2021 was unarguably the decentralized economy’s best year so far, particularly for non-fungible tokens (or NFTs) which experienced a super-sonic boost in terms of both capital and adoption. Sadly, Google’s recent trends report indicates a sharp decline in NFT interest, which has thrown doubt on what could otherwise have been described as a smooth ride for the tokenized economy.
Prior to the report’s release, many experts in the field were of the opinion that the NFT market thrived mostly on hype, and the debate is open as to whether the rapidly emerging economy can survive beyond this hype phase. Some experts advocate for people to focus on the utility that NFTs offer, as they consider this to be the best approach to creating a sustainable NFT market.
While the Google Trends report shows a steady decline in NFT searches, one thing has remained constant; retail interest in the space is dropping proportionately. According to the report, search queries for the term ‘NFT’ have dropped to the levels recorded back in October 2021, the same period in which the emerging industry started to enjoy attention on all fronts.
As indicated by statistics from nonfungible, a website that tracks real-time decentralized asset transactions such as NFTs, the volume of NFT trades per week has significantly dropped to under $2,000, compared to its ATH of almost $6,000 recorded at the beginning of the year.
This steady decline can be seen more clearly in the trade volume of OpenSea, which is arguably the biggest online NFT marketplace. According to multiple reports, the platform’s NFT transaction volume surpassed $3.5 billion in January, setting a new all-time record, but has since seen a progressive decline.
Interestingly, there are several justifications for the downward trend currently being experienced in the NFT market which go beyond “diminishing hype”. Some of these concerns are related to the easing of pandemic-era stimulus checks, as well as the ongoing Russia-Ukraine conflict.
There have also been several controversies arising from the abundance of inexperienced investors falling victim to abandoned NFT projects, having been drawn in by celebrity and influencer endorsements. One such case was that of Lana Rhoades, a former adult entertainment actress, who raised over $1.8 million by launching an NFT project, before swiftly abandoning it.
In her justification, her actions were born from the fact that she could not ensure that the NFT prices would rise in sales value, and so opted to instead drop the project midway. Rhoades is not alone in such cases, there is seemingly no end to the number of abandoned projects in the NFT space.
That said, it can largely be agreed that the majority of the successes enjoyed by the NFT space thus far were predominantly fueled by hype. But it doesn’t end there; this leads to several questions of paramount importance. Firstly, does this decline signify any major danger to the industry? Secondly, does the NFT ecosystem stand any chance of long term survival? And lastly, is there still hope for this young industry as the hype slowly fizzles out?
Are NFTs Really Sustainable Projects?
To answer the question of whether NFTs are really sustainable, we must first answer the preceding questions in the following order:
- Does the decline in NFT interest signify any major danger to the industry? Well, it depends on how the data is interpreted. If the trends are predominantly approached from a sales perspective, then the answer is likely to be “yes,” but if it is examined in terms of utility, then the scope is more positive.
As mentioned above, Google’s search trend reports are best used for one purpose, and that is to determine, among other things, retail interest in a product based on the number of times people searched for it, and its related terms, online.
As such, going by Google’s report, which indicates a downward trend in NFT search interest, there is no doubt that retail for related products is facing a lot of prospective uncertainty in the future. Notably, demand for NFTs and related services, as well as participation in their projects, may continue to decrease if the pattern continues.
However, while the declining search interest gives cause for concern for the future of NFT sales, it holds no weight on their utility. In fact, this could be the push the space needs to pay more attention to experts’ advocacy of just how important the utility of NFTs could become.
The truth is that, ever since the first NFT debuted publicly in 2014, most of the general interest in the space has been driven by profit. As a result, the value of NFT projects is perceived as being “vague,” because they do not serve any tangible purpose other than to offer the said value attributed to them by holders and collectors, and the industry has largely evolved following this course.
When downward search trends occur, people tend to focus more on extrapolating the genuine applicability and utility of projects, and this could ultimately drive up demand once more, with the additional benefit of encouraging more projects that add technological value to the field.
- Does the NFT ecosystem stand any chance of long term survival as the hype slowly fizzles out? The simple answer to this question is “yes,” and the truth here lies in the fact that possibilities for NFT application are endless.
It is also important to note that, beyond simple hype, NFTs have a wide range of practical uses, though many of them are yet to be optimized. This is particularly evident in the growing participation of major corporations in the space.
To date, the industry has seen the likes of Adidas, McDonald’s, Ray-Ban, Nike, the NBA, Taco Bell, Microsoft, and Coca-Cola, among other global brands, dip their toes into the NFT/metaverse world.
However, while the majority of these brands have made their entries to the NFT space, they have barely scratched the surface in terms of the sheer possibilities that NFTs can offer. Regardless, these brands have been doing the unexpected.
For instance, sportswear giant Adidas, back in December 2021, partnered with ‘Bored Ape Yacht Club’, gmoney, and the team behind ‘Punks Comic’ to debut its NFT project.
As a result, Adidas community members (i.e customers) can access the brand’s virtual wearable collections in metaverse gaming world ‘The Sandbox’, as well as being able to buy gmoney’s physical hoodie, tracksuit and iconic orange beanie.
Louis Vuitton also joined the craze, introducing a themed challenge called ‘Louis the Game’ in February 2022. The high fashion brand tasked its followers with joining its popular mascot – Vivienne – in collecting 200 birthday candles as she retraced the company’s 200 year story.
Without a doubt, brands are increasingly leveraging NFTs as a marketing tool, not only encouraging their consumers and target audiences to participate in NFT collections, but also involving their communities in exploring themed campaigns.
In the same way, individuals have also found their own ways of leveraging NFTs, especially in the terms of promoting their skills and generating income. For instance, in a recent publication, we explained how GameFi combines gaming and decentralized finance to create unique experiences that offer value to their players, as well as highlighting the instrumental role that NFTs play in the ecosystem.
People are signing up for GameFi projects like Axie Infinity and Alien World to compete with other players and participants to earn and win NFT items, each of which can be exchanged for valuable cryptocurrencies. Of course, while this is currently one of the most enticing use cases for NFT, there are many more exciting applications in the works, just waiting to be explored, and it will only be a matter of time until they reach the public eye.
One thing is for sure: NFTs’ greatest days are still to come, and regardless of whether current search trends are headed up or down, it’s hard to forecast exactly what the future holds for the emerging industry.