Are NFTs overrated?

When Sina Estav, who bought Jack Dorsey’s first tweet as NFT, auctioned it on April 13, no one anticipated what would follow. The NFT he bought for almost $3million – more than Madagascar and Haiti's combined national budgets, received the highest bid of $280 against the listing price of $48 million. The auction received just seven bids ranging from 0.009 to 0.0019 ETH – leaving the mouth of everyone agape. But this was not surprising to those who have labeled NFTs as hyperbole, exaggeration, fads, and overrated, among other names. But the question is, are NFTs truly overrated?

Although many have sold artwork as NFTs for staggering amounts, with Beeple, the digital artist who sold an NFT via Christie’s auction for $69 million, topping the list, there are still doubts and concerns about the functions of NFTs.  

Why NFT is touted to be overhyped

Imagine you can create a thousand of the same or similar artwork in a few minutes or use an app to create different versions of the same NFT. With no limit to the amount of anything you can mint as NFTs, ranging from music, collectibles, and in-game assets, thousands of creators are already on each marketplace. Therefore, the NFT market is driven by artificial scarcity because the cost to create most of the NFTs on the marketplaces is lower than real-world art, leading to more NFTs than buyers.

Okay, think of art that you own, but anyone can download it and enjoy the benefits like sharing and using it as a screensaver; the only difference is that you own the certificate of authenticity of that digital art. So what is the joy in holding a certificate of an item that others could use? For instance, an NFT buyer owns the digital certificate to a music moment minted as NFT, but other people can download it. However, this doesn’t make NFT a fad because owing the art piece is different from being able to download it, especially with the opportunity of reselling the piece for a higher price. 

NFTs have been touted as fads because of the extremely high prices, ruling out many low-income earners from participating in the space and limiting the number of digital works middle-income earners can afford. Additionally, the utilities promised are difficult to go through because NFT is still unfolding and hasn’t become a staple among most internet users – the total NFT market was $41 billion with 28.6 million wallets in 2021. Another reason why the debate of NFT being exaggerated has shifted towards the critics is rug pull situations, where NFT creators may liquidate the entire asset, leaving the investors at a loss.  

These reasons shifted the debate towards the critics that do not believe in NFT and see it as a trend that would fade soonest. But does it mean we should withdraw from trading NFT, or do we need to find better and long-lasting use cases?

Beyond the hype, is NFT here to stay?

Whether NFT is here to stay or not depends on the side of the debate, while the points above proved that NFT is a fad, especially with speculative NFT providing no value for their worth, bringing out tangible reasons for investing in NFT may swing the debate. The top reason, which will also ensure NFT isn’t a fad, is to provide use cases, which will also grow the ecosystem. 

NFTs that solve business problems will stay, and speculative NFTs may go. Blockchain technology, the foundation of NFT, serves real purposes like web2.0. As a result, blockchain technology products providing solutions to businesses will stay. But does that mean NFT provides real use cases? Let’s see. 

Many top celebrities invest in NFTs, including Lindsay Lohan, Ja Rule, and Mark Cuban. Brands aren’t left out as well as Louis Vuitton, NBA, and Formula1 have joined the moving trend, but this is not enough to convince us why NFT is here to stay. Still, NFT is here to stay because...

First, NFT is the first blockchain asset that the price is not affected by the price of other cryptocurrencies. Thus, with the fact that blockchain, together with smart contracts, is the technology for the future, we are going to witness more use cases, with NFT a worthy member. 

Beyond fad, NFTs provide tremendous opportunities for businesses to register ownership and authenticate products, allowing customers and business owners to make money simultaneously. Although current NFTs prices are driven by speculation rather than real values and subjected to price manipulation from insider trading and influencers, providing use cases with actual real value will make NFTs stay. 

Additionally, blockchain has ushered in tremendous use cases like metaverse, GameFi, DeFi, web3, and decentralized autonomous organization (DAO). With the realization that these use cases are here to stay and have a say on how we live, NFT is also part of the blockchain ecosystem. Moreover, NFT is such a use case that allows others to thrive. It shows opportunities in other use cases like NFT staking in DeFi, as voucher or ticket in the metaverse, and as in-game assets in GameFi, among others.

Are those points enough to guarantee the long-term efficiency of NFTs? Maybe yes or no. However, the future can be brighter when use cases are mouthwatering and irresistible for businesses, investors, and all parties. Thus, providing more use cases may swing the debate towards why NFT is here to stay. 

Creating more use cases

When you hear of NFT, the attention is towards digital art like Crypto Punks and Bored Ape Yachts, collectibles, in-game assets, tweets, etc. But if there is anything 2022 has taught us, the curtain is drawing on NFT hypes, begging for the provision of better use cases, or NFT may be a thing of the past. But what are the current use cases of NFTs?

As it stands, what are the reasons why you would hold some pictures of apes and other digital artwork that others can download for free? Therefore, there are need to explain the features of NFTs before shedding light on the use cases; this includes 

NFTs guarantee access to royalties and dividends

NFTs permitting future airdrops of other NFTs to gain token rewards without investing a dime

NFTs representing real asset ownership

NFTs unlocking access to land in the virtual space

Even with these standout current use cases of NFTs, there are yearnings for NFTs that will stand the test of time and provide the pathway for the future of NFTs.

Major utilities expected of NFTs

Launchpad NFTs

Numerous crypto projects rock the market daily, and standing out from the noise begs for extra effort. Whitelist and giveaways may help get attention to different NFT projects. Therefore, using NFTs to support new NFT projects and economies is an important use case, for instance, granting membership to early NFT projects and future releases.   

DeFi benefitting from NFT

NFT can have more functionality in the DeFI space by merging NFT with mining, staking, and liquidity. For instance, Wolf Game NFT generates over $50 million in a week by providing means to stake NFTs to earn tokens where in-game decisions of the players impact staking rewards and NFT fates. In addition, the Bored Ape Yacht Club will also release its token with staking features.

NFT in web3 integrations

Big brands like Nike, Ferrari, and Adidas are exploring the possibilities of NFTs and metaverse – Adidas purchased Bored Ape NFT, and Nike provides a digital twin of their products. With NFT, the possibilities are growing as web3 integrations grow. Here NFTs will help record transactions, prove ownership of products, enjoy incentives, serve as vouchers, and other use cases.

NFT in decentralized autonomous organizations (DAO)

Constitution DAO raised $47 million worth of Ethereum (ETH) to bid on a copy of the US constitution traditionally auctioned by Sotheby’s. Although they lost the bid, the attention raised much optimism about the future of organizations, how they work, and their capital formation. So it is not out of place to see more DAO-focused NFTs where the contributors enjoy the dividends.

Providing functional use cases of NFTs through dynamic and nested NFTs

NFT needs to evolve beyond the buzz of buying bored apes and tweets. The common use case of NFT is the representation of digital artwork where a collector can purchase a token and own the artwork. The metadata bearing these tokenIDs, NFT description, image, and others don’t change.  

It is impossible to build games or videos that require data or NFT updates after achieving some milestones with unchangeable metadata. As a result, video games and fantasy sports leagues on blockchain will be limited or impossible to build. But NFT needs to evolve to provide more use cases – here is where dynamic and nested NFTs come in.

Dynamic NFTs

Dynamic NFTs allow changes in the metadata through a smart contract providing and initiating instructions for the underlying NFTs and metadata to change. Besides the metadata, dynamic NFT can be minted after achieving some milestones in a game to manifest some hidden features.

What makes dynamic NFT stand out, and what are the use cases?

The primary feature of dynamic NFT is the metadata containing traits, names, and file links of the token. For instance, updating the metadata unlocks many benefits like character progression in a game – a child becoming a man. 

Additionally, dynamic NFT will bring tremendous benefits to real estate as it ensures changes in maintenance history, age, market value, past sales, and other real estate property features. These are examples of how dynamic NFT will revolutionize the NFT space and bring never-seen-before use cases. Thus, blockchain and smart contract evolution are to the beauty of NFTs, too.

Nested NFTs

With nested NFTs, you have digital assets embedded in other digital assets. For example, you can embed liquidity tokens, utility tokens, social tokens, interest-bearing assets, and others into another asset. From the word ‘nest,” a nested NFT is a basket of other assets. You can trade nested NFTs on a marketplace with their values as a sum of other digital assets embedded in them.

But why are nested NFTs important, and what opportunities do they provide?

Akin to a mutual fund encompassing multiple equity stocks, a nested NFT houses many tokens, allowing you to manage a crypto portfolio through a single NFT. Through smart contracts, users execute trades, and the nested NFT is updated when a new asset is added or sold. With optimism roaring high, what are the current use cases?

Artists and creators enjoy nesting to assemble their artworks – many artists can come as one to trade their artwork and share the royalty whenever an NFT is sold. Equally, the music industry will benefit when individual songs from a different artist are nested and sold as nested NFTs. This cuts gas fees and other charges.  

Additionally, company promotional NFTs in the form of nested NFTs that are time-locked are ideals for giveaways, revenue sources for companies, and community prices. This is what MatrixSwap and xFUND are doing. Another use case is the vesting capsule, where brands time-locked nested tokens for a specified period. Still, the tokens can be traded, used as collaterals, and others even when the tokens embedded in them have not hit the market.

In conclusion, the future of NFTs is not in apes or tweets with little or no functions. As such, speculative NFTs may fade out soon. However, like the foundational technology, blockchain, in which NFTs are developed, providing use cases for NFTs will guarantee the long-term and tremendous possibilities of NFTs. Nested and dynamic NFTs currently unearth these possibilities.