The non-fungible token (NFT) market has been in more than a doldrums lately. Since peaking in January, the volume of daily NFT sales has plummeted from just over $6 billion to just $850 million — a nearly 90% drop.
For a new asset class, these types of declines can be legitimate concerns, but they’re not unheard of. There is evidence that this decline is part of the maturation of NFTs. Every new asset class goes through stages of development. Use cases evolve as utilization increases.
Even Bitcoin (BTC), the original cryptocurrency, went through a similar process. Initially, bitcoin was reportedly used for transactions on the dark web. Slowly, it has gained wider acceptance, to the point that publicly traded companies like it Tesla (TSLA) started holding bitcoin.
The early stages of NFT adoption were dominated by profile picture NFTs based on ether (ETH) Network, like Bored Ape and CryptoPunks. As this chapter on NFTs comes to a close, we can expect more blockchains to emerge and different use cases to emerge more frequently.
Just last month, NFTs based on the Solana (SOL) Blockchains are enjoying increasing popularity. So much so that NFT transactions on the Solana networks recently surpassed Ethereum in daily sales for the first time. Because Solana has cheaper fees and faster processing speeds than Ethereum, it has become a popular alternative for NFT investors and creators.
Just a few months ago, this would have been an unimaginable achievement. But now that market share is spread, Ethereum is unlikely to regain what it lost. The eyes of the NFT world are beginning to see that there are alternatives to Ethereum.
This is also reflected in the measures taken by the NFT marketplaces. This year, OpenSea started listing Solana-based NFTs. To go one step further Meta (META) announced that their social media apps Facebook and Instagram would start integrating not only Ethereum NFTs but also Solana, polygon (POLY)and Flow (FLOW) NFT too.
I think it’s safe to say that the NFT marketplace will likely never be the same. Ethereum’s iron grip is probably gone. New competitors attract serious attention.
Alongside other blockchains, NFTs are proving they can offer more utility than just a profile picture. At its core, an NFT is a collection of code that proves ownership. Known as a smart contract, this code can be customized to perform a variety of actions. Sellers of an NFT can add terms that entitle them to a share of the sale each time an NFT changes hands.
This type of utility is starting to attract the attention of many large organizations. Famed venture capitalist Gary Vaynerchuk commented on the future role of NFTs in a recent interview with sports media outlet Bleacher Report. In the interview, Vaynerchuk was asked how he views the use of NFTs by professional sports leagues. He said, “One thing I can guarantee you is that in 25 years, our (NBA) tickets will be NFTs.”
His reasoning is that by using an NFT ticket, the NBA can program smart contracts to ensure royalties are earned every time a ticket changes hands in the aftermarket. Currently, if a ticket is sold on eBay or any other platform, the NBA has no benefit from the sale.
For the same reasons, Vaynerchuk believes NFT technology will revolutionize concert tickets, airline tickets and even real estate ownership.
NFTs aren’t going anywhere anytime soon. Investors should take note of these developments and continue to investigate how the underlying technology is being used. The profile picture era of NFTs will probably only be remembered as the first of many chapters in the history of NFTs.
Randi Zuckerberg, a former director of market development and spokesperson for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. RJ Fulton has positions in Bitcoin, Ethereum and Solana. The Motley Fool has positions in and recommends Bitcoin, Ethereum, Meta Platforms, Inc., Solana, and Tesla. The Motley Fool has a disclosure policy.