2023 NFT Market Review: Integration with AI, Blockchain Games, and Social Media, Solana and Bitcoin NFTs Gradually Becoming Mainstream

Author: WILLIAM M. PEASTER

Compiled by: Deep Tide TechFlow

As we look back on 2023, it is clear that NFTs have just emerged from a tough bear market. However, exploring through hardship has always been synonymous with Web3, and due to new technologies and new driving forces, many NFT projects not only survived but thrived. This article takes a look back at the NFT market in 2023.

1. The Rise of NFT L2

When I first started researching NFTs in 2019, the NFT L2 scene did not exist. This year, we began to see various NFT-friendly L2 developments.

Pioneers like Arbitrum and Optimism started to gain more minting activity and saw their continuously evolving tech stacks being used to launch new cultural center rollups, such as Xai and Redstone.

Industry giants like Coinbase and Zora also joined the competition, deploying Base and Zora Network, respectively.

New entrants also joined the fray, such as Frame, an L2 that directly incorporates NFT royalties and other content into its network.

In other words, the era of NFT scaling has officially begun!

2. New Capabilities for PFPs

The profile picture (PFP) space of NFTs was particularly hard-hit during this bear market, with most projects seeing declines in attention and floor prices in the first three quarters of the year.

However, some NFT series defied the trend and became dark horses in the PFP category, namely Openens and Pudgy Penguins.

Jack Butcher's Openens launched Set 001 in May 2023, providing a new blueprint for how to release collectively curated NFT series over time, inspiring the imagination of thousands in the process.

As for Pudgy Penguins, this project upgraded to a blue-chip PFP after experiencing a series of significant developments in 2023, the most notable being the placement of Pudgy Toys in 2,000 Walmart stores.

3. The Development of Game NFTs

The entire NFT gaming scene made significant strides in 2023, but it can be confidently said that the dominant games in the field—Axie Infinity and Parallel—continued to perform excellently.

Axie's ecosystem not only expanded with new Axie-based games, but the main game also underwent significant upgrades, such as the introduction of Axie Experience Points (AXP) and the Axie Parts Evolution System.

On the other hand, Parallel released new starter decks this year and launched a test version of its game, which received widespread acclaim.

Both games are better than ever, and even more exciting content is set to arrive in 2024!

4. Infrastructure Renaissance

In 2023, there was an incredible explosion of infrastructure surrounding NFTs.

For example, Nouns V3 just open-sourced the first DAO-native forking mechanism.

ENS name wrappers have also been released, providing unprecedented flexibility and functionality for ENS domain holders.

Additionally, Zora launched Protocol Rewards, a system that rewards Zora users with ETH.

But these are just the tip of the iceberg. ERC-6551 just turned every NFT into a wallet, mint.fun made minting easy, Privy introduced user-friendly embedded wallets, and more.

In short, now is a great time to build around NFTs!

5. Multi-Chain Forces

While Ethereum currently dominates the vast majority of all NFT activity, Bitcoin and Solana NFTs made a massive entry into the NFT camp in 2023.

Since the launch of Ordinals in January, the Bitcoin NFT scene has been revitalized, with a surge in activity. Similarly, Ordinals quickly inspired the standardization of other alternative Bitcoin tokenization methods, such as Stamps, which only accelerated the recent Bitcoin NFT activity.

As for Solana, the network has become the next frontier for major airdrops and has seen significant increases in its SOL token and activity statistics in recent months, attracting a large influx of new users who flocked to top projects on the chain, such as NFT marketplaces like Magic Eden and Tensor.

Thus, Ethereum, Bitcoin, and Solana are currently the mainstream players in NFTs, and this trend is likely to continue for the foreseeable future.

6. On-Chain Renaissance

In 2023, on-chain NFTs and on-chain experiments saw a resurgence.

For instance, the minting of Chaos Roads and the recent updates to Terraforms have pushed the boundaries of what is possible in blockchain art. Additionally, projects like BasePaint and Party have paved new ways for people to coordinate and co-create on-chain.

Of course, "on-chain" is not inherently better than "off-chain." It is simply that blockchain is a new type of medium + infrastructure combination, and the visions created here have never been as open and full of potential as they are now!

7. The Flourishing of Crypto Social

Crypto social applications stood out in 2023, with typical examples being Warpcast and Lens.

With the surge of applications, NFTs received renewed attention as these projects highlighted and facilitated NFT minting.

As a result, it has become easier to find the NFTs your friends are minting and share the NFTs you mint at any time.

In short, the continuously emerging crypto social scene this year has made NFTs overall more social!

8. The Arrival of AI

In 2023, we witnessed the first significant projects combining AI with NFTs.

In the metaverse space, Upstreet (a multiplayer game world designed for interactions between humans and AI agents) released a 28-page ChatWorld exploring various potential applications of AI agents within Upstreet.

Additionally, game experiments like Parallel Colony introduced the idea of "1.5 player games," where humans passively guide autonomous AI agents to perform various tasks, blurring the lines between when human gaming ends and AI gaming begins.

Though these efforts are still in their early stages, they indicate that the combination of artificial intelligence and NFTs could undergo significant changes in the future.

9. RWA Tokenization

RWA stands for "Real World Assets" on the blockchain, which can be anything from real estate to physical trading cards.

One of the primary methods of bringing off-chain assets on-chain is to represent them with NFTs!

In fact, in 2023, we prominently learned about the NFT-supported RWA model through Courtyard's tokenization of Pokémon cards.

This is just one example from the cultural aspect, but more experiments, whether cultural or financial, are gradually emerging.

10. Cross-Chain Development

2023 was also a year when it became more feasible than ever for NFTs to move from one blockchain network to another.

This is largely thanks to the rise of projects like LayerZero, a pioneer in cross-chain NFTs for transferring between blockchains, and Holograph, which developed Hologram NFTs that maintain consistent IDs across all Ethereum Virtual Machine (EVM) environments.

Additionally, Chainlink's Cross-Chain Interoperability Protocol (CCIP) was launched this year, paving another solid path for projects to achieve NFT interoperability across a range of chains.

Thus, NFTs no longer need to be confined to a single network. They can go wherever they need to go, representing a newer possibility that will see widespread development in the coming years!