The NFT market continues to grow, despite some seeing it as a speculative bubble. A non-fungible token (NFT) is defined as a unit of data stored on a blockchain to certify ownership of a digital asset like images, audio, videos, or other types of collectibles such as books, blogs, tweets, or memes. While NFTs have yet to gain mainstream attention, brands from a range of sectors are adopting them to cement their position in the developing metaverse mega-theme.
NFTs are gaining popularity, despite the business community’s scepticism towards blockchain
Some estimates suggest that sales of NFTs recorded an astronomical 60-fold growth between 2018 and H1 2021. Celebrities, influencers, and artists were the prime drivers of this growth, while large companies are now starting to get serious about NFTs. For example, in March 2021, the artist Beeple sold an NFT of his work for $69 million and in December 2021, Nike acquired RTFKT, a company that creates NFT sneakers.
While investments in NFTs are gaining momentum, enterprise sentiment towards underlying blockchain technology remains low. Blockchain attracted the most scepticism from respondents in GlobalData’s Emerging Technology Sentiment Analysis Q3 2021 report, with 19% saying that it was all hype. Roughly 16% of respondents said the same in the Q2 2021 polls.
NFTs will continue to grow and present an interesting value proposition
Much of the recent growth of NFTs is attributable to the steady progress of cryptocurrencies. The cryptocurrency market is worth $3 trillion and will continue to grow in 2022. This indicates that NFTs will become more popular in the next year, as they start to enable the trading of ownership, royalty payments to original artists, and provide a new venue for creativity. The main growth areas for NFTs will be in sport, digital art, and gaming, according to GlobalData’s Tech, Media, and Telecom Predictions 2022.
Large companies from sectors like sport (e.g., NBA), beverages (Pepsi), apparel (Gucci), music (Universal Music Group), e-commerce (Alibaba), entertainment (Disney), travel (Marriot), and gaming (Tencent) among others are gravitating towards NFTs. According to the data from NFT company Dapper Labs, the NBA’s Top Shots has generated more than $700 million in sales from NFTs between 2019 and August 2021. This demonstrates that NFTs offer new revenue stream opportunities. Companies are also keen to use NFTs to improve brand awareness, reinforce consumer engagement, and expand into the metaverse – an emerging mega-theme that is being touted as the next incarnation of the internet.
NFTs are a channel for companies to enter the metaverse
The metaverse is a virtual world where users share experiences and interact in real-time within simulated scenarios. It could transform how people work, shop, communicate and consume content. Thus, companies are looking to establish their positions in the theme early and NFTs are just a way of achieving this. Adidas, for example, has partnered with NFT creators Bored Ape Yacht Club and Pixel Vaults Punks Comic, inked a deal with crypto investor Gmoney, and purchased digital land in the Sandbox, a blockchain-based virtual universe.
The growing NFT craze will popularize the metaverse among potential users
The metaverse is still conceptual, meaning it is not widely known or understood by the general public. The metaverse will gain mainstream awareness as more brands join the NFT craze and develop new experiences for users in the coming years. This trend will legitimize the metaverse in the eyes of the wider world and bring in significant revenue.