Written by: Nancy, PANews
In the past few years, the NFT market has experienced dramatic fluctuations, from the initial explosive growth to the current sharp decline. In this market storm, the vast majority of NFT projects have failed to withstand the severe test of the market, causing doubts about the long-term viability of NFT as a crypto asset class.
At the first global NFT developer summit "NFTCON 2024" jointly initiated by PANews and NFTScan, PANews released the latest NFT industry report. This report deeply analyzes the current development status of the NFT market and explores the potential path for the sustainable development of NFT, helping everyone to more fully understand the complexity of the NFT market and gain insight into its possible innovation paths in the future.
Multiple challenges and market changes for NFTs
Since entering 2024, the NFT market continues to face numerous challenges and uncertainties. Despite several key indicators suggesting a gradual stabilization of the market, the NFT landscape has also changed due to shifts in market demand, platform competition, and narrative trends, necessitating new empowering for its value system.
Sales decline, profits rebound, and potential market demand grows
According to the latest data from CryptoSlam, as of November 6, NFT sales this year have approached $7.43 billion, a decline of about 14.8% compared to the beginning of the year. In terms of average selling price, the average sales amount for NFTs this year is $119, which has increased compared to last year, but is still only about a quarter of the historical peak.
Despite the overall sales decline of NFTs, market profits have shown signs of recovery. As of now, profits from NFT transactions in 2024 have exceeded $33.3 million, sharply contrasting with the nearly $250 million negative earnings situation in 2023. Additionally, the volume of wash trading in the NFT market has also shown a significant downward trend, with this year's NFT wash trading amounting to only $2.32 billion, which is only about 8.5% of the total wash trading in 2022.
However, from the perspective of the buyer-seller market dynamics, there is a continued growth in potential demand for NFTs. This year, the number of independent NFT buyers reached 6.878 million, setting a new historical high and significantly exceeding the number of independent sellers, which stands at 3.611 million.
Challenges of established projects and narrative difficulties
Unlike previous years, the NFT market in 2024 has yet to see any popular projects that can lead the market. More severely, once-popular established NFT projects are now facing a collective downturn, with many former star NFTs experiencing a decline in value, and market enthusiasm and confidence gradually waning.
According to data compiled by Dune earlier this month, NFT projects have generally experienced significant decreases in floor price and transaction volume, even leading NFT projects like CryptoPunks, Bored Ape Yacht Club (BAYC), and Azuki are not immune, with their prices hitting historical lows in many years. Meanwhile, in terms of monthly transaction volume, projects that can exceed one million dollars are extremely rare, further highlighting the severe challenges and adjustment pressures currently facing the NFT market.
At the same time, some popular narratives in the past NFT market (such as collectibles, art, metaverse, gaming, etc.) are also facing skepticism, with issues such as the proliferation of low-quality and counterfeit items, overvaluation bubbles, and insufficient market liquidity causing some narratives' actual value to face challenges.
Changes in the dominant position of mainstream blockchains: Bitcoin surges, Ethereum cools down
In 2024, NFT sales are primarily concentrated on the three mainstream blockchains of Bitcoin, Ethereum, and Solana, contributing a total of $6.53 billion, accounting for 87.9% of the overall market. In this year, Bitcoin's sales performance has been the most outstanding, reaching $2.77 billion, a growth of 1.53 times compared to last year; Ethereum still dominates the NFT market, completing transactions exceeding $2.44 billion, but its performance has significantly declined compared to previous years, only about one-tenth of the peak in 2022; while Solana's performance has been relatively stable, with sales reaching $1.32 billion, achieving slight annual growth.
Market landscape of trading platforms: Magic Eden grows against the trend
In terms of trading markets, Blur, OpenSea, and Magic Eden are currently the mainstream trading platforms. Dune data shows that as of November 4, Blur holds 49% of the market share, ranking first; OpenSea follows closely with a market share of 29.2%; while Magic Eden ranks behind with a 5.4% market share. Notably, amidst the overall market cooling this year, both Blur and OpenSea have seen declines in market share, while Magic Eden has shown strong growth momentum, particularly standing out in market performance.
Complexity and uncertainty of regulation
The development of NFTs faces serious regulatory uncertainties, as there are significant differences in the definition, classification, and regulatory policies of NFTs across different regions. The lack of a unified legal framework, especially with vague guidelines in areas such as intellectual property protection, consumer rights, and anti-money laundering, brings considerable confusion to market participants.
Innovative pathways for the sustainable development of NFTs
The sustainable development of NFTs requires innovation not only in traditional digital collectible attributes but also through integrating DeFi, RWA, consumer applications, and public chains to explore new pathways for enhancing asset liquidity and value conversion. Here are several possible breakthrough directions:
DeFi
NFTfi is a product of the deep integration of NFTs and DeFi financial paradigms, providing NFT holders with more financial tools and value-added pathways, such as lending, staking, derivatives trading, yield farming, liquidity pools, etc., broadening the application scenarios of NFTs, thereby greatly promoting the liquidity and price discovery of NFTs, and significantly enhancing asset value.
For example, in financial derivatives and lending, NFTs can serve as collateral to provide users with lending services, and they can also be used as financial derivatives to create various financial instruments and investment strategies based on NFT value; in GameFi, items, characters, skins, etc., are converted into NFTs, providing gamers with more sources of income and promoting the liquidity and value discovery of gaming assets; artistic/knowledge product NFTs combined with DeFi can engage in staking financing, providing holders with more liquidity; DeFi can also be combined with NFT insurance to provide insurance services for NFT assets.
RWA
The combination of NFTs and RWA (real-world assets) breaks the geographical and temporal limitations of traditional financial markets, allowing various real-world assets to be intuitively and conveniently displayed and traded in digital form on the blockchain. Through NFT tokenization, the transparency and efficiency of real asset transactions have been significantly improved, greatly enhancing asset liquidity, allowing investors to buy and sell assets more conveniently. Furthermore, the competitiveness and transparency of the NFT market help form a more reasonable price discovery mechanism, allowing asset prices to more accurately reflect their true value, thus providing investors with a fairer and more open trading environment.
For example, once the ownership or usage rights of real estate are converted into NFTs, buyers and sellers can easily conduct transactions through blockchain platforms. This approach not only enhances asset liquidity but also reduces transaction costs and intermediary fees; when the digital ownership or partial rights of artworks are tokenized into NFTs, they can be transferred and traded through NFT trading platforms, providing new methods for the investment and trading of artworks, addressing issues of trust and geographic limitations in traditional art markets; in the field of supply chain management, by recording the identity information of products and suppliers in areas such as luxury goods and agricultural products in NFTs, the origin and quality of each item can be traced; certain financial assets (such as bonds, equity, fund shares, etc.) can also simplify the asset trading process after being converted into NFTs, improving the liquidity and transparency of traditional financial assets; in the insurance industry, digitizing insurance contracts or policies into NFTs allows customers to manage, trade, or transfer their insurance rights more conveniently and enhances the transparency of insurance contracts.
However, the application of NFTs in the RWA field not only needs to address legal and regulatory issues but also faces risks such as market acceptance and technical security, but it provides innovative solutions for the management, trading, and financing of real-world assets.
Consumer applications
As consumer demand for personalization, uniqueness, and virtual identity continues to grow, NFTs show enormous potential in consumer applications, fundamentally redefining the interaction and value exchange logic between brands and consumers, effectively driving the growth of fan economies, and promoting the popularization of NFTs in the consumer field. Consumer applications of NFTs are not limited to digital art or rare items but can also be applied to digital identities, brand loyalty, membership rights, gaming, virtual goods, and more.
For example, Web2 brands like Nike and Adidas can use NFTs as substitutes for membership cards or loyalty points, allowing consumers to enjoy exclusive offers, events, and services with these NFTs, and even resell them on secondary markets; platforms like Decentraland and The Sandbox allow users to purchase virtual land NFTs, enabling them to create, develop, lease, and sell their virtual shops, entertainment venues, museums, and other digital assets in the virtual world; music platforms like Audius and Royal allow NFTs to serve as proof of ownership of music and artistic works, providing direct income for creators, while consumers can own unique versions of music and enjoy future revenue-sharing rights; NFTs can serve as digitized event tickets, allowing consumers who purchase NFTs to gain access to concerts, sports events, art exhibitions, and other activities, increasing the authenticity and transparency of ticketing while providing unique interactive experiences for consumers; consumer brands like Gucci, Balenciaga, and Rtfkt are beginning to experiment with using NFTs to engage in virtual fashion and digital clothing events, where consumers can purchase limited edition virtual clothing, shoes, accessories, etc., to showcase their personalities and identities in the virtual world.
Social networks
NFTs have enormous potential to reshape interaction patterns on social media and social platforms, particularly in building personalization and virtual identities. For example, NFTs can serve as symbols of personal identity, representing users' unique achievements, preferences, and identities; social platforms can integrate NFT markets, allowing users to buy and sell digital goods, artworks, or other NFT assets, enhancing interactivity and social experience within the platform; NFTs can also provide the basis for decentralized social networks, enabling users to truly own and control their content creation and sharing, while directly earning economic returns from platform activities.
Public chain
From the current development status of NFTs on mainstream public chains like Ethereum and Bitcoin, high gas fees, strict limits on block sizes, slow confirmation speeds, and scalability bottlenecks pose significant limitations to the widespread application of NFTs. To address these challenges, some projects have begun to seek innovative pathways such as cross-chain and L2.
For example, the rise of multi-chain ecosystems allows NFTs to no longer be constrained by a single public chain, achieving a more efficient asset transfer and trading environment by breaking down barriers between chains, injecting new vitality into the liquidity and popularization of NFTs; L2 solutions play a crucial role in expanding the trading capacity of NFTs and reducing high transaction costs, making it more affordable for more users to trade and create NFTs. Additionally, emerging public chains like Polygon and Solana, with their advanced architectural designs and innovative consensus mechanisms, are continuously optimizing the trading speed and security of NFTs, providing users with a smoother, safer, and more efficient NFT experience.
Conclusion
NFTs need to evolve from mere digital collectibles to more diverse, liquid, and market-potential asset classes, which is crucial to fully preserving and enhancing their unique cultural connotations and personalized social identity attributes. At the same time, the NFT market also needs to actively seek integration with broader asset categories and application scenarios. This not only helps enhance the practicality and investment value of NFTs but also promotes their recognition and popularization in broader application scenarios, thus opening up new growth spaces.
