Like a shooting star streaking across the night sky, non-fungible tokens (NFTs) drew much excitement when they first hurtled through the digital asset space only to lose much of their appeal in just a couple of years.
About 95% of NFTs have completely lost their value since they were minted, and 18% of the top traded NFT collections are now essentially worthless, according to crypto gambling platform app Gambl.
That’s a far cry from the situation in 2021, when NFT trading volumes hit their peak at more than US$23 billion as young, tech-savvy investors looked to gain exposure in virtual assets, says decentralized application store DappRadar.
The hype over NFTs soon faded as the penchant to collect unique and rare items was replaced by doubts over the quality of the works themselves. Investors also began to reconsider the value of NFT because even if they possess proof of its authenticity, they cannot prevent others from copying and sharing the work over the internet.
Despite the huge drop in NFT valuations, however, many individuals and companies still see value in NFTs. The Thailand franchise of Taiwanese bubble tea chain KOI Thé, for example, recently launched a promotional campaign encouraging customers to collect NFTs as digital stamps in exchange for free drinks.
The blockchain technology behind NFTs is also paving the way for a new generation of anti-fraud tools leveraging its ability to verify asset identity and ownership.
Supporting music creators
In the music industry, the global music NFT market is forecast to reach US$7.65 billion by 2028, four times its size in 2022, according to market survey firm Industry Research. A crucial factor in the booming market is the loyal fan base ready to support music products, including tickets, merchandise and subscriptions, says New York-based online learning platform Yellowbrick.
A report by accounting major EY points to the unique experience provided by NFTs to music fans in terms of exclusivity, proximity and authenticity. NFTs have been helpful in merchandising “unique and tradable digital assets”, it adds.
The smart contract that typically underlines an NFT grants musical artists a better grip on their creation. It enables the artist to track every trade of their NFT music, thereby safeguarding copyright, averting piracy, and protecting them from being deprived of rightful compensation.
Incorporating copyright tax features into the NFT generates fixed income for the musician. Through this feature, NFT marketplace OpenSea was able to distribute US$1 billion to artists registered on its platform in 2022.
Fighting counterfeit products
NFT can also help in reducing the proliferation of counterfeit products, which have significantly impacted the revenue of luxury brands. Fake goods have generated an annual income of US$2.8 trillion, depriving legitimate brands of direct sales worth €37 billion (US$40 billion) every year, according to AI-powered luxury goods authenticator Entrupy.
As a certificate of authenticity, NFT details the materials and other pertinent information about a product, thus offering a foolproof way to differentiate original goods from counterfeits.
Aura Consortium, a blockchain solution provider founded by renowned luxury brands such as Prada, Mercedes-Benz and LVMH, has developed a digital passport that details the information of an authentic product, enabling its buyer to claim and transfer ownership, a function that resembles the features of NFT.
But beyond its ability to authenticate goods, NFT represents a significant innovation that could pave the way for a new era of commerce, promoting creativity and originality, decentralizing business operations, and providing a level playing field for individuals and enterprises.
