- The Ground Floor
- The Story of NFTs in 2023
The Story of NFTs in 2023
Breaking down the reasons for NFTs to remain relevant in 2023…
In today’s edition of The Ground Floor we are breaking down the reasons for NFTs to remain relevant in 2023…
The Story of NFTs in 2023
In the minds of many people, NFTs make little sense.
When asked about their understanding of NFTs, most people familiar with the existence of these digital assets will allude to Bored Apes, and the prohibitively high cost of owning one.
This narrative poses a problem, thankfully, 2023 marks the beginning of a new narrative ~ a narrative that has existed long before the inception of Bored Apes.
This new narrative is the breakthrough use case for NFTs ~ digital collectibles.
In 2021 & 2022, with interest rates at record lows, and a global workforce being confined to their homes in response to Covid, NFTs experienced a surge in demand that spurred the creation of many new NFT projects.
By positioning these projects as “membership clubs” ~ such projects succeeded in solving the perceived problem of people feeling a lack of connection as a result of our inability to socialize in person during this time.
Nonetheless, as someone who was very active in NFTs at this time ~ it’s difficult to say with a straight face that participating in a membership club was the main motive for many people to mint an NFT at this time.
Instead, the main motivate would be best described as a desire to sell these assets to someone else for a higher price.
Unrealistic Roadmaps? (2022)
The bigger the ambitions an NFT project conveyed, the easier it was for people to succeed in speculating on the future value of these assets.
Mention the word metaverse, future airdrops, tokenomics or any other word that captured a teams desire to deliver value to their token holders, and the price of these assets would surge ~ leaving the founders of these projects feeling awfully accomplished, and the community members basking in their new found wealth.
This approach came with a cost.
Such big ambitions allowed teams to temporarily feel a sense of accomplishment as the metric that mattered most (floor price) informed the team that the market valued the set of actions the team was taking to create value.
Nonetheless, good intentions don’t always result in good outcomes, and this became very apparent at the end of 2022 as the people who bought into these big visions began to reflect on the progress, or lack thereof made to date.
This issue was compounded by the ease at which Blur allowed collectors to exit large positions in projects in a matter of minutes, and what followed was an exodus of people selling NFTs in bulk, returning to the safety of owning ETH.
Digital Collectibles (2023)
Reflecting on the rocky road NFTs have experienced since their popularization in 2021, it’s clear the reasons to remain interested in NFTs have changed enormously over the last two years.
As the money that was once in abundance to mint out any & all NFT projects has long left our eco-system, the use case that continues to show signs of retaining relevancy in NFTs is perhaps the most obvious: Digital collectibles
The the most compelling use case within digital collectibles is digital art.
(Left ~ Right: Squiggle, Fidenza, Autoglyph)
The following thread does an amazing job breaking down why digital art is such a perfect use case for NFTs, however, the key distinction between an NFT positioned as a collectible vs an NFT positioned as an access pass to future benefits is the ability for collectors to evaluate the product they are purchasing.
NFTs that promise future perks have the advantageous position of being evaluated based on the products they will build ~ collectibles continue to command more capital in Web3 as collectors have the advantageous position of being able to evaluate the finished product they are purchasing today.
The continued success of digital collectibles is at the core of the reasons to remain optimistic about the future of NFTs.
As an active participant in this eco-system, it’s been extremely refreshing to see the market mature, as we move towards a model of rewarding the creators capable of shipping finished products as opposed to promises of future products.
It will likely take years to re-build the trust lost from founders communicating big ambitions followed by an inability to bring their visions to life, nonetheless, there remain reasons to be optimistic about the future of NFTs in 2023.
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This newsletter is for informational purposes only and does not constitute financial or business advice to any person or entityIm$2