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NFTs are not dead. Their potential is simply different from what was originally embodied by the epic rise and crash of the PFP market in 2021. Profile photos, digital art, and collectibles are just a few basic use cases for non-fungible tokens, a revolutionary form of digital asset in which Unlike cryptocurrency tokens, each item is unique and usually cannot be seamlessly replaced with another item.
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Unfortunately, the concept of NFTs has been conflated with expensive JPEGs as a result of the NFT craze of 2021, which not only did crypto in general and NFTs in particular a terrible disservice, but was, in retrospect, extremely stupid. That’s why just a year after the initial boom, trading volumes fell by more than 90%.
The runaway speculation about NFTs was a human problem, not a technical one. The situation was similar to some precedents, for example baseball card collecting in the 1980s. If you buy packs or boxes at a time, you’ll pay very little per unit for a number of cards – and only a select few would end up being worth a significant amount of money in the long run.
In general, collectibles such as sports cards, music albums, and popular memorabilia begin life as “one of many,” all of which have little cost/value, and no one can really predict which ones will be worth anything in the future. .
Million dollar zoo animals
Naturally, everyone got caught up in the fever of the bull running in 2021, and many lost their sense of proportion: They paid as much as seven figures for digital zoo animals. And of course, some legends and celebrities sought out expensive PFPs precisely because they were expensive and they wanted to be flexible. NFTs quickly became a status symbol, representing the (perceived) wealth of their owners.
The whole idea of paying huge amounts of money for newly released digital collectibles in the hope that they would increase in value was ridiculous. No wonder that if you say to the norm that NFTs are useful and will be an important part of the future digital economy, you will probably be laughed at. All they remember is people paying stupid amounts of money for ‘art’ that a kid could create in MS Paint.
Breaking through the foundations
The image of NFTs has been seriously damaged in the eyes of the broader public and has not recovered along with the broader part of the market. This is a real shame, because NFTs as a vehicle for digital ownership had real potential to attract masses of new users to web3.
To appreciate the potentially transformative power of NFTs, it’s important to first base your thinking on the fundamentals.
An NFT is a data structure for modeling data with unique properties.
People’s lives are increasingly moving into the digital space, so it should come as no surprise that there will eventually be digitally native goods that people want to own.
Modern property
In the web2 world, owning anything digital is pointless because it can be so easily copied and/or shared. (Looking at you, memelords wearing out the ‘save as’ shortcut on your keyboard.) To mitigate this, content owners will often use common Web2 digital rights management barriers such as paywalls, encryption, or simply blocking access to limit. But ultimately, this added friction only makes it harder to share with the creator’s audience and keep their attention.
This is where NFTs come into the picture. Their use cases are limitless: not only to create digital representations of physical things (real-world assets), but also to express ownership of digitally native things.
However, it is important to understand what rights are actually granted to the owner of an NFT. Is your NFT a digital representation of your ownership of a physical Picasso painting? Does your NFT only give you the right to display the digital art itself? What about the right to print T-shirts with the art on them and collect royalties on the sales? This is an area that requires a lot of attention to get right. If NFTs come with ten pages of fine print licensing agreements, that will definitely take the fun out of it.
Usefulness beyond PFPs
In addition to solving the problem of digital ownership, NFTs can also be imbued with all kinds of utility: exclusive access to members-only events, collateral for loans, DAO voting rights, representation of positions in DEX Liquidity Pools, etc. – making them an incredibly valuable tool. powerful tool for makers. These applications may have absolutely nothing to do with art, and NFTs may function in the background as essential components powering complex protocols.
Often, non-crypto residents fail to distinguish the technology from the asset, leading to blockchain taking the blame for people’s stupidity or nefarious behavior. Regardless of the rock-bottom prices of infamous PFP collections, NFTs are not dead at all; their innovation is simply overlooked. You might be surprised how many NFTs are supporting the RWA revolution currently happening in the blockchain sector.
Read more: SEC Investigates OpenSea, But NFT Artists Likely Not Targeted | Opinion
Aaron Evans
Aaron Evans is the head of fundamental operations at the Moonbeam Foundation, a smart contract platform for building connected applications that access users, assets and services across any chain. Aaron has over 25 years of experience in the tech industry and a background in software engineering. Before joining the Moonbeam Foundation, Aaron was senior vice president of Fuze, an integrated communications platform, where he helped generate $100 million annually for the company.