Eye on AI - January 7th, 2022
Welcome to Aigora's "Eye on AI" series, where we round up exciting news at the intersection of consumer science and artificial intelligence!
This week, we’ll be looking at the explosive growth and future potential of NFTs.
Pandemic Brings Explosive Growth to NFTs
One thing 2021 will surely come to be known for is the rise of NFTs. An NFT, or non-fungible token, is a unique and non-interchangeable unit of data stored on a blockchain which acts as a digital ledger of ownership. Though NFTs have been around since 2014, they went relatively unnoticed until the pandemic. With physical interaction reduced, brands, artists, musicians, and celebrities were forced to search for new ways to remotely engage with their users. This, according to the article “From art to gaming: The biggest NFT trends of 2021,” led to unprecedented growth in the NFT market.
“... the volume of nonfungible tokens (NFTs) sold this year could eclipse $18 billion,” writes Cointelegraph contributor Zhiyuan Sun. “From artwork, music and in-game characters to videos and photographs, these minted certificates of ownership for digital assets on blockchains are well sought after by collectors, investors and philanthropists alike.”
Part of this growth can be tied to the growth of crypto as a whole. The other part, according to the Nasdaq article “NFTs: Beyond the Hype,” was due to the emergence of marketplaces labeled as ‘hype generators’ which relied on hype to drive prices for digital assets through online auctions. These markets are largely driven largely by wealthy collectors. Additional marketplaces for mass use, such as digital ticketing and gamification, are growing, but have yet to see the same market impact.
“Stretching from proof of attendance and fan engagement to media consumption, the opportunities for similar NFT uses are encouraging,” writes Nasdaq guest contributor Nilesh Khandelwal. “The real potential and future of NFTs lives in this realm, beyond the hype of blockbuster transactions dealing strictly over collectibles.”
Future Growth of NFTs Lies in the Metaverse
There’s little consensus on whether the NFT market will continue to grow. Warren Buffett famously referred to Crypto as “rat poison,” though to date hasn’t commented on NFTs specifically. Other major investors, including Mark Cuban and Elon Musk, see NFTs as the future of digital payments. The growth or decline of NFTs, as Khandelwal noted above, depends largely on a realm where NFTs can be used beyond hype marketplaces. That realm, according to digital art auction platform Nifty Gateway co-founder Griffin Cock Foster, may be the metaverse.
“We were very surprised by how quickly NFTs grew and how quickly they've managed to capture the imagination of the world and of culture,” Griffin told Business Insider. “... If the metaverse becomes as big as Meta seems to think it will, then NFTs will play a foundational role in that.”
The gigantic ‘if’ in all this is if a successful metaverse can be created at all. At best, it’s years away from becoming a reality. At worst, it will never become what we imagine it could be.
“The concept [of the metaverse], which could be more than a decade away from being fully realized, will take cooperation among tech giants,” writes Reuters contributor Elizabeth Culliford. “In June, investment firm Roundhill Investments created an exchange traded fund (ETF) to track and profit from the work of the metaverse enablers. Hours before Facebook announced its rebrand, another firm launched its own metaverse ETF.”
It’s anyone’s guess whether a fully adopted metaverse will successfully be created. If it is, NFTs will almost certainly play a major role. And with brands like Nike, Adidas and others already investing, betting on a future metaverse, though uncertain, could be worth the risk.
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