Everyone is talking about the record sales of an artist or game related NFTs and many newcomers are looking to profit from this new technology. But should we be cautious of promises too good to be true?
For those of you who were there in 2017-2018, you will remember the ‘revolutionary’ projects that ran their ICOs with the promise of changing the world through cryptocurrencies and blockchain. Yet today 99% of these projects are dead and their investors are left with useless tokens.
Some simply made an exit scam, others just gave up but all had a similar goal in common which seemed to meet a growing need in our society: to move out of banking and financial centralization to become ‘your own bank’. This dream was shaken by the brutal fall of cryptos during 2018 and it was open season for all the critics to degrade the various initiatives related to the blockchain in the months which followed.
However, slowly but surely, Non-Fungible Tokens began to develop on Ethereum, offering more and more content and possibilities. First, in the form of collectibles, there were video game objects, NFTs that were related to art and now NFTs seem to be exploring more and more use cases, especially thanks to some large famous companies who have entered the space.
Of course, this promotes their adoption, but how is the balance being struck? Can NFTs really revolutionize the world of art, gaming and true ownership?
When it comes to blockchain, it doesn’t take long for profits to overshadow its transparency and underlying technology and since the coronavirus crisis confined the planet, many newcomers to the ecosystem are discovering a new way to make some money.
‘What do I have to buy to get rich?’ This question is heard far too frequently during these bull market times and is the root of a lot of problems within crypto ecosystems like the NFT markets. It poses a problem for a good and simple reason, which is that it completely sets aside the notion of ‘use value’. Any asset, whatever it may be, is immediately perceived as a tradable asset and becomes meaningless if not to be bought and sold.
The many players in the ecosystem like to show the gains they have managed to make, exchange platforms are promoting their latest listing, the media are talking about the last ATH reached by this or that crypto… sometimes forgetting the real usefulness of the crypto in question.
The story of NFTs begins on Ethereum in 2017 thanks to CryptoPunks and then following the sharp drop in the price of crypto-currencies in 2018, the developers focused on the gameplay of the decentralized applications that they offered. The goal was to, above all, have as many users as possible play their game: the entry price was affordable for any wallet and the pre-sales were thoughtful so everyone had a chance to secure rare assets.
One of the best examples of accessible play that has brought real change to the NFT space is undeniably Axie Infinity. The ability to battle your little monsters, breed them or resell them at extremely low prices (0.01 $ETH on average) has created an increasingly solid, and importantly, a helpful and engaged community.
For slightly larger portfolios, Decentraland was for its part the flagship project in real estate speculation: for many years the game was simply inaccessible and the various sales that took place in the game were simply to build an empire or bet on the value of a piece of virtual land in the future.
This aspect of using blockchain for large-scale entertainment has allowed many users to familiarize themselves with this environment and subsequently help newcomers while discovering new projects in parallel.
While the 2018 crypto winter became the year to educate newcomers and recognize those who desired to grow in this ecosystem, thoughts of high percentage profits were put aside.
The opportunity of being able to offer artworks to an enthusiastic community and having collectors able to own the digital items in their wallet whose possession was absolutely proven and unfalsifiable has attracted artists interested in this new emerging sector, first from the community and then from the real world.
Being able to exhibit in CryptoVoxels or Decentraland was an opportunity to create a new kind of experience for anyone walking through these metaverses without anyone noticing.
These two use cases weren’t especially recognized by the real world and yet they were at the forefront of a worldwide cashless trend that was only evolving. It took 2020 and a global confinement for the habits of artists to be forced to change.
At first timidly, a few tests took place, then towards the end of the year many internationally renowned artists got the word out: it was possible to sell works on the blockchain to an audience that had significant financial means.
A new audience and a new way to sell, all in a purely virtual environment and therefore in line with the new social distancing measures, it didn’t take long to see players from the old world arrive. Reproducing the same thought patterns to allow them to keep their elite place while taking advantage of their notoriety in this new digital frontier.
With the price of Ether reaching record highs, this mix between hype of new artists using new technology and the promise not to have a new use but to be able to resell their more expensive work has brought the ecosystem into the real world. Yet, with the transaction fees not having come down, it seems to have become normal to pay a small fortune for a transaction that everyone would have bailed out of during the Summer of 2020.
It is therefore difficult to convince newcomers who do not have the notoriety of Deadmau5 or Lindsay Lohan that blockchain is inexpensive and accessible fir them to carry out their project to a public that is very enthusiastic about new initiatives.
Is it getting to a point where speculation is making people forget the real value of things? Looking at a recent event on Rarible, it would seem that a lot of people were “fooled” by the artist Pest Supply but not quite in the way you might think when first hearing about him.
By imitating the style of street artist Banksy, a significant number of collectors believed they were buying an original that would be of great value in the future. Total sales amounted to 512 Ether (just over a million dollars) before a crypto-artist asked Banksy’s official contact if he had embarked on the blockchain adventure …and received a negative response.
The speculators were therefore disappointed but at the same time (and obviously without knowing it) they encouraged an artist to continue producing what he liked. Let’s not forget that this is the basic purpose of cryptos: encourage as many people as possible to use them without falling into abusive speculation which has led to the various financial crises in the world.
To take the example of Axie Infinity cited above, it is no longer possible to find them on Opensea for less than 0.03 Ether ($60!), but remember: their supply is unlimited and soon Ronin will fix the gas price.
This technology is open and accessible and this is just as true for the old world as the new with the old world bringing with it marketing techniques much more developed than the organic growth that the NFT sector has experienced up until now. Just like in the real world, if there is too much of a gap between speculation and the real usefulness of an asset, this represents a risk of total loss in value over the long term.
We can hope that the next updates to the Ethereum network like the EIP-1559 or the use of sidechains in the future will make it easy and low cost for everyone to use. At the moment NFTs do not seem to have changed the world which is just starting to take an interest in this new way of certifying different assets.
Will the possibility of seeing a future transparent method for the exchange of works, diplomas or even the provenance of parts of a Breitling watch bring more ethics to the world?
The question remains open and the answer lies mainly in the choices that users will make with their cryptos..
Image : Chakkree Chantakad