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The Great NFT Crash, Sports And Future
Despite its many naysayers, NFTs offer promise in the long run
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The digital world has grown exponentially in the last two years riding on the multiple waves of the Covid-19 pandemic. The tech enthusiasm had spilled over onto the world of blockchain, cryptocurrencies, and even NFTs, as 2021 proved to be the peak year for all three of them. While bitcoin touched its all-time high in November last year, NFTs sales touched USD 17.7 billion in 2021 from USD 82.5 million in 2020 (according to a report by NonFungible.com and L'Atelier BNP Paribas). This turn of events has even implored industries like gaming to explore opportunities in blockchain.
But the tremendous enthusiasm simmered this year and then took a nosedive as the markets across the board reeled as the war in Ukraine broke out. The value of cryptocurrencies, which have a huge correlation to the NFT markets globally, has dipped significantly, with bitcoin struggling to stay above the USD 20,000 mark and Ethereum lingering around USD 1,000. As a result, the number of NFT sales reached 16,000 (USD 14 million) on 17 June 2022, having previously touched 118,000 (USD 780 million) on 1 May.
According to DappRadar, June could be the first month for NFTs to record under USD 1 billion in sales since this time last year. NFT sales have dropped by a massive 75 per cent since May, and the trend suggests that it could hit its lowest levels in July. Some NFTs that were in high demand in May saw their prices shrink by 30 per cent over the last month.
The sales of NFTs have been on the dip month-on-month, but the outlook still looks to beat the estimates from last year by a significant margin even as we encounter bear markets.
"This current so-called downtrend of the NFT/Crypto ecosystem can help in two ways – one, it will bring positive and utility-driven NFT projects into light, while those with not so strong road map will wither out. This will, however, create a strong, compelling NFT world. Secondly, currently, there is a bit of interdependence between cryptocurrency and NFTs largely because we transact completely on blockchain", explained Ramkumar Subramaniam, CEO and co-founder, GuardianLink.
"Once there is a separation between the two, NFT will become an asset class in its own right. A non-fungible token is inherently valuable irrespective of the value of any crypto coin because of the underlying asset, be it digital or physical", added Ramkumar.
Today, most of the NFT marketplaces accept cryptocurrencies for purchase. However, not all NFTs are dependent on cryptocurrency, but blockchain helps in provenance, transfer, and keeping the record of ownership.
But What Makes Nfts So Valuable?
Non-Fungible Tokens (NFTs) are unique digital items that one can buy and sell online. Their ownership record is stored on the blockchain, just like cryptocurrencies. But unlike crypto, each NFT's uniqueness drives its price point. Think of NFTs as digital artwork that can be owned. But these NFTs can be music, art, video clips, memes, gifs, trading cards, avatars, and much more. So, owning an NFT is much like owning the original copy of an artwork. And much like artwork, the owner can only expect its value to increase with time.
Last year, when Beeple's NFT connected to his artwork "Everydays: the First 5000 Days" sold for USD 69 million at Christie's (a 255-years old auction house), it made him one of the top three most valuable living artists. The artwork is a collage of 5,000 digital images created by Winkelmann for his Everydays series.
"The physical world had attributability and prominence, while the digital world had the versatility of transfer. Something that bridges both these worlds together is the concept of non-fungible tokens (NFTs)", said Ramkumar Subramaniam.
Besides NFTs being the quintessential bridge, it is also expected to underpin the value of exchange in the upcoming era of Web3. And metaverse, which is considered to be the natural extension of Web3, is tailor-made for NFTs that would form the very basis of ownership in the virtual world. Aside from buying virtual real estate, people could even engage in purchasing unique items like cars, planes, yachts, and much more through NFTs.
"The use-cases are infinite. You can integrate it into the metaverse, art, and music industry. The domain has broadened with innovation, and with time entrepreneurs will be readily innovating in the space. Hence, more opportunities will arise inevitably", shared Sunny Bhanot, co-founder and CTO of Rario.
Vast Potential Of NFTs In Sports
Apart from the metaverse, the world of sports is perhaps where NFTs find their greatest application. Why? Sunny Bhanot explains it the best. "I recall many people cherishing Sachin Tendulkar's signed bats. Perhaps for that, they had to attend the game or wait outside his house and do everything in their power to get close to him. With NFTs, the fans can do that from the confines of their home and still prove its authenticity", he said.
Sports as a domain has everything that can add value as an NFT. For instance, in a game, you need assets that are distinguishable, unique, and have a certain value. Beyond this, sports and NFTs can have a highly symbiotic relationship. "In fact, sports collectibles coming into the digital realm is going to be fueled completely by non-fungible tokens", asserted Ramkumar.
The NFT craze has already caught fire in the realm of sports as teams and ticket vendors are selling digital tickets in the form of NFTs. Some are also turning ticket stubs into NFTs, and these digital stubs are bound to be of huge value as time passes. In a world where physical ticket stubs as memorabilia have sold for half a million dollars, non-perishable NFT stubs could be invaluable to sports fans.
The collectible NFTs are the next step in enhancements of traditional loyalty programmes, and combining them with fungible tokens will help drive greater levels of fan engagement. While social media has provided some level of athlete access to the fans now, metaverse and NFTs can help power the next generation of fan engagement.
"If you look at collectibles, it was always a fan who had that iconic bat or football from an iconic game etc. So, he had to have physical access for that. Non-fungible tokens break the barriers of time and distance, making fan engagement more universal. Therefore, a Manchester United fan sitting somewhere in Indonesia will be able to own a digital collectible that would ascertain an endorsement as well as an element of authenticity", explained the GuardianLink CEO.
"NFTs are not just limiting fan engagement to a particular geography; it is encouraging fan engagement to become more universal", he added.
In a cricket-crazed nation like India, it's safe to say that there are opportunities aplenty for NFT marketplaces focused on the game, and companies like Rario have identified this. "Prior to NFTs coming into the market, fantasy gaming options like Dream 11 completely changed the narrative by getting the fans to enjoy the sport throughout the year and in their own manner. Rario, too was built to give fans the opportunity to interact with the game at a deeper level, our NFTs range from owning moments to player cards. The Rario NFTs also act as a gate pass to exclusive events, matches, and meeting your favourite cricketer and much more", mentioned Sunny Bhanot, who established Rario along with Ankit Wadhwa in 2021.
The world of NFTs in cricket and other sports opens a lot of possibilities in the near future. Some sports teams in the West have also experimented with giving fans access to their favourite stars in a virtual setting during a game. The jury is still out on how distracting that could be for the sports stars, though!
With one of the youngest populations on earth, India is the top destination for cutting-edge technologies across the board. As the number of crypto enthusiasts grows in the country, so does the enthusiasm around NFTs. On the international front, VCs have continued to be receptive to NFT projects and continued with their funding despite the bear market, citing their potential.
"In the coming years, NFTs will play an important role in people's lives. It is evident, and we can already see the shift from NFTs being something only celebrities created and sold to it now being used by universities as academic tokens. On top of this, as metaverse goes mainstream, NFTs will turn more in demand, pushing their market size to only increase", concluded Sunny Bhanot.
Despite its many naysayers, NFTs offer promise in the long run. Perhaps their relevance will come to the fore as the metaverse grows and starts playing a prominent role in our everyday lives. As they say, time will tell.