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The NFT bubble has popped. Now what?

Written by Julianna Wu, Brady Ng Published on     5 mins read

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Despite the massive interest in NFTs, people wonder if the tech-enabled medium has long-term benefits or if it is just a way for speculators to get rich quickly.

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The rush of coverage about non-fungible tokens (NFTs) after an artwork made by digital artist Beeple sold for USD 69 million at auction made readers feel like the medium would reinvent our relationship with visual culture and other cases where a blockchain address is needed for proof of ownership.

But data about NFT transactions shows that the tide has ebbed, interest has plummeted, and only a small portion of tokens will retain their value in the long run.

The weekly sales volume of NFTs reached a rapturous peak in the first week of May, with the spike hitting USD 102 million in daily transactions on May 3. But sales have since nosedived by nearly 90%, according to analysis conducted by crypto-focused media outlet Protos. Interest in one-off artworks appears to have tapered off, but NFT collectibles like CryptoPunks and NBA Top Shots continue to be traded regularly. If that development continues, it would be apt to compare NFTs with trading cards.

And just like trading cards, “90% of NFTs are going to be worthless,” said Alex Taub, co-founder and CEO of Upstream, a professional networking platform, during a panel about digital artwork and collectibles held in Miami last week.

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Yet, there are individuals who still see promise and space for experimentation in NFTs. KrASIA spoke to people in Beijing who are staking part of their futures on the tokens.

Cao Yin is one of the earliest DeFi investors in China, chief expert of digital finance for China Cinda Securities, and the founding partner of a financial advisory agency called the Digital Renaissance Foundation. With those qualifications, he knows a thing or two about building new infrastructure in a cutting-edge sector, and the value of being the first to show up. Cao approaches NFTs purely from the perspective of an art collector. “It’s a type of fine art,” he said, cautioning that discussions about the tokens frequently involve collectibles like CryptoKitties. But locate the unique creations, Cao believes, and “this will have the same point of departure as collecting works by Jean-Michel Basquiat and Yayoi Kusama because these are works of art that have very important cultural and economic value.”

Cao’s logic lies in the belief that human interactions with technology and cultural impulses need to evolve with the times. “Art has a new identity, and artworks are no longer like classical creations such as those made in ancient times: this thing is mine and no one else can access it, so it is scarce and therefore carries value,” Cao said. “In the digital era, in the metaverse, the value of art is that it is a cultural totem.”

There are only around 50 artists who utilize NFTs in their creative process in China, according to Cao, but they link up with a broader community that mostly exists in North America and Western Europe. While many operated solely as digital artists and graphic designers, creators of more conventional mediums are also breaking into the space to experiment with new ways to compose work.

One of those artists is Zhong Wei, who is already an established painter whose work has been exhibited across Asia. When Zhong spoke to KrASIA in late April, he had just begun dabbling with tokenizing his artworks. “I feel like this medium has immense potential. It could be cataclysmic for the entire art industry—it could subversively bring about massive impact,” Zhong said.

The artist imagines a “new cultural ecosystem” formed via NFTs, but has so far not yet encountered any artistic practice that blends well with the tech behind them. What Zhong recognizes, however, is that the current application of NFTs is financially motivated, where “some people place conventional digital art on NFT platforms for sale and speculation.”

When KrASIA spoke with the painter, he had already minted one NFT artwork to better understand the process. Even though the market for NFTs has cooled and the rush of high-dollar transactions seems to have evaporated, it is the concept of NFTs as a way to deliver art that holds appeal for Zhong. The format’s consequences on creativity, he believes, is the same as what could have been observed with the rise of platforms like TikTok, which “lowered the threshold for entry, lowered cost, and reduced differences between videos” that were uploaded and disseminated online.

Zhong characterized this as a decentralization of creativity, one that mirrors an imbalanced development of our consumer-ready technospheres. “The NFT community is a bit like barren Mars. Even though we have cultivated currencies that can be spent on Mars, there is no lodging, no places of worship, no hospitals or schools that are ready for the planet… There is no broader ecosystem for NFTs. What the community needs is a lot of people to develop many aspects of this technology so that anyone can upload their work.”

Read this: Infinite estimates | The true value of NFT art is in the protocol behind it

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This tension between lowered barriers to entry and the difficulty of getting on board are still playing out on popular NFT trading platforms. People who want to upload their artworks typically need to pay a “gas fee,” which is a charge settled in cryptocurrency. That means anyone who doesn’t already hold crypto faces the prerequisites of setting up a wallet, utilizing an exchange, and managing transactions. Only after that can their work live on a blockchain.

Yet most of us are just observers, curious enough to seek out these images for a peek with no motivation to fork over Ether. When an exhibition featuring big-name NFT artists was staged in Beijing in late March, it lured plenty of visitors to the city’s 798 Art District.

The organizers behind “Virtual Niche,” as the presentation was called, set out to showcase the broad range of expressions that could be carried on the blockchain, that NFTs are more than static image files, gifs, or videos. Whether the message sank in was unclear—understanding the ins and outs of art that exists as blockchain addresses rather than their physical manifestations is a distinction that may not matter to most viewers.

Then there is also the matter of the strict regulation of crypto transactions in China. Organizers called this a sensitive matter, and stated that their financial dealings in fact took place abroad.

The consensus seems to be this: When it comes to artistic expression, the medium is not the message. New creations need to have uniqueness in their staying power, rather than in mere uncommonness. “In the age of the internet, information’s reproducibility does not impact its scarcity,” Cao Yin said. “Even though it may exist in countless copies, truly valuable content is still rare.”

Are NFTs here to stay? Yes. But in the ways that crypto oracles predicted? Unlikely. For now, they are a novelty rather than a solution to a problem, a plaything for enthusiasts who are excited about fresh applications of tech.

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