The NFT market is on the verge of bankruptcy. In the last 6 months, NFT sales prices and trading volumes have dropped by nearly 90%. Monthly volumes of billions of dollars on the Ethereum network have returned to the levels below $300M in its pre-hype period last year. Opensea, the leading marketplace in the NFT market, laid off 20% of its staff in July 2022. Apart from NFT projects and marketplaces, NFT focused platforms such as launchpad, wallet, lending, analytics, etc. are the ones that feel the negative impact of the current market the most. While NFT renting platform Rentable shuts down citing ‘close to zero traction’, the leading lending protocol NFTfi’s loan volume dropped to one-fifth and totalled only $10M in this month. Some Web2 brands trying to enter the NFT space are also in retreat. Snapchat shut down its Web3 division earlier this month and the Animoca Brand-backed racing game produced for Formula One closed down. So how do we save the NFT ecosystem despite such a negative atmosphere? Or should we?
The answer to these questions depends on how the concept of NFT is perceived. If we look at NFTs only as fun collectibles and PFPs, we can say that their popularity has reached its peak and it is difficult for them to rise to these levels again. I am not sure if we should save this type of NFTs. However, some of the so-called blue-chip collections have now created their own brands and are building products/services on those brands. I think these NFTs will and should be present in the future Web3 popular culture. I also know that top-tier gaming/metaverse NFTs that have received large investments — although their revenues have dropped drastically — have largely shifted the budgets they have collected from the marketing side to the development side and are preparing for the next bull run. I believe that “too big to fail” companies have been formed in this field and that they should exist in the Web3 entertainment and social areas of the future. In addition, I think that utility NFT projects that use NFT as membership cards and entrance tickets due to the ease of use and flexibility offered by its technology will continue to increase their market share by taking advantage of the new possibilities of developing smart contract standards.
Well, how will it be? How will the good old days ever come back?
“The good old days will never come back.”
The Web3 ecosystem is evolving too fast to stay in the old days. Likewise, today’s consumer culture doesn’t like nostalgia and is always looking for new experiences. Therefore, I do not think it is possible to bring back the old market conditions with an unhealthy growth trend. On the contrary, I believe that we need to create new good days with our own hands. For this, the following three things should be the focus of ecosystem development:
- Smooth and transparent user experiences
- Security and freedom
- Use cases with real benefits
A good user experience has always been a problem in Web3. It is very difficult to understand user needs and develop products accordingly in a new and rapidly developing field that has not yet established a solid user base. Considering that even central exchanges and top tier wallet providers have not yet been able to provide a good enough UX, we can say that there is still a long way to go in this area for NFTs. Simple and intuitive interfaces are essential to increase adaptation, but there is a challenge in providing this: Decision makers are in danger of drowning in an ocean of tens of thousands of unfamiliar assets, and many of them drown. For this reason, while considering the appropriate design, platforms should not give up informing the user with transparency and providing objective guidance with actionable data. In this sense, acquisition of meaningful data, visualization and effective storytelling should be an indispensable factor in UX design.
Use cases have been one of the most questioned points of NFTs recently. Games with the play to earn (P2E) model, whose use case is relatively obvious, have often been likened to pyramid systems due to their tokenomics and have been rightly criticized. It should be an important warning that the largest P2E NFT game, Axie Infinity (nearly $3B valuation in Sep, 2021) has dropped below 10K from 63K active players today. I think this problem will be overcome in the coming period with the emergence of games that focus on entertainment rather than monetization and offer satisfying experiences in terms of graphic quality and fiction. Similarly, metaverses need a little more time to become economically and technologically accessible and satisfy the user. On the other hand, utility NFTs have recently gained popularity by offering proof of ownership functions such as project shares, entrance tickets, and memberships. I think this function will be one of the fundamental building blocks of Web3 with additional functions as in Soulbound NFTs, providing interactivity with dynamic metadata and adding privacy layers.
To make a long story short, I have no doubt that “better” days will come for NFTs if difficult times are considered as a productive building time for those with power, prioritizing user needs and adaptation, in accordance with Maslow’s theory. For those who are interested, I share the Maslow’s hierarchy of needs that I adapted to Web3 below.