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The NFT Market Is (Painfully) Maturing, and Projects Must Adapt

BY Eric James Beyer

July 13, 2023

The crisis that the highly-anticipated NFT project Ether has run up against isn’t entirely of its own making. Yes, its team arguably fumbled the ball in a number of ways: initially announcing a steep mint price of 1 ETH and then lowering it, cutting the supply of the project in half due to lack of demand, and failing to mint out even that reduced number of NFTs after waiting a full week between private and public sales.

But you have to feel for the undoxxed team behind Ether, largely because they seem, unwittingly, to represent the last of their kind — an NFT project that followed the blueprint of the past amid a sea change in the industry. Quite simply, the NFT market has fundamentally transformed since the bull run of 2021. It’s drastically different than the summer of 2022 when new projects could still find some measure of success by copy-pasting and coasting on the formula of those that came before them. 

Recognizing this fact, along with the vital implications that follow, will spell the difference between survival and obscurity for businesses that want to find fertile ground in Web3, especially the digitally native. Here’s why.

NFT growing pains

NFTs are in a bad way. Weekly sales volume figures have fallen significantly since December 2022 (numbers that already paled in comparison to June of the same year), and the amount of unique buyers and sellers in the ecosystem — one of the better metrics for indicating the health of the market — has only followed a similar pattern. 2023 has not been kind to the ecosystem, and outside of some notable fine art sales from Art Blocks and Sotheby’s, there hasn’t been much for the industry to hang its hat on.

Why is this happening? You might call it a kind of maturing; many in the space note that blindly throwing their ETH at random speculation from anonymous teams lacking transparency about who they are and what they plan on doing simply isn’t enough anymore. The load-bearing pillar the NFT space has built much of its foundation upon has at last shown itself to be (at least partially) a pillar of sand. The challenge now is in reinforcing it so that the entire structure doesn’t come collapsing down on top of itself.

Reaching out, reaching beyond

Certain projects have seen the writing on the wall for some time and have taken steps to build a Web3-based empire that can withstand extreme weather thrashing. Pudgy Penguins’ recent foray into retail toys for children represents one of several approaches to bringing value to holders beyond the possibility of bull-run quick flips. Forgotten Runes‘ fast-tracked lore and media franchise is another project that shows promise in justifying its continued existence to both holders and those who couldn’t care less about NFTs and crypto. DeGods and y00ts holders, via the clever design of Frank DeGods and the rest of those projects’ teams, have increasing opportunities to grow their social followings and earn revenue as a result.

None of this is to disparage the team behind Ether. The project had roughly all the necessary ingredients for a successful launch that the space is used to seeing. But transparency and utility — real utility, not just buzz-word rhetoric about the concept or tokens that grant access to directionless and unimaginative “IRL events” — has taken the place of mystery and speculation in the NFT landscape.

That the bear market continues to present a challenging environment for builders in the space could ultimately be a great thing. The longer it lasts, the more likely it is to produce projects that consciously look to build beyond the Web3 echo chamber that is the NFT scene. The next bull run will undoubtedly see a rapid return to much of what makes the space exciting, but it’s those same intoxicating features — flash-in-the-pan projects, volatility, casino-like randomness — that could do the space real harm if they are allowed to regain and maintain a position of cultural and financial prominence.

Mass adoption will have to wait

The NFT marketplace and aggregator Blur, for all its potential problems, has exhibited a proactive strategy in appealing to a specific demographic of people (in this case, the NFT pro-trader) and providing them tools of value in no uncertain terms. But, while Blur consistently accounts for much of the volume that takes place in the NFT ecosystem, retail platforms like OpenSea account for the majority of users by a long shot. The pro-trader demographic knows exactly why it’s engaging with NFTs on a regular basis. The space must ensure that the average retail buyer has just as much clarity.

That will only happen if and when the majority of retail NFT volume consists of more than just people securing allowlist spots for hyped-up projects and then flipping them for profit. Scalable Web3 projects with value propositions that recognize the importance of stepping outside the insular NFT Twitterverse are likely one of the space’s best chances of moving forward. Mass adoption isn’t an on-off switch, and hating on the world of web2 is unlikely to serve Web3’s interests.

Web3 enthusiasts would also do well to recognize the fact that not all NFT projects are the same; evaluating one by the metrics used to assess another is akin to using the same standard of success to measure a tech company like Apple and a publishing entity like Penguin Books. Cool Cats is not RTFKT, nor should it be judged as such.

So many people in NFTs taking a step back and asking themselves why they’re in the space and what purpose these fascinating projects and communities ultimately serve is a sign of some much-needed soul-searching in the industry. With the frenetic noise of the last bull market fading ever more into the distance, now is the perfect time for consumers to expect more from Web3 projects and for builders to step up and give it to them.

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