The NFT revolution Part 3: where we’re going – Tech & innovation

The Future of NFTs: Insights from a Journey through Blockchain Technology

In the rapidly evolving landscape of blockchain technology, which includes cryptocurrencies, NFTs, and the metaverse, it is vital to assess the short-lived but tumultuous existence of non-fungible tokens (NFTs). This article, the final installment of a series exploring NFTs, aims to offer expert insights into their potential future and market viability.

Over recent months, I’ve immersed myself in the dynamism of blockchain technology—both from an artistic and a technical perspective. In addition to advising clients and developing various Web3 projects, I have fostered a balanced view of the technology, attempting to transition from initial skepticism to a more optimistic outlook. Yet, while I am excited about the potential innovations, I remain cautious—there are still numerous unanswered questions regarding the future of NFTs.

Looking ahead, I envision a future in which these technologies become commonplace. However, this integration will likely differ significantly from current applications and diverge from the original principles intended by blockchain advocates.

The Original Intention of Blockchain

The Bitcoin whitepaper, an iconic document in the cryptocurrency realm, explicitly states its goal: to facilitate direct online payments between parties without the interference of financial intermediaries.[1] This vision fosters a decentralized financial ecosystem that has attracted both enthusiasts and skeptics alike. In principle, the pursuit of decentralization seeks to undermine the monopolistic tendencies of financial institutions—entities that have often acted against the public’s interest, leading to an environment dominated by greed.

Nonetheless, it is human nature to revert to established power dynamics. Thus, the challenge lies in finding an equilibrium between extreme centralization and unbounded decentralization.[2] A purely decentralized system without proper safeguards raises concerns that are worth contemplating. Will we ever achieve a balanced solution that leverages the benefits of both approaches?

Emerging Insights and Analyses

Recent discussions with a diverse range of individuals—both within and outside the blockchain community—have shaped my perspective. Here are the key insights derived from these interactions and my professional experiences:

NFTs: A Niche Market

Despite significant media coverage surrounding blockchain and NFTs, these technologies still cater to a niche audience. As of mid-2022, it was estimated that 300 million people globally owned at least one cryptocurrency wallet, comprising roughly 4% of the world’s population.[3][4] While projections suggested that this figure could reach 1 billion by the end of 2022, such growth remains modest compared to the 76% of the population that holds a traditional bank account as of 2021.[5]

In terms of NFTs specifically, research indicated that merely 4% of U.S. citizens had created or traded NFTs in 2022,[6] reflecting limited adoption despite year-on-year growth. Moreover, the proportion of online art sales—including NFTs—compared to the traditional art market remains minimal, highlighting their primarily collectible status rather than expansive artistic application.[7][8]

Complexity of Decentralized Finance

An inherent drawback of the decentralized finance model is its complexity. Contrasted with traditional banking systems, where consumers benefit from streamlined processes and easy access to their funds, the blockchain landscape often presents barriers to entry.

Users must comprehend the underlying technology to navigate this space effectively; a task that can be daunting. Although platforms such as Binance have improved user interfaces, many remain intimidated by the technical knowledge required. The volatility and unpredictability of cryptocurrencies make them less reliable as a store of value,[9] necessitating user diligence in understanding their risks.

Security Concerns

While blockchain technology is often touted as secure, incidents of hacking and cybercrime have surged, with 2022 witnessing a doubling of hacking incidents compared to 2021, resulting in losses totaling nearly $2 billion in assets.[10][11] This suggests that while blockchain is mathematically secure, the ecosystem as a whole is vulnerable due to a lack of robust controls and established security protocols.

Moreover, the absence of organizational frameworks raises questions regarding consumer trust. Users must understand the importance of securing their assets, often resorting to hardware wallets to protect sensitive information. Yet, awareness of these practices remains low among the general public, creating a significant barrier to broad adoption.

The Path Forward

As we look to the near future, there are vital developments on the horizon. With Ethereum’s anticipated shift to a proof-of-stake consensus mechanism,[13] we may witness reductions in transaction costs and environmental impact. However, the NFT market is currently grappling with challenges, as evidenced by a staggering 99% drop in transactions on platforms like OpenSea compared to previous highs.[15]

This decline invites skepticism about the sustainability and relevance of NFTs. Detractors argue that NFTs, along with the broader blockchain ecosystem, still lack substantial real-world applications. Without clearly defined use cases, these technologies risk remaining adrift in niche markets.

Nevertheless, it is essential to recognize signs of maturation within the industry. The recent collapses and security breaches have alerted both individuals and regulatory bodies to the need for increased oversight. Just as stock exchanges and the internet navigated periods of volatility before achieving acceptance and growth, so too will blockchain technology evolve. The industry is ripe for regulation, which may provide necessary oversight while maintaining the core principles of decentralization.

Ultimately, the future remains uncertain—but uncertainty breeds innovation. This is an opportune phase for visionary entrepreneurs to redefine existing frameworks and discover new applications within this fast-paced industry. As we move forward, the societal implications of blockchain technology will undoubtedly reshape our lives.

In summary, we stand at the precipice of a transformative era within the gambling and broader financial sectors. For those prepared to seize opportunities amidst turbulence, the future holds boundless potential.

[1] https://bitcoin.org/bitcoin.pdf [2] The interpretation of decentralization explored here focuses on empowering individuals rather than endorsing chaos or lawlessness. [3] https://earthweb.com/cryptocurrency-statistics/ [4] https://buybitcoinworldwide.com/cryptocurrency-statistics/ [5] https://www.worldbank.org/en/publication/globalfindex [6] https://www.security.org/digital-security/nft-market-analysis/ [7] https://www.statista.com/statistics/1236560/online-and-offline-sales-share-fine-art-auctions-in-selected-global-countries/ [8] https://www.statista.com/statistics/1299636/sales-value-art-and-collectibles-nfts-worldwide/ [9] https://corporatefinanceinstitute.com/resources/knowledge/valuation/store-of-value/ [10] https://finbold.com/crypto-hackers-loot-2-billion-in-h1-2022-as-cybercriminals-thrive/ [11] https://blog.chainalysis.com/reports/2022-defi-hacks/ [12] https://community.trustwallet.com/t/what-is-crypto-bot-sweeping-everything-about-this-scam-strategy/488179 [13] https://nftnow.com/features/ethereum-merge-heres-what-to-expect-from-the-groundbreaking-move/ [14] https://decrypt.co/108791/ethereum-merge-almost-here-what-could-go-wrong [15] https://stephenmoore.medium.com/the-nft-boom-is-over-trading-volume-on-opensea-falls-99-a31e00f109b0

Sergio Muscat is the founder of Oxygia, a boutique consultancy specializing in strategic, operational, and human insight advisory. With extensive experience in project management and business analysis, Oxygia assists organizations of all sizes in navigating the future landscape of blockchain and digital innovation.

Photo by JD Photography on Unsplash