The Next 10 Years of NFTs? - TokenSmart NFT Humpday Report #30

Welcome to the 30th issue of the NFT Humpday Report, a weekly column covering and providing embedded analysis on the NFT economy’s biggest topics du jour. Brought to you by WIP meetup collaborators and nft42 community hub TokenSmart.

Most people are interested in getting a finger on the current pulse of the NFT ecosystem, and that’s challenging enough as is. Much harder is actually forecasting what the future of NFTs will be like from here.

Of course, it’s certainly a fruitful analytical exercise because it forces us to get an accurate sense of where NFTs are today and then to extrapolate accordingly with the best news currently available. If you want to put your analyst hat on and get your brain going with some non-trivial possibilities, below is a range of predictions regarding what the next decade for NFTs might look like. 

  • Irrespective of major layer two scaling advances, L1 Ethereum becomes increasingly inexpensive for NFT minting courtesy of a combination of Flashbots-like MEV innovations, gas limit increases, and ultimately sharding.

  • For this reason, NFTs will continue contributing to ETH evolving into a triple point asset, a novel appearance in the history of money. This means ETH is taking on the qualities of a commodity (digital gas for transactions), a store of value (DeFi’s base currency), and a capital asset (earn ETH yield for staking in Eth2). The more demand to use ETH, e.g. around NFTs, cements ETH as a commodity. This demand drives fee burns courtesy of the EIP-1559 upgrade due out later this year, which improves ETH as a SoV. So long story short, NFTs will keep reinforcing ETH’s status as a triple point asset in the years ahead. Thus when ether “flippens” bitcoin’s market cap at some point in the next decade, NFTs will be a considerable part of the reason.

  • L3 scaling solutions like an NFT-centric version of Connext’s Vector will make it trivial to rapidly and cheaply move NFTs across L1s, L2s, sidechains, what have you. 

  • Going back down a level, L2 projects like ones centered around ZK-rollups and Optimistic rollups will see lots of technical progress, so along with sidechains NFT users will have no shortage of options when it comes to cheap and instant transactions

  • On the L1 level we’ll continue to see NFT usage play out across the lines of smart contract platform fragmentation, meaning there may be “kings of the hill” like Ethereum but users will keep flocking to different smart contract platforms for different reasons, like how Tezos has seen an influx of environmentally-minded users lately or like how Binance Smart Chain (BSC) has seen an influx of crypto gambler types. 

  • The NFT economy will experience further market cycles along with the wider cryptoeconomy, but even with the cycles playing out however they do, the total all-time volume around NFTs will cross $500B at some point during the Roaring 2020s. 

  • Top cryptoartists will continue vaulting into the mainstream, so that more than a handful will come to have their work widely recognized far outside the borders of the cryptoeconomy. The success of cryptoart in general will lead to “artist” being increasingly viewed as a viable career path, in stark contrast to popular conceptions in prior decades. On-chain cryptoart will age well as people keep rallying toward the highest-quality NFTs, and generative on-chain cryptoart will flourish in particular.

  • Ethereum’s metaverse scene will continue to mature as its constituent projects evolve and become more traversable to more people. This blooming will give rise to new waves of metaversal explorers and entrepreneurs, and many more people will start to make livings working around these virtual environments. 

  • Speaking of making a living, the play-to-earn paradigm being pioneered by NFT games like Axie Infinity will become increasingly pivotal within the wider video game market vertical, which is exploding across the board. Not only will masses of more players rally to this novel paradigm, but it will also see increasingly interesting confluences around things like eSports, player guilds and DAOs, DeFi, and more. 

  • On the point of DeFi, expect to see a further Cambrian explosion of NFT + DeFi melds over the next decade as people continue to innovate toward new horizons. For example, holding a limited-edition NFT in order to unlock certain perks in DeFi, like yield bonuses, is something that’s going to happen a lot more. 

  • Another thing that’s going to be huge going forward is NFT composability, i.e. being able to meld or accessorize NFTs with other NFTs. This will lead to more advanced creative and market dynamics, as people bundle their NFTs together toward a growing variety of ends. 

  • NFT fractionalization is going to become big, though I also expect projects in this arena to start facing more scrutiny from securities regulators (at least in some jurisdictions) as these watchdog agencies start to play catchup. 

  • Uniswap V3, which is due out any day now, is pivoting Uniswap’s liquidity provider (LP) tokens from fungible ERC-20 tokens to NFTs. This is going to revolutionize the way that DeFi approaches liquidity and will lead to many DeFi projects experimenting deeply with NFTs in the coming years and expand peoples’ understandings of what NFTs are and can be. 

  • Large mainstream brands will increasingly adopt NFTs as integral tools in their marketing arsenals, while large mainstream financial institutions like banks will start to explore the financial possibilities around NFTs, a la Uniswap V3. 

  • We’ll see the creator economy come to life, where droves more people start to openly use stacks like NFTs + DAOs + social tokens and so forth to readily chart their own personal and professional journeys.

Thanks for reading the 30th NFT Humpday Report! Check back this time next week for more excellent NFT ecosystem coverage! Cheers 🌠