Is the NFT hype train over? Find out what a tech "hype cycle" is and how we NFTs could play out in 2023.
We’ve seen more creative and financially viable NFT technologies emerge in 2022 than ever before.
NFT gaming, NFT ticketing, NFT music and albums, and sports NFTs are just some of the many applications that have been developed in the past year. Vice President of business development at Dapper Labs, Ridhima Ahuja Kahn, was quoted in a Deloitte article saying “Web3 is going to impact every single sector and industry.” And yet, in 2023, NFTs may seem to be in a nebulous place to you.
Are NFTs dying out?
The art collections and digital memes bloating the sales charts of yesteryear make NFTs seem like they’re dying out. You’d be correct to feel skeptical about future applications of NFT and blockchain technologies. The hype, it seems, is over.
However, what’s been playing out in the NFT world has happened before with other technologies when they were first introduced. Back in 2015, 3D printing experienced a significant drop in consumer interest. According to Forbes, in 2020 and 2021 there were several acquisitions as 3D printing was implemented in more sectors. And if we go all the way back to 2005, the hype cycle of mobile phones was scrutinized to see if they would actually be implemented.
According to a report by Activate Consulting, the end of excessive hype cycles gives way to more tangible use cases rooted in technology and media that are already established. Their report goes on to say that NFTs have desired characteristics in marketing such as building communities, rewarding loyalty to a brand, and displaying or collecting merits. But before we look at 2023 NFT trends, let’s briefly explore what a “hype cycle” is.
Tech maturity and the “Hype Cycle”
When a new technology is discovered or introduced into the market, there’s a general trend that its applications tend to follow. This trend is defined by Gartner as the Hype Cycle. This cycle is defined to provide a blueprint for how technology matures and is adopted into the real world. The Hype Cycle is meant to assist in determining whether a new piece of technology is worth early investment or if you should wait for further maturation and development.
The Gartner Hype Cycle comprises the following five stages:
- Innovation Trigger
- Peak of Inflated Expectations
- Trough of Disillusionment
- Slope of Enlightenment
- Plateau of Productivity
This cycle usually takes place over a few years and explains the sudden drop in sales that happens during the “Trough of Disillusionment” stage. This helps explain what took place between 2021 and 2022 with NFT sales, plus the innovation boom that occurred prior. According to the cycle, the “Slope of Enlightenment” stage comes next where we can expect a slow increase in sales.
So, what are the signs to look for at this stage?
According to Gartner, more instances of the technology benefiting a specific enterprise start to pop up. Later generations of a product also appear and some enterprises fund pilot projects to experiment with the technology. Eventually, mainstream companies will implement the product and it’ll have a broader, more understood application.
NFT trends to look out for in 2023
In 2022, Activate Consulting performed an NFT consumer research study to determine why NFT purchasers were buying digital tokens. It was determined that there was a significant decrease in purchasing NFTs for investment of innovativeness or novelty. Instead, there was an increase in purchasing items for display, collection, and support of an artist, athlete or celebrity. According to the same survey, the demographic of NFT purchasers trends toward the 18 to 44 age demographic in households with an annual income of $100K or more.
Here are a few NFT trends that are examples of effective implementation of NFTs into the mainstream market. These trends signify a shift from the “Trough of Disillusionment” over to the “Slope of Enlightenment”:
- NFTs as ticketing/identity verification
- Brand community building with NFTs
- Play-to-earn models enabled by NFTs
1. NFT tickets
Ticket monopolies inflating ticket prices and impeding the ticket-buying process have been a problem for several years now.
At the end of 2022, fans of Taylor Swift had their ticket purchases cancelled by Ticketmaster. The fans proceeded to file class-action lawsuits accusing ticketing service Ticketmaster and its parent company, Live Nation, of fraud, misrepresentation and antitrust violations.
Ticketmaster also came under fire for issuing more tickets to Bad Bunny concerts in Mexico City than there were seats. These “fake tickets” were issued by Ticketmaster but holders were still turned away at the gates of the event.
NFT ticket solutions like Yellowheart cut out the middleman by allowing artists and organizers to sell NFTs linked to an individual identity, directly to individuals. Because the NFTs are registered on the blockchain, the artist/organizer can collect royalties or impose limits on resellers, reducing their profits and making it easier for fans to receive their tickets or event passes at a fair price.
2. Brand communities
Doge Fight Club may have fun pieces of art to buy, trade, and collect, but the true benefit of owning membership is access to an exclusive community group. NFT collections will often incorporate Discord servers or other platforms that NFT holders can congregate and discuss mutual interests. While this may not seem significant on its own, Ridhima Ahuja Kahn of Dapper Labs stated that “Web3 transforms passive consumers into community members.” And various studies have shown that brand communities help increase brand loyalty, among other benefits.
A Forbes article stated that NFTs can double both as exclusive currencies to spend on your business’ products and services as well as increasing brand loyalty without having to go through a middleman.
3. Play-to-earn games
Play to Earn (or P2E) games have emerged as the next big way to monetize games.
Games like Gods Unchained involve trading, dueling, and collecting cards that act as NFTs. Gods Unchained was established by Chris Clay, the former game director of Magic: The Gathering Arena. This game differs from Arena in that players can actually buy, sell, and trade the cards that they own. Gods Unchained has had an impressive rise in sales in 2022, lending credibility to this new genre of game. This game is currently on MacOS and Windows but is moving toward the mobile space to increase accessibility. Because of how difficult it is to track and verify ownership of virtual properties without a blockchain database, NFTs are directly tied to the success of P2E games. Having in-game properties act as NFTs also leads to “true ownership” where your in-game items are tied to you, not your game account.
We expect NFTs of 2023 to focus more on real-world benefits and applications rather than just digital possessions. These three trends are just a few examples of the many mainstream implementations of NFTs. The success of these implementations will help drive the shift in the Hype Cycle from the “Slope of Enlightenment” to the “Plateau of Productivity” where the technology is integrated into the wider market. Because of this, now is a fantastic time to experiment with NFTs to increase brand loyalty, cut out unnecessary middlemen, and fuel community engagement.