While the price of non-fungible tokens (NFTs), representing digital art, is back down to earth after skyrocketing last year, a panel of experts believes the future is still bright for the innovative technology.
Ken Evans, managing director of the Tampa Bay Innovation Center, conducted a virtual tech talk Tuesday on what the future holds for NFTs. Joining the panel were Angela Dalton, founder and CEO of Evans, Brooklyn-based Signum Growth Capital, and analysts Nicholas Grouse and Frank Downing at St. Petersburg-based ARK Invest.
Evans began the discussion by asking whether the panel believed they would see the widespread adoption of NFT technology among enterprise corporations. Downing said he agrees with information technology research and consulting firm Gartner’s recent claim that increased expectations for NFTs have peaked.
“The last two years have been a broad crypto bull market, and we’ve seen a lot of innovation and a lot of investments and a lot of ideas, and we need a lot of follow-through on those,” Downing said. “So, there’s a lot of attention to the space, and it’s really cool, and I think there’s going to be a lot of building.
“But there’s also a lot of foam in the market.”
Downing compared the current NFT market to the boom and bust of the opening coin offering of 2017-18. He added that startups realize that launching tokens is a successful way of fundraising, and money flows into the space before substantial product development.
While there are some early use cases for NFTs, such as with digital arts and gaming, he said the industry is learning as it follows a no-playbook.
“I think as the broader markets are selling crypto, especially in the NFT space, we will see some consolidation, and some of the foam die off,” Downing said. “It’s hard to set an exact time frame on this, but over a two to three year time frame, you’ll see …
Gross called NFTs an interesting mix of investment and consumption that is not typically seen in the digital space. The technology provides proof of digital ownership, and people have made and lost significant amounts of money using it as an investment tool.
In a May 11 article, CNET noted how the highly publicized bored ape Yacht Club NXT collection has lost almost half its value since April. However, its digital art is still selling for hundreds of thousands of dollars, and shares of streaming giant Netflix have also halved over the same period. As of press time, Amazon shares are down 25% over the past month.
When it comes to long-term usefulness, Grouse calls digital art the tip of the NFT iceberg. He compared the technology to the early launch of Apple’s App Store, which caused a “massive change” in the way people consume and interact online.
“If you had asked someone at the time what the App Store was going to enable,” Grouse said. “I don’t think anyone can tell you that Uber and Lyft and all these multibillion-dollar companies that would have been generated because of this simple shift from desktop to mobile. I think this is where we get to NFTs. We are in the space where we originally launched this ‘App Store’, it’s ability to build utility around digital ownership.”
“In 5-10 years, we are going to see a huge boom in applications and usability arising from this simple idea of digital ownership.”
Dalton said that while he thinks speculation is a hype cycle, the technology is just starting to prove itself through digital art. She thinks of the Metaverse as a neighborhood, with fortnight-like sports serving as streets that the public would descend to watch a movie or chat with friends. In a virtual community, added Dalton, everything around you looks like art.
Dalton also used the established technique as a reference point. She explained that in Web 2, the current iteration of the Internet, the invisible protocol allows people to move freely from one website to another. In Web3, developers who are in the process of building said that communities are solving specific problems using blockchains, but interoperability between blockchains is still in its infancy.
“Yes, it (NFT) has really gotten hyped up, but it’s limited by the fact that we don’t even have interoperability in these NFT platforms yet,” Dalton said. “We’ve actually seen some positive signs that we’re moving forward.
“So, I think the next wave will be more interesting to hundreds of millions of people, not just what some people are guessing.”
For mass market adoption, Grouse said transacting with digital tokens must match the simplicity of e-commerce. He added that purchases should be processed within a fraction of a second without the “horror” involved in owning digital wallet keys and possible loss of assets.
Consumers will appreciate developers recreating some of the Web 2 infrastructure into a decentralized Web 3 platform because of the familiarity, he added. Gross noted that this is a common debate in ARK during brainstorming sessions, and he believes that greater centralization will lead to wider adoption of emerging technologies.
“That’s something we need to be very careful with timing and building because with centralization comes convenience, but also points of failure,” Grouse said. “So it’s a double-edged sword like that.”
