2021 was a big year for NFTs. These assets have transformed from niche digital artefacts to commodities that some of the most famous celebrities are excited to own. They’ve allowed artists from all disciplines to be fairly compensated for their work, providing a new lease on life after 2020 took a huge toll on entertainment and the arts. At the time of writing, the NFT market is sitting at a monthly sales volume of about $2 billion—up from $400 million at the start of the year.
It's hard to pinpoint the catalyst for this growth. Perhaps it’s high-profile sales like Beeple's 'Everydays: the First 5000 Days', or respected musicians like Kings of Leon releasing NFTs that came bundled with real-life perks. Whatever the source, it’s the continuation of celebrities being open about purchasing and selling NFTs that is fueling this growth. NFTs have become desirable and culturally relevant. People are proud to show off their collections.
But what are the next steps? How can we move NFTs from being something that most people have heard about to something that the majority of people own? What is preventing us from unlocking 'mass adoption'?
Uncovering NFT use cases
As time goes on, we are seeing a growing number of use cases for NFTs. Long gone are the days when NFTs solely referred to pixel art or collections of 10,000 randomly generated characters. While projects like these are undeniably still going strong, we believe this is just a small portion of what will come to be on offer. We’re becoming more aware of the technology that NFTs sit upon, the blockchain, and the potential for innovation this brings to a wide range of use cases.
One of the most exciting is the ability to create communities around the ownership of NFTs. A well known example is Bored Ape Yacht Club, a project that was started between four friends in April 2021. Purchasing an Ape grants the owner exclusive membership to the club, giving access to special events around the world and merchandise strictly released for NFT holders. The possibilities around community building are truly endless—expect many more exclusive NFT communities to emerge.
Another important use case for the music industry is that NFTs help solve the industry-wide problem of ticket touting and scalping. This is when companies or individuals buy a large amount of tickets and resell them for a much higher price, resulting in many people being priced out of attending their favourite shows.
NFTs help solve this by programmatically giving back to the original seller each time the token is transacted. Say you buy a ticket to a gig, and then sell it on an online marketplace because you cannot attend anymore. The artist will get a cut of that sale. The same goes for any digital asset that is sold, whether it be a music album, photograph, or profile picture. The artist and creator is always rewarded for each transaction. On most platforms, creators can even set their own royalties for future resales.
Gaming is another growing use case. Play-to-earn, in which players purchase NFTs as game characters and then earn financial incentives for continuing gameplay, is already booming. Axie Infinity is perhaps the most well known example— players in some parts of the world are even able to earn a living wage by playing it. While play-to-earn is still limited to titles that have been created exclusively for that purpose, there is huge potential to incorporate NFTs into games that we play everyday. Imagine being able to sell Fortnite skins for cash once you no longer want them, or purchase rare items and weapons in Call of Duty.
These developments and use cases are coming about quickly. Over the next few years we’ll be seeing new cases develop as the technology matures and the user experience is improved.
Improving the NFT purchasing process
When NFTs were gaining interest at the start of the year, the process of buying one was lengthy, difficult, and expensive. You would need to purchase enough crypto to buy the NFT you wanted, which meant going to an exchange and then transferring the funds you bought into a browser wallet. There is a lot to learn and understand in that process, and a lot that could go wrong for people who aren’t used to making these transactions. No doubt it put a lot of people off from buying their first NFT. It’s one of the biggest blockers preventing mass adoption.
As interest in NFTs has grown, so have Ethereum gas fees. Buyers can spend over $150 on top of the price of an NFT to make a transaction on the Ethereum blockchain. To help with these transaction costs, there are some incredibly exciting developments emerging on Layer 2 networks—blockchains that run on top of the main blockchain and can confirm transactions faster and cheaper. These Layer 2 solutions are designed to handle low-cost transactions, which is going to be a vital piece of the puzzle for mass-adoption as it lowers the barrier to entry for people all around the world.
NFTs are still very early in their maturation, but as new use cases emerge and the purchasing process is simplified, we’ll be closer than ever before to fully realizing their mass adoption.
MoonPay's NFT Checkout solution
At MoonPay, our focus is to make crypto accessible for the next billion people, and a key part of that is user experience. We’re introducing an NFT Checkout solution that allows people to purchase NFTs directly with a credit or debit card—a huge improvement over the current process. Want to learn more about how MoonPay's NFT Checkout solution can help your business? Contact us for more information.