It’s been two years since non-fungible tokens (NFTs) first entered the popular lexicon, and the industry has ridden quite the rollercoaster since. NFTs – the tokens which rely on a digital blockchain authentication, deriving their value from relative scarcity – first exploded in popularity in early 2021, with a series of eye-popping sales ranging from a $2.9m tweet to $69.3m .jpeg artwork.
Like other blockchain-enabled technologies, NFTs had a rocky 2022. In a year when Bitcoin lost over half its value, and the cryptocurrency exchange FTX collapsed, several early backers in the NFT market became embroiled in controversies.
Logan Paul – having already seen one such token lose all but a fraction of its value – was heavily criticised after his CryptoZoo project was reported as a scam, whilst figures as prominent as Justin Bieber and Paris Hilton were listed as co-defendants in a class action lawsuit surrounding the company behind the Bored Ape Yacht Club NFT collection.
So, does this mean the end of NFTs? In the eyes of some experts, 2023 could be the year in which marketers shift budgets away from NFTs and towards other emerging technologies, such as AI.
That’s not to say we should be reading NFTs their last rites, however. While the initial bubble has undoubtedly burst, this offers an opportunity for the NFT market to mature, ridding itself of bandwagoners like Paul and focussing on innovation. As Adrian T’so, Head of Strategy at DDB Hong Kong, notes: ‘there is no reason why NFTs … should be limited to a coupon for merch or some fancy jpeg. It can be those things, but it is already so much more.’
Indeed, while the failures of some investors stole headlines in 2022, several best-in-house examples slid quietly under the radar. A collaboration between Deeplocal and Shopify at SXSW, which allowed festivalgoers to shop merchandise from the Doodles online store in an interactive experience, won acclaim for its immersion, highlighting the potential for NFTs to thrive in so-called ‘phygital’ e-commerce environments, where the digital and real worlds collide.
Media, too, can benefit from innovative activations centred around NFT technology. In Brazil, a shoppable OOH crypto art exhibition drew some 13 million organic impacts and was named a winner in last year’s Drum Awards. And, though the future of the industry remains uncertain, a host of museums have invested in NFTs, affording digital artists unprecedented mainstream recognition.
While far from refined, the NFT industry is not dead yet. Marketers may invest elsewhere in the immediate term but NFTs are likely to form part of the wider web3 ecosystem, alongside AI and the Metaverse. First, the technology to power NFTs into valuable assets for marketers and consumers requires attention.
For blockchain technologies, sustainability continues to be a major issue, with the demand for resourceheavy server farms and cryptocurrency mines consuming enough energy to power some 80,000 households. But as innovation in the sector grows, so the carbon footprint should fall. Ethereum, the second biggest blockchain, recently transformed to a ‘Proof of Stake’ system which reportedly uses 99.9% less energy, and competitors are likely to follow.
We are certainly years away from realising the full potential of NFTs, and brands would be wise to consider their environmental impact before investing yet. Sure, NFTs are probably Not For Today – but tomorrow could be a different story.
