NFT-2022: What to expect from a brand-new industry? Part 2

NFT is a huge branch of the blockchain economy that essentially formed before our eyes in 2021. And while few people knew what “non-fungible tokens” even were a year ago, by the end of the year, the most prominent corporations were already integrating NFT solutions into their products, and the market volume amounted to tens of billions of dollars. Let’s take a look at what we can expect from NFT in 2022.

While the NFT market is growing rapidly, there are ongoing disputes regarding the economic nature of non-fungible tokens. For example, stock exchange traders reproach NFTs for not being a “real asset”, unlike, say, shares.

Of course, one can argue about our understanding of an asset’s “reality”. With the P/E ratio (share price to earnings per share) of more than 10, the cost of acquiring a share can be recouped with dividends in no less than 50-100 years (given that dividends are at best 20% of profits). And considering the P/E of popular stocks gets as high as 100 or even 200, a thousand-year asset recoupment period does not make it “real”.

In both cases, we own only a set of numbers – an entry in the register of shareholders or tokens. We can make money on it only by reselling it, which is where the main difference between stocks and NFTs comes in. Shares generally have instant liquidity – we can sell them the second we want to. And yes, we can also quickly sell “iconic” NFTs like CryptoPunks. But if we get stuck on “iconics”, it will soon reduce the NFT to the art market, which is just a fraction of the stock market’s size.

So what provides such high liquidity for shares? Is it stock exchange? No, that is only a mechanism that creates the possibility of quick liquidity. The high liquidity of shares is actually ensured by the gambling environment – everyday hope of earning money on shares and a fear of losing them. Hence all the daily buys, sales, options, and shorts, which in turn cause regular fluctuations in stock prices, like purchases and sales of chips at the gambling table.

The constant ebb and flow of hopes are due to the continuous influx of new information. Here’s a chip shortage, there’s a drought, or a hurricane, or a speech, and this affects that, and it’s going to impact these companies’ stock prices. In addition, each company generates its own newsbreaks with the latest releases, entries into new markets, major contract signings, quarterly reports, etc.

And what information is out there about 99% of NFTs, besides the creators, curators, buyers, and resellers puffing out their chests? So far, almost none.

Luckily, it is changing. Last year, NFTs mainly were just images. But I believe in 2022, non-fungible tokens will get huge value as club passes, tickets, certificates, licenses, online game “chips”, and so on.

Art tokenization also remains a hot topic, and more and more major brands are likely to engage with it. There are also yet undeveloped trends, such as tokenized musical works. They have not been sold for huge sums by this point, but many platforms are already building spaces specifically for working with music tokens. Another one is trading NFTs that have real-world uses, apart from being works of art.

And while digital art is what has given non-fungible tokens their popularity, it is but the tip of the iceberg. We see quickly emerging new use cases for NFTs and a general shift from crafting to using, as tools for creators are becoming more reliable. What used to require entire developer teams has now turned into NFT “mining” platforms that provide an interface for creators to determine rarity, auction mechanisms, and royalty percentages from secondary sales on Ethereum, Flow, Tezos, NEAR, and other networks. The NFT supply is booming thanks to easy-to-use token-making tools.

Naturally, along with easier and better ways to create NFTs, there are new interesting ways to use them. For example, NFT can serve as a pass to exclusive content and opportunities. Today, creators use NFTs and social tokens to directly monetize their fans by giving them access to premier content, features, and a direct way to invest in their favorite creators. In the future, we will see experiments in which NFTs and social tokens interact, as well as the emergence of crypto versions of Patreon, Substack and OnlyFans.

Here’s an actual current example: American DJ and EDM producer 3LAU offers exclusive access to unreleased songs and new ways to interact with him. To be eligible to purchase some items in the latest 3LAU sale, users must have previous 3LAU NFTs. This is just one case of creators using new mechanisms to reward early adopters and utilize their NFTs.

As early as 2022, we’re going to see a decentralized, cryptocurrency-based Patreon, very different from today’s website fans use to subscribe to content. Content creators will use NFTs and social tokens to create an economy around their communities. Using new platforms, creators will seamlessly sell NFTs, unlock content and images based on owning NFTs or social tokens, and distribute sales revenue back to contributing community members. We will see fascinating experiments where NFTs and social tokens interact, such as NFT drops, which can only be purchased with specific creators’ social tokens, or NFTs, which later grant fans access to social tokens giveaways.

Social token platforms like Roll, tokenized community-management systems such as Collab.Land and Mintgate, and payment streaming services similar to Unlock and Superfluid will all play their role in new decentralized use cases for Patreon.

To be continued…