’s been vice versa).
And should universal use cases ever arise, they will have to fix the often-unaddressed issue — the environmental impact. As the technology is intrinsically linked to the blockchain and cryptocurrency, it takes a lot of computing power to process transactions and minting. dappGambl’s report identified 195,699 NFT collections with no apparent owners or market share. When you weigh this up with the energy required to mint these NFTs — approximately 16,243 metric tons of CO2, equivalent to the yearly emissions of 2048 homes — that’s a lot of wasted energy. Both literally and metaphorically. The future NFT creators need to ask themselves, does the benefit outweigh the cost? Does adding a few tradable items to video games, or allowing fans to “own” a snippet of a musician’s album, or to be able to see the entire history of a house before buying it, really justify that output?
We will likely never see an NFT boom like the one in 2021-2022, certainly not in terms of trading works of art (read: pixelated JPEGS). But to survive total annihilation, the assets need to evolve, and quickly. Until such point, I think I’m done giving the technology any more oxygen, because, as it stands, it’s another trend bites the dust.
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