The value of NFT’s
Recently, there was a headline that sparked a wave of reactions across the internet. It was about the perceived valueless condition of Non-Fungible Tokens globally.
This headline was based on a report published by DappGambl, a Blockchain think tank that provides deep-dive analysis of decentralised applications, crypto gaming, and general news. DappGambl analysed about 73,257 NFT collections (which contain millions of NFTs) based on information provided by NFTscan and CoinMarketCap. They revealed that exactly 69,795 of those collections had a market capitalisation of 0 Ether. In essence, no one really purchased them or found them valuable.
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A lot of interpretations have sprung up describing the situation as a case of failed investments. Some of these interpretations are not based on facts and therefore mislead investors. The fact remains that the NFT ecosystem is one where supply is always significantly higher than demand (the reason being that it is relatively easy to produce NFTs in bulk) and under competitive market conditions, prices will fall. That does not necessarily mean that the products (NFTs) in this case are worthless. It means that there is a drop in demand which is fueled by the general global economic crisis coupled with a host or regulatory frameworks for digital assets springing up around the world. This was not the case 2 years ago when NFTs peaked. NFTs for a long time, were abused and the use cases were not thoroughly tested and implemented. Instead, it was seen as a money-making venture, and projects that did not require NFTs in their business models began releasing collections with hopes of not missing out on possible profits. This was the rise of an endless yet unnecessary supply of NFTs.
Another cause for concern, however, is the sustainability of NFTs and how they may impact the environment. There is a correlation between the amount of energy used to mint cryptocurrencies and the amount of NFTs associated with those cryptocurrencies, considering them as complimentary products. DappGambl claims that the energy required to mint the 73,257 collections is equivalent to about 27,789,258kWh which is approximately 14,243 metric tons of CO2. For a lot of global climate aspirations to become reality, numbers like these should be reduced or at least accounted for. These current market conditions reveal the fact that the demand for NFTs has to be increased and this can only be possible when the actual use case of NFTs is being implemented. We need more Non-fungible tokens that have real-world value, and utility and can be a store of this value. NFTs should grow beyond pieces of artwork and collections because there are use cases in virtually every industry where verification and authentication are required to do business. We should see more applications for NFTs in the supply chain, Insurance, and SME enterprises. This will boost the demand in the right direction for long-term sustainability.
