Nonfungible tokens (NFTs) took the world by storm in March and April of this year with an onslaught of daily headlines about record-breaking sales and big-name companies dropping their own one-of-a-kind digital art pieces dominating the mainstream media.
Fast forward a few months and the narrative has shifted to the ‘NFT bubble’ popping and doom and gloomers warning that NFT investors are on the verge of losing all of their money.
You knew this was coming, right?
NFTs Are Dead
(of course you can buy this song as an NFT)https://t.co/gj6JFpFKZX pic.twitter.com/NFveBKgdRn
— Jonathan Mann (@songadaymann) June 4, 2021
Active users jump ship
Active users are the lifeblood of NFT marketplaces, but the choppy nature of the cryptocurrency markets over the past two months, including the May 19 sell-off which saw $1.2 trillion in value wiped from the crypto market cap has led to a precipitous decline in user activity.
The decline in active wallets coincided with a decline in sales across the space as rapidly falling token prices exacerbated the losses of holders and collectors who saw their valuable art pieces lose up to 90% of their value overnight.
NFTs are down but not out
All is not lost, however, as there are many solid value propositions and use cases for NFTs that entrepreneurs and traditional businesses have noticed and embraced the sector.
The blockchain ecosystem has already put forth multiple viable options to deal with problems facing the NFT sector, such as the launch of Enjin’s Efinity and JumpNet protocols which help to lower fees and allow for interoperability across different networks.
Another popular solution Polygon, an Etheruem sidechain that allows projects to stay on Ethereum while also having access to a fast, low fee environment. In the past three months a large number of NFT-oriented and gaming projects have migrated to Polygon and as the crypto and NFT market improve, these low fee environments should help to boost activity on the network.
The NFT ecosystem may have seen a significant drop in activity and token values over the past month but it’s far too early to proclaim the death of NFTs as the world has only scratched the surface of what is possible with this nascent smart contract technology.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
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