2023 NFT Track Summary: Is it Progressing Towards Transformation or Falling into Silence?

Original Title: "The Current State of NFT 2023"

Original Author: Francesco

Original Compiler: Luccy, BlockBeats

In the vibrant and often unpredictable realm of digital assets, non-fungible tokens (NFTs) have been a hot topic of discussion. Once heralded as the next major revolution in the art and collectibles market, the status of NFTs in the public's mind has undergone a significant transformation.

Many insist that NFTs are dead, and this article will delve into the current state of NFTs, discussing data analysis and market trends.

I hope no one here considers them the sole source for NFT news. To me, this seems like a bottom signal.

Although the crypto market has recently shown signs of a rebound, driven by expectations surrounding Bitcoin ETFs and Bitcoin halving, the NFT market appears to lag due to a lack of strong catalysts.

Perhaps the only necessary catalyst is to ensure that NFTs are no longer silent and will eventually return to hype.

NFT = Unfun Times

What I mean is, has the trading volume of NFTs sharply decreased compared to 2022? Yes.

So, are they dead? That might be a bit premature.

By definition, NFTs are on-chain and will therefore always exist.

In short, you just can't kill them.

However, it would be dishonest not to mention the fact that we have moved away from the glorious days of NFTs. We must acknowledge the significant decline in sales and public interest over the past year.

The decline of NFTs is undeniable: during this period, high-profile sales of NFTs have decreased, and market saturation (with countless new NFT projects deployed) has led to consumer fatigue.

What Are the Main Issues with NFTs?

There are several core issues at the heart of the NFT slump:

False promises of new projects: 99% of new projects deployed in the market are aimed at riding the hype of NFTs. Similar to the "shitcoin" phenomenon of 2018, many NFT projects are built on speculation, lacking substance or long-term vision, leading to their inevitable decline.

Blue-chip projects struggle to rebrand themselves as global brands: After their NFT collections achieved success, some blue-chip projects are now facing the dilemma of rebranding themselves and providing value to holders.

It is not unreasonable to compare NFTs to the "shitcoin craze" of 2018. Many NFT projects lack clear use cases or utility, resembling speculative assets rather than sustainable digital goods.

This has led to the birth of a bubble, and when the bubble bursts, many investors find their assets worthless.

Another Group

Although the lines are often blurred, the NFT crowd is a different type compared to crypto degens. They have different moral perspectives and different reasons for entering this space.

Overall, the NFT crowd is less ideologically engaged in this field, focusing more on the artistic and economic aspects.

Additionally, many scammers have found NFTs to be the current hype, just like previous trends (multi-level marketing, cross-border e-commerce, etc.), and they have jumped on the bandwagon.

This has been evidenced by countless celebrities promoting scams or starting their own scams to make quick money, especially Kim Kardashian, Mayweather, Paul Logan, and others.

Therefore, the stance is that we cannot consider the NFT crowd as part of the crypto community but rather as an external subset with different reasons for participation.

Nevertheless, we must also acknowledge that NFTs have indeed empowered artists globally, which is a positive aspect.

Challenges Facing Blue-Chip Projects

Even so-called "blue-chip" NFT projects are facing difficulties. These projects were once at the forefront of the NFT boom, but now they are struggling with an uncertain future.

The challenges they face are multifaceted:

Uncharted territory: Many of these projects are in uncharted territory, trying to navigate a constantly evolving and unpredictable market.

Evolution challenges: Evolving from a simple NFT project into something more substantive, such as integrating gaming or other utility features, has proven difficult. Where should the focus be?

Complexity and waning interest: Some projects, like Otherside and DeGods, have made the entire process overly complicated, leading to a decline in public interest.

We can illustrate this dilemma with Bored Ape Yacht Club (BAYC) and DeGods.

BAYC

BAYC needs no introduction; like Cryptopunks, the apes are one of the most iconic and representative NFT collectibles.

BAYC started with a collection of 10,000 Bored Apes.

Then, the project airdropped a Mutant Ape (MAYC) and a dog companion to BAYC holders—essentially giving holders thousands of dollars in airdrops.

However, the airdrop strategy will not work forever. In fact, by launching new collectibles, you are effectively diluting the total supply of the entire collection.

While BAYC was once a collection of only 10,000 NFTs, there are now 10,000 dogs and 20,000 MAYC. Additionally, each dog and MAYC has been airdropped an Otherside plot (with a total supply exceeding 100k). Now each Otherside plot will also create fragments, not to mention the HV-MTL collection (with 30,000 pieces).

The post-NFT direction taken by BAYC mainly focuses on two major verticals:

• Gaming
• Lifestyle (as a global lifestyle brand, such as BAPE, Supreme)

However, with this diversification, holders need to put in increasing effort and energy to stay updated and pay attention to everything.

For example, users expect to develop their Otherside plots through daily efforts. As a holder, I have given up simply because I haven't been keeping up.

What was once a simple community is now evolving into an increasingly complex and fragmented ecosystem.

Moreover, the gaming competitions created by BAYC raise a question: If they want us to only hire professional players to win these internal competitions, is that really community-focused? What about ordinary people who couldn't succeed through NFTs and have normal lives? Will they always be excluded from any victories?

It feels like this project is drifting away from its origins and neglecting its core community.

Another example is Legends of Mara, another independent experience related to Otherside.

Additionally, users have been waiting for news about Otherside for over a year, with many ultimately giving up waiting and leaving the community.

Is It Too Much? When Will It Stop?

Expanding their cinematic universe is a powerful tool for broadening public engagement. However, it can also have the opposite effect, undermining the core values of BAYC's original and primary collectibles, thus threatening the project's community foundation.

Due to the project's unclear path forward and significant investment from venture capital firms (a16z invested $1 billion in BAYC), many have expressed concerns that BAYC will never return to its former glory and will ultimately become Mr. Hyde, a Web2 giant.

DeGods

For DeGods, the situation is even worse, largely due to the team's strategic decisions rather than ecosystem expansion.

Once one of the best and most promising projects on Solana, it has now become synonymous with chaos and incompetence.

Here’s a rough summary of what happened:

DeGods launched their second series y00ts, promising a revolutionary points system, quoting Steve Jobs, and positioning themselves as the new Apple of NFTs;

After the FTX collapse, DeGods ultimately left Solana (their headquarters), migrating DeGods to Ethereum and y00ts to Polygon (because they received funding);

This was essentially a major betrayal of the community that had supported them from the beginning, raising their price from 3 SOL to over 10 ETH;

This was the peak of DeGods, with everyone talking about how they would become the new BAYC, and their token DUST and the company behind it would become valuable in the future;

Fast forward a few months, Dust Labs has not delivered anything of value, and the price of DUST reflects that.

DeGods announced an aesthetic revamp plan: DeGods Season 3, set to launch on August 9, 2023.

As part of the marketing, DeGods adopted their preferred strategy: over-promising, delaying delivery, and ultimately failing to deliver on time.

Season 3 was highly anticipated, driving DeGods' trading volume to new highs.

However, things quickly became dire.

What will Season 3 include?

y00ts migrating back from Polygon to Ethereum (acknowledging a significant failure; who would host their NFTs on Polygon unless they received funding?).

DeGods' art downgrade: simplified, removing unnecessary features. However, with a twist, users must pay 333 DUST (around $450 at the time) to downgrade their DeGods (some might say, finally giving the DUST token some utility).

However, in reality, this is like saying, "This is our third attempt to create the art for DeGods because we failed to convince our community with previous attempts."

They also launched a "Point Parlor," where users can stake their Season 3 DeGods to earn points and win rewards and prizes.

Here are some of the prizes from the "Point Parlor": of course, these are nice, but I'm not sure if 10,000 DeGods holders will be satisfied with a few good prizes.

Like many other collectibles, DeGods holders elevated their founder Frank to a mysterious figure with business acumen and Steve Jobs-like brand potential.

This can also be seen in the Messiah-like way Frank speaks.

However, we have seen that over-reliance on god-like founders has never brought any benefits.

Season 3 sparked much debate and controversy.

The things the team promised never really materialized, leaving a huge gap between promises and execution.

As a result, they ultimately lost over 50% of their value in just over a week.

In any case, the example of DeGods tells us the importance of under-promising and over-delivering, rather than the reverse.

If you act like a messiah and then fail to deliver, the tables will eventually turn. The DeGods team has repeatedly shown that they are a mess when it comes to their roadmap and plans. They have been inconsistent in their art and have never truly established a long-term path forward.

Each new update touches the artistic dynamics of the collectibles in some way. Additionally, they have failed to fully leverage Dust Labs and DUST, which is a huge missed opportunity.

Last but not least, this has been exacerbated by the behavior of their founder, who reluctantly acknowledged their mistakes.

While I may sound a bit biased, that is not the case. I had high hopes for DeGods and even hold some DUST; I am personally very disappointed with what has transpired in the execution process.

These two blue-chip examples show that sometimes, simplicity is the best approach.

Complex approaches often make things overly complicated.

NFT Market

After discussing how blue-chip projects struggle to create the next wave of development for their projects, let's dive into market data.

Is NFT trading volume declining?

Is anyone currently buying NFTs?

We analyze the Ethereum and Solana NFT markets to find out.

Starting with the monopoly of NFTs on the leading platform OpenSea, Ethereum faces a series of challenges regarding NFTs and their development.

The market on Ethereum is adapting to changing consumer preferences and the evolving nature of NFTs. These platforms are striving to address issues of accessibility, scalability, and environmental concerns.

In particular, the market has ventured into two major trends:

• From OpenSea's monopoly to Blur's dominance
• The debate over royalties vs. no royalties: Should users buying and selling NFTs pay royalties to artists or the NFT market? An increasing number of markets have ultimately shifted to no royalties. This article provides a brief overview.

Since Blur announced its launch and airdrop, NFTs have never been the same. Many have accused the platform of unilaterally dragging down the NFT market as whales farm Blur points by offering and listing NFTs.

Currently, over 78% of total NFT trading volume occurs on Blur, while OpenSea accounts for less than 18% of the total.

Nevertheless, even if it seems far-fetched to hold Blur responsible for the decline of NFTs, they have introduced new dynamics that affect buyers and sellers.

What About Royalties?

Initially, the NFT market enforced royalties, compensating either artists or the teams behind NFTs. This ultimately sparked an industry-wide debate involving major markets.

As shown in the chart below, March 2023 marked a key moment when the market began introducing optional royalties.

Currently, only slightly over 45% of total NFT transactions pay royalties.

What About Solana's NFTs?

Solana has emerged as a prominent competitor in the NFT space, praised for its high transaction speeds and lower costs. Solana-based NFT projects provide an alternative to Ethereum's high gas fees, but they also face the common challenge of maintaining relevance and public interest.

Particularly in recent weeks, as Solana's most hated token surged to $60, on-chain NFT activity has increased, especially with a rise in transactions from Ethereum and Arbitrum to Solana.

From the chart above, it is clear that Solana's daily trading volume has been rising since early November 2023.

Moreover, since September, NFT trading volume and active traders have grown by 300%.

But is this the only trend for Solana?

The Current State of NFTs

The numbers for NFTs have increased in various aspects.

In fact, since October, the NFT space has experienced a small-scale trading volume recovery.

Of course, if we place this leap in a larger context, more arguments are needed to demonstrate whether NFTs have truly returned. Nevertheless, we can observe that sales are slowly returning from oblivion, while buyers and sellers are also returning (possibly pleased to see the NFTs they once owned during the bull market, which are now almost worthless, gaining some demand).

Here are the top NFT sales from last week:

Here are the top 11 NFT collectibles ranked by sales volume (surviv000rs):

Interestingly, Mad Lads (from Solana) has emerged, now valued at over 4 ETH (170 SOL).

Finally, an important question is whether we are finally seeing some big bids again (perhaps from some guys who made money through memecoins?).

More Native Technology: NFT Perpetual Contracts

Another very important development driving the next step for NFTs (if any) is the development of more native technologies based on NFTs. In 2021, you could hardly do anything with your NFTs. With the emergence of new native technologies, such as NFTperp V2, that is about to change, allowing users to long or short their favorite NFTs.

Food for Thought

The world of NFTs is at a crossroads. While the current state may seem bleak, the potential for innovation and adaptation still exists.

The future of NFTs will depend on the ability of creators and platforms to evolve, providing real value and utility that far exceeds mere speculation. Whether NFTs will achieve a victorious return or fade into the background of digital history is a question that only time can answer.

In particular, we expect the most successful companies to eventually carve out a clear path forward from PFP collections.

Despite living in a three-year bear market, the NFT market is expected to grow at an average rate of 30% from 2023 to 2030.

Especially, the next wave of development will have the opportunity to geographically decentralize the industry, as currently, the U.S. (including Canada and Mexico) accounts for over 30% of total revenue.

Another foreseeable trend for the future is that an increasing number of NFTs will be designed for commercial use rather than just personal use.

Judging by this initial wave, it is akin to declaring that cryptocurrencies were dead during the bear market of 2018.

We all know how that turned out.

Unfortunately, due to the scope of this article, I cannot focus on touching upon Ordinals and xNFT, two very interesting developments in these fields, especially considering the recent surge in Bitcoin NFT transaction volume.