By Hiba Hassan, head of design and communications department, SAE Institute Dubai
The NFT market has crashed, wiping out billions of dollars in value. DappRadar reported a drop in net sales from $12.5bn in 2022’s first quarter to $3.4bn in the third quarter. Whether trade volume, NFT games sales (Axie Infinity and Gods Unchained) or art collectibles (CryptoPunk and Bored Ape Yacht Club), crash reports have been filling news sites since spring. But what are NFTs, and why are they important?
A non-fungible token (NFT) is a form of digital unit coded on the blockchain, designating ownership to its holder. Each NFT is designed to be unique, unlike cryptocurrencies that are interchangeable. While the blockchain can’t accommodate a massive amount of data, the data the NFT holds is linked with items such as images, videos, audio, or even in some cases physical objects. In other words, an NFT is a digital proof of ownership or certificate of authenticity that cannot be copied, substituted or subdivided since it is forever recorded on the blockchain public ledger. The last two-year boom in the market has dismissed the value of NFT technology and placed emphasis on its associated art.
Opensea is the largest and first NFT marketplace, established in 2017. It hosts art, music, photography, trading cards and virtual worlds. Rarible focuses on buying and selling art, collectibles and video game assets, and signed a deal with Adobe in 2021 to verify metadata and ensure the authenticity of the creators on its platform. Binance, a late joiner in the NFT world, opened its marketplace in 2021 but has been a player in the cryptocurrency exchange since 2017. Binance offers artwork, gaming items and collectible NFTs at a low fee.
With the hype on NFTs peaking, many brands surfed the waves. According to its creator Dapper Labs, the NBA’s Top Shot product is among the stars, with reported sales of $224m in February 2021. The store sells legendary moments in sports history, an equivalent to collectible cards. In August 2022, Tiffany & Co announced a collaboration with CryptoPunk NFTs to appeal to younger audiences. It created a collection called NFTiff that provides 250 digital passes to claim a custom-made Tiffany pendant using 18 carats of rose or yellow gold with a minimum of 30 gemstones and diamonds to portray a likeness of the CryptoPunk art. The collection is sold out. The pendants will be available to pass-holders beginning in early 2023. On November 14, 2022, Nike announced the launch of its Swoosh marketplace, which will feature NFTs as digital assets for games and the metaverse, and future collaborations with athletes. “We are shaping a marketplace of the future with an accessible platform for the web 3-curious,” says Ron Faris, GM of Nike Virtual Studios. The platform is accessible to beta users and will launch its first collection in 2023.
In the Middle East, several innovative NFT marketplaces are emerging. Nifty Souq launched in August 2021, the first and largest platform for the region to make and sell NFTs. It offers user-owned digital goods, including songs, music, illustrations, gifs, poetry and many more assets. Nuqtah welcomes all artists and art fans and allows local fiat currency purchases, making entry into the NFT space easy. Nfty Arabia and Oasisx.world are launching marketplaces that let users trade art from the region. Another notable NFT marketplace is Asly.io. While the platform has yet to launch, it promises curated content, giving it a unique niche. This marketplace might be a key facilitator for brands to enter the ‘purposeful’ NFT market beyond digital trading and avatar art NFTs.
The involvement of MENA brands in the NFT space is in its infancy. Art Dubai held a real-life NFT and digital art marketplace early this year for its 15th annual fair, called ‘Art Dubai Digital’. Dubai Culture also launched Morrow, a platform that curates NFT arts. The Ministry of Culture in Saudi Arabia launched an NFT digital art forum in partnership with Sotheby’s and the Visual Arts Commission. And in April 2022, Emirates announced its entry into the metaverse and NFTs. NFT-watchers hope the airline will go beyond collecting and trading digital NFT assets to explore the possibility of NFT tickets and rewards programmes, leading the NFT utility to a new height locally and internationally.
According to a report published in July 2022, NFT market potential will grow from $3.42bn in 2022 to $18.22bn by 2028. The market growth of purposeful NFTs is critical for that projection. Chainalysis economist Ethan McMahon says the current crash is a needed shake-up of the market to move away from crypto assets like avatar images and more towards innovative NFTs with utilities (gaming, royalties, real-life asset ownership, etc.). NFT technology has yet to showcase its potential, and brands need to embrace the true essence that could revolutionise customer loyalty and enhance targeted advertising.