Headlines predicting the death of Bitcoin are nothing new. Over the past decade we’ve seen every conceivable permutation of why “Bitcoin is dead,” but the current crypto winter has produced very few of these terrible statements.
This time it seems a little different. Perhaps it’s hard to write such a eulogy now that Bitcoin (BTC) is hovering around $28,000 and a Bitcoin ETF is on the horizon. It doesn’t seem like Ethereum is dead either.
But the blockchain industry and its commentators still need a corpse to poke at, and that’s what they’ve discovered with the rotten cadaver that is the non-fungible token market.
NFTs are dead. Dead. Lifeless. NFTs are the “Norwegian Blue” from Monty Python’s Dead Parrot Sketch. And the grave dancing has begun; to quote a recent Rolling Stone headline: “Your NFTs Are Actually – Finally – Totally Worthless.”
Rolling Stone is right: Most NFTs are indeed completely worthless.
Still, that shouldn’t be surprising to anyone who has been in crypto for a few cycles. Most ICO tokens from the 2017 bull market vintage were dead by the winter of 2018/19. The same goes for the countless DeFi protocol tokens following the DeFi summer of 2020.
Today, more than 1.8 million tokens have a total market capitalization of just over $1 trillion. But the top 10 largest protocols and tokens account for more than 93% of the total.
Do the math. That’s a long, long tail of worthless zombie coins. The vast majority of all tokens die. So why should NFTs be any different?
The barrier to setting up an NFT project in the hope of getting rich was (and remains) low. Anyone can, and seems to have done so, create an NFT collection in a few minutes with a few keystrokes.
So what happened when a wave of trading activity and money flowed into this new corner of the crypto market in mid-2021? The free market responded exactly as it was intended: it provided supply. And supply ≠ quality, especially in this industry.
We’ve seen the same cycle time and time again, this happens to be the first real NFT winter.
A-listers have quietly deleted their NFT Twitter avatars. Jimmy Fallon isn’t shilling with Paris Hilton on late night TV. Ashton Kutcher’s Stoner Cats has reached a settlement with the Securities and Exchange Commission (SEC). There is a collective feeling of shame.
NFT trading volumes have collapsed, from around $1 billion per week in mid-2021 to early 2022, to less than $100 million today.
NFT trading volume by chain. Source: CryptoSlam
It’s gloomy. But as I said about NFTs in October 2021, “Highs and lows are nothing new, it’s what comes out of them that’s worth paying attention to.”
For those curious and open-minded enough to look beneath the surface of today’s generalization “NFTs are dead,” there are signs of life amid the rubble.
In September, news emerged that PayPal had filed a patent application in March around an NFT purchase and transfer system.
Pudgy Penguins continues to expand into physical toys, first selling on Amazon in March and recently expanding to 2,000 Walmart stores in the US (Disclaimer: I own a jpeg of a fat penguin.)
Doodles has collaborated with casual shoe brand Crocs in a similar effort to merge the physical and digital, with an equally similar collaboration between Gary Vee’s Veefriends and Reebok.
At a concert last summer, Harry Styles fans were able to download an app with a self-custodial digital wallet for future NFT rewards. Meanwhile, Justin Bieber is working with a blockchain music platform to turn a song into an NFT with royalty streams to the NFT holders.
The top auction houses continue to bring mainstream artists into the NFT world, Keith Haring with Christies for example, and Sotheby’s is partnering with Ledger to offer a co-branded Ledger Nano X (hardware wallet) for buyers of premium digital art.
If you keep looking, you’ll find more and more signs of life, because NFTs aren’t “dead.”
The fundamental technological primitive of what NFTs are and what they offer will not “die,” any more than blockchain will “die.” They will simply continue to evolve as the weak hands, weak teams, scams, copycats and fast money fade into history, yet another footnote from another crypto cycle.
As we transition from this NFT winter to a new season, we can expect to see NFT projects that are more advanced, commercially viable, and will enrich the ecosystem in new and meaningful ways.
Tama Churchouse is the COO of Cumberland Labs, an early-stage Web3 incubator, and founder of Digitali, a community-driven NFT Wiki that serves as a comprehensive database for NFT collections.
This article is for general information purposes and is not intended and should not be construed as legal or investment advice. The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
