How the Death Knell for NFTs May Have Been Premature

Non-fungible tokens (NFTs) were declared dead — at least on life-support — after the crypto market cooled down from the height of the hype cycle.

At its peak, NFTs in the form of digital art and collections sold for tens of millions of dollars, and yet as crypto winter set in, a study in September 2023 by crypto research group dappGambl found that 95% of NFTs were all but worthless.

But, as the use of blockchain technology continues to expand, businesses are adopting NFTs in different ways that show signs of maturity in the space.

We speak to experts in blockchain to see the green shoots of life in a technology that still has much to offer the world — in unexpected ways.

Table of Contents Table of Contents

1. Key Takeaways
2. NFTs — Without the Hype
3. Fortune 500 Companies and Experiments with NFTs
4. NFTS can be Behind the Scenes and Offering Value
5. Hybrid Token Standards Unlock New Use Cases
6. The Bottom Line
7. References

Show Full Guide

Table of Contents

1. Key Takeaways
2. NFTs — Without the Hype
3. Fortune 500 Companies and Experiments with NFTs
Show Full Guide
4. NFTS can be Behind the Scenes and Offering Value
5. Hybrid Token Standards Unlock New Use Cases
6. The Bottom Line
7. References

NFTs — Without the Hype

Sol Nasisi, founder of digital publishing platform Booksie and co-founder of Chainletter Labs, told Techopedia:

“One problem with prior NFTs projects is that they required users to understand wallets, how to purchase crypto, gas fees, and more.

“The complexity was too much for many people and created a barrier — but the hype part of the cycle is over, and now it’s time to build applications that add real-world value.”

“You remember when NFTs were the hottest thing around because they were so rare and exclusive? Nowadays, it feels like everyone’s hopped on the train, and it’s watered down the whole vibe. People are churning out NFTs left and right, pricing them however they please, and it’s taken the shine off the market.

“And those NFTs with celebs attached? They’re not always the jackpot folks hoped for,”

Gady Kohanov, founder of crypto learning app BitcyClub, told Techopedia.

“So, how do we bring back the excitement? Three words: Offer people solutions!”

Fortune 500 Companies and Experiments with NFTs

Fortune 500 companies and brands — the largest in the US by revenue — have tentatively experimented with NFTs with mixed results.

Eric Pulier, CEO of Web3 platform Vatom, told Techopedia:

“It is a rare F500 company that will move the needle for their enterprise by selling NFTs, or — for that matter — using NFTs as badges of entry for “clubs” and such, as many such attempts have shown. Consumers want value for their time, not complexity, not gimmicks.”

The NFT projects that have worked best so far leverage the engagement and gamification of smart digital objects to create fun experiences and provide owners with real value.

BitcyClub’s Kohanov said:

“Why should Fortune 500 companies give a darn about NFTs? Well, they’re always on the lookout for fresh ways to make a profit, and if NFT creators can offer unique solutions, it’ll create demand from those in need and drive up prices, catching the eye of investors looking to thrive.

“It’s a new opportunity waiting to be seized. After all, scarcity drives up value. So, if we can inject some uniqueness back into NFTs, it’s sure to turn heads among the big players.”

Brands looking to introduce NFTs to customers can provide them with functionality beyond NFT marketplaces so that they are compatible and liquid across decentralized finance (DeFi).

They can now also reach audiences without having to launch NFT projects at all by leveraging other projects.

Pulier explained, “Imagine ‘Project A’ — unrelated to any brand — successfully deploys its tokens at scale, with a community engaging with its tokens and related games.

“In Project A, there are 1 billion NFFT tokens issued, and they’ve achieved 2 million wallets using them.

“Of those tokens, there are 100,000 ‘blue star’ non-fungibles entangled among the fungible tokens.

“One day, a brand can wake up and say: All blue star holders are getting a free PepsiCo at Kroger today.”

Along with creating brand affinity, Andy Liann recently highlighted to Techopedia the incoming NFT trends, which all emphasize real use cases.

The accelerating emergence of real-world asset (RWA) NFTs is not just about tokenization, but about improving accessibility and creating new markets and liquidity opportunities, Liann said.

In addition, NFT exchange-traded funds (ETFs) allow access to a diversified portfolio of NFTs, allowing for broader participation, while artificial intelligence may help make NFTs more accessible and functional.

Meanwhile, curating real photographs as NFTs appeals to major brands looking for authenticity, quality, and exclusivity.

NFTS can be Behind the Scenes and Offering Value

Market observers have long said that the key to adopting blockchain technologies — including cryptocurrencies and NFTs — is that they become part of the underlying infrastructure that users do not think about.

When making a retail purchase online, buyers are unaware of the payment rails processing the purchase — they simply choose their items and submit their payment details to place an order for delivery.

As Nasisi from Booksie put it:

“Being able to create publicly verifiable, unique digital assets is extremely useful, so it’s going to continue to find applications in publishing, art, finance, supply chain management, and more.”

Booksie’s Limited Editions, for example, allow digital creators of books, short stories, poems, essays, and articles to sell their work as premium products that are limited in number and come with ownership rights — recorded on the blockchain — for the purchaser, who can display, transfer or sell them if they wish.

Nasisi added: “The blockchain allows us to create a new digital book publishing and purchasing experience complete with real ownership, rare books in limited editions, and opportunities for book collectors and resellers to participate in external markets.

“The blockchain can help a writer grow their royalties and also protect their work and reputation. The public ledger can be used to create new types of content and business models for writers, including limited editions, access to fan clubs, exclusive reader rewards, and more.”

Booksie is also beta-testing Postmarks, a feature that allows authors to digitally stamp their work on the blockchain to prove authorship and is used to verify that content has been created by a human.

Nasisi added:

“There’s so much potential to use NFTs to fundamentally change the nature of digital content across a variety of industries. Publishing is just one small piece.”

Hybrid Token Standards Unlock New Use Cases

The value of NFTs is seen in their ability to provide exclusivity, proof of ownership, and accessibility, but they also have some limitations, including high transaction costs, low liquidity, and lack of interoperability.

To address these challenges, developers have started proposing new hybrid token standards that combine features of fungible and non-fungible tokens to create new types of tokens that can be adapted depending on their use case.

Pulier of Vatom, told Techopedia:

“Unlike fungible tokens that trade more like stocks, NFTs trade like art, with the psychology of individual uniqueness. This dichotomy, where fungible tokens bring superior liquidity and NFTs bring better engagement, creates the opportunity for a new solution that merges the two.

“This is the idea of an NFFTs, a non-fungible fungible token, a new token type that combines the gamification power of NFTs with the liquidity of crypto.”

ERC-404 is an experimental Ethereum token standard that combines functionalities from fungible ERC-20 tokens and non-fungible ERC-721 tokens so that tokens can be both fungible and non-fungible, depending on the specific implementation.

For example, an ERC-404 token can be traded as a fungible token but become an NFT once it is used or redeemed — taking on unique characteristics and value.

Conversely, an ERC-404 token could start as an NFT and be fractionalized into smaller fungible tokens for trading and then recombined as an NFT.

Pulier is developing a new smart contract called ERC-741, a reference to the combination of the ERC-20 and ERC-721 standards.

“While recently we’ve seen many projects proposed to address the challenge of a hybrid token, none have yet addressed the key requirements the NFFT is meant to solve,” Pulier noted.

In the new proposed form, an NFFT must:

• work for new projects and existing projects without disruption or re-issuance
• scale to mass volumes
• work across all chains
• handle denominations simply
• be 100% compatible with current centralized exchanges, decentralized exchanges, marketplaces, and decentralized apps (dApps)
• maintain ownership, even as the hybrid tokens are flipped between states, moved between wallets, or used in the larger world of exchanges, games and apps

The first hybrid NFFT projects are using AI-generated humor and art to issue thousands or even millions of tokens in a transaction, each one with creative content.

Pulier said:

“Owning novel, interesting objects at this scale was never before possible, and we are having fun exploring the kinds of emotional and economic user experiences this phenomenon opens up.

“What is creativity? What does it mean to own and share unique works in this context, and what kinds of new gamification concepts now emerge?”

A resurgence in NFTs will not be led by speculation, Pulier added.

“The primary motivation for most people’s use of crypto is speculation, and anyone who claims otherwise is misguided or serving an agenda.

“Yet, despite this fact, NFTs are poor speculative instruments, given their unique nature and the economics of finding an interested seller or buyer per object.

“Conversely, fungible tokens are ideal for speculation and, as a result, they command superior liquidity and volume across centralized and decentralized exchanges.”

According to Pulier, rather than trying to create more speculation on NFTs, NFFTs focus on their usefulness as objects of utility or engagement rather than price.

“In this context, NFTs will start to do what they do best, leaving speculation behind.”

The Bottom Line

While the hype around NFTs from recent years has cooled off, the benefits of tokenized ownership of digital and real-world assets still make them an attractive tool to a growing number of service providers and brands.

Rather than focusing on the novelty of NFTs and price speculation, new use cases are emerging that use NFTs as part of the Web3 infrastructure that enables content creators to offer new and interesting features to their audience.

A final word from BitcyClub’s Kohanov: “If we want NFTs to sparkle again and become a must-have in major marketing strategies, we’ve got to get down to business and offer real solutions. That’s the key to making NFTs stand out from the pack.”