Non-fungible tokens (NFTs) are a relatively new internet phenomenon, but already they’re seeing use in unexpected, novel ways. The tokens — whose creation and transfer occur over the blockchain, a decentralized digital ledger — are perhaps most widely known as a way to show ownership of an asset, like a Tweet, a drawing of a disinterested ape, or the Nyan Cat meme This by no means exhausts their capacities, however: users are creating NFTs for website domains to prevent their ownership from expiring, clothing for videogame characters, smart real estate contracts, and a huge array of other inventive applications.
When NFTs entered the public consciousness, the internet was still very much in the Web 2.0 era, an epoch dominated by user-generated content, social media, responsive websites, and — unfortunately — a somewhat lax view of data security and privacy. Now, NFTs, other blockchain-based tech like cryptocurrency, and a growing interest in the Metaverse are pushing the web to its next evolution, Web3. This is set to be a period in which these technologies, bolstered by a heightened ethos of decentralization and data autonomy, will change the nature of life in the digital realm.
Web3 is still a way off, however. There are also many unknowns surrounding it. This also holds true for NFTs, whose evolution in the coming years is bound to impact the coming iteration of the internet.
“The future of NFTs depends on myriad complex factors and developments,” said Zain Jaffer, Founder of Zain Ventures. “While nothing is certain, looking at modern innovations and expectations for the future of the internet can help us make educated predictions about how and why people will be using this core blockchain tech going forward.”
Growing Pains
In January of 2021, there were an average of 21,815 NFT sales per day on the Ethereum, Flow, and Wax blockchains — this number exceeded 82,000 in May of that year. While these numbers seem strong, it’s worth noting that this coincided with decreased prices. Although the global NFT market is expected to reach $112.43 billion by 2028 and enthusiasm for the technology remains strong, there’s a chance that this burst of enthusiasm may wane. This isn’t to say that the NFT market will disappear, however: it’s more likely that we will simply see fewer headline-grabbing sales of multimillion dollar art NFTs.
This less volatile environment would represent maturation rather than stagnation. The NFT market may never again reach the dizzying levels of hype that come with, for instance, comedian and actor Seth Green making a prestige TV show about his NFT ape. However, their digital utility could become much more widespread.
Contracts, stock shares, titles, logins, and deeds, among other commercial documents, could be minted into NFTs. The blockchain allows everyone to see when these items change hands, making authentication a breeze, and, in the case of fraud, making it easy to track a thief’s digital identity. NFT tech can also be used to create smart contracts, which contain algorithms that automatically run processes–such as transferring ownership of a property from one party to the next after a set date or after a set amount of money is sent–as soon as the proper conditions are met.
“Right now, the internet is in the honeymoon phase with NFTs. Everything is new and exciting,” Jaffer said. “But eventually, the emotional highs diminish, and you’re left with a stronger, stable relationship built on reliability and trust.”
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The Yacht Club Sails On
None of this is to say that NFTs will necessarily stop commanding jaw-dropping prices, or that such a future is incompatible with one in which they are used for everyday business transactions. It’s highly likely that companies will begin minting NFTs for premium digital assets, such as Adidas apparel for avatars or NFTs for digital real estate in the Metaverse. There are many exciting scenarios in this potential future, such as NFT tickets to digital concerts that come with special VIP perks and can appreciate in value as a potential collectible to be sold. Some companies are already making this future a reality.
These technologies have profound implications for the gaming industry. It allows gaming companies the chance to create and sell NFTs tied to unique items, vastly increasing their scarcity and value. The play-to-earn gaming model, in which gamers achieve in-game assets that they can resell for real-world money, will change the way video games are made and played.
There is, of course, another option: the market could collapse. However, this option is unlikely because even if the enthusiasm for brand-name digital assets, expensive works of art, and unique in-game equipment disappears, there are many other uses for NFTs, some of which have yet to be discovered.
“The underlying tech behind NFTs lends itself well to the corporate world,” Jaffer said. “But I also believe that they will play an essential role in our transition to Web3, and that people will continue to seek rare and exciting NFTs. We don’t know what the future holds. NFTs may even evolve into something completely unexpected. But I doubt they will disappear outright.”
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