NFTs — What is the State of the Industry?

Here at Find Satoshi Lab, we’re always playing the long game.

As we launch our new NFT marketplace MOOAR, we’re continuing to stick to this value — we believe NFTs will be a massive market in the future, as the power of NFT technology is realised.

Why are we so bullish on NFTs? Isn’t the market stagnating? Well… it’s a little more complicated than that. Let’s dive in.

For context

In the last couple of years, NFTs have made a name for themselves as one of the most promising new technologies of Web3.

Last year, their rise went hockey-stick meteoric, bursting into the mainstream with a splash and spiking 21000% to hit $17.6 billion in trading volume, according to a report from nonfungible.com.

Social Identity

Why has there been such a huge interest in NFTs? For one, NFTs are a natural progression for the next evolution of our digital identity. The current state revolves around different identities across multiple platforms, with little overlap. NFTs are the first step in allowing users to migrate their identity, one that they truly own, across different platforms.

This is augmented by the sense of belonging that comes with it, being a part of a community of like-minded individuals that live and breathe similar values.

Further, NFTs have introduced a new form of subtle social flexing. What once consisted of posting lavish pictures, has now transitioned to a simple process of just setting your PFP to a prized NFT and the world gets the hint. This is one of the reasons why our marketplace, MOOAR, is focusing on PFP collections. Social identity will be one of the biggest proponents for the NFT movement, and we want to be fully behind it before the next bull run!

While growth of NFTs has continued to hold relatively strong through Q1 of 2022, with over $12 billion in trading volume and over 28 million in sales, the same can’t be said for Q2. Amid economic drawbacks and the infamous collapse of the Terra ecosystem, the wider crypto market crashed as both individual investors and centralised finance liquidated en masse.

In parallel with the wider ecosystem, the NFT market dropped by 33% ($8 billion) in terms of trading volume, and sales count dropped by 29% to 20.23 million.

Courtesy of DappRadar

Now that the initial surge of popularity, hype, and speculation has slowed and the dust has settled, what is the state of NFTs today?

Let’s take a look.

The State of the NFT market

Looking simply at the numbers across the board doesn’t paint a pretty picture. After peaking in January, trading volume has now declined by over 97% since the start of the year, from $17 billion to $470 million.

Meanwhile, qualitative interest has also dropped off a cliff, with a downturn in Google search trends and discussions across the web. Even blue chip NFTs have been affected. Trading volume in Q3 for the top 11 blue chip collections dropped by 88%. Bored Ape’s volume has dropped 43%, CryptoPunks is down 21%, and Mutant Ape’s is down by 30%.

But, contrary to popular opinion, this doesn’t spell doom for NFTs.

Looking closer, a number of metrics show that there’s reason to believe there’s still plenty of life in the NFT market.

For example, in 2022 the number of unique traders in Q3 still increased by 36% compared to Q3 of 2021 — a good sign, because an increase in new purchases signals that there are curious individuals out there still testing the waters.

Meanwhile, there are plenty of bear-market-defying sales examples. The NFT space witnessed one of the biggest CryptoPunks NFT purchase in history just this September — an 8,000 ETH (~$4.4 million) sale of CryptoPunk #2924. Another example, a generative art project called QQL sold $17 million worth of NFTs this September as well.

Ultimately, demand for NFTs may have fallen off from its highest peaks, but this is natural. New and exciting technologies have almost always brought about periods of frenzied overspeculation, causing imbalances and bubbles that lead to big crashes. Just look at the internet and the dot com bubble, for example.

Defying the Bear Market: GameFi

Meanwhile, an interesting trend that publications like DappRadar have picked out is that blockchain gaming as a whole has also seemed to defy the bear market plunges of the wider ecosystem. Game dapps is “the strongest vertical resisting the market crash,” wrote the authors, with 1.15 million daily unique active wallets (UAW) interacting with blockchain games on average in May, only a 5% decrease — outpacing the plummet of the wider crypto market by a huge margin.

The report points to projects across the board that have showed this

• Splinterlands, a collectible trading multiplayer card game, is like pokemon cards meets world of Warcraft. The game has pressed on with 350,000 daily UAW, shrinking only 4% in May from April numbers.
• Illuvium, an NFT creature collector and autobattler game built on the Ethereum blockchain, is a play-to-earn in a graphically rich sci-fi adventure where users can conquer the wilderness and help crash-landed crew flourish. In June, it sold 20,000 land plots generating 4,018 ETH, or $72 million at the time of the sale.
• Farmers World, a play-to-earn blockchain game where users can grow crops, harvest them, and exchange fruits with others, grew its player base by 18% in May and surpassed 133,000 daily UAW.
• Upland, a virtual property strategy game that’s mapped to the real world, has doubled its player base since May 2021.
• Gala Games is a “new fusion of tech, gaming and creativity…. brought to life iRL at various exclusive and extravagant events around the globe. It hosted its own conference, the Galaverse, in Malta where it unveiled promising partnerships and laid out its plan to build a blockchain game empire.
• Down the investment road, Dapper Labs and a16z have continued to funnel capital into blockchain gaming despite the market downturn. a16z announced GAMES FUND ONE, a dedicated fund committing $600 million to the future of games. Meanwhile, Dapper Labs raised $725 million to further expand the Flow ecosystem.

And even this September, user activity on blockchain gaming DApps have continued to surge, such as Gameta, Alien Worlds, Solitaire Blitz, Arc8, as well as Splinterlands and Farmers World mentioned above. Animoca Brands’ Benji Bananas saw a 2016.54% increase over the past 30 days.

And finally, there’s yours truly — our team here at STEPN, with millions of active monthly users and an incredible user base of dedicated users that are walking, running, and jogging together and building great and healthy habits every single day.

The power of NFTs doesn’t change because of the bear market

As we look to the future of NFTs, many question the future of the industry. Can it last the winter of the bear market? Can it overcome the challenges — like FUD, increased scrutiny, the threat of government regulation and policies, concern around fraud and tax evasion?

If you talk to experts, the answer is almost a resounding yes. NFTs are undoubtedly one of the most promising new technologies around today. And the industry is still quite nascent, in its very early stages. Some could argue that we are at a parallel time in the “new technology” cycle to 2001, where skeptics declared that the “the internet was over.”

One incredible example of the power of NFT-powered gamification is the game “Guardians of Steel and Concrete.” A Japanese NGO made a citizen-powered game to crowdsource infrastructure damage reports and cut their maintenance costs drastically.

Gamers were asked to locate and take photos of manholes to earn tokens, which would eventually be redeemable in real life. When tested in the Tokyo ward and Shibuya, the 10,500 manholes were documented in 3 days — it would have taken many years and cost exponentially more for city engineers to complete the same task.

Zooming out

Many industry professionals believe that the NFT market will not only continue to exist, but will expand and play an increasingly important part of our lives. A Cointelegraph report noted that the NFT market could be worth a staggering $231 billion by 2030 as its use gets integrated — beyond video games, music, art and digital collectibles, to anything that could benefit from tokenising assets.

We at FSL are excited to uncover the full potential of NFTs, and can’t wait to play a part in bringing that to live through our products.