With so many developments happening, will NFTs be a cornerstone for Web3 or a trend that is waiting to pull the rug on everyone involved?
It has been just over a year since the iconic sale of Beeple’s NFT piece, Everydays: the First 5000 Days, was bought for US$69.3 million by Singapore-based entrepreneur, MetaKovan on 11 March 2021. That momentous sale became the catalyst for the NFT space and has paved the way for NFT trading to enjoy a 21,000 per cent jump from US$82 million in 2020 to US$17.6 billion in 2021.
The staggering transaction amounts have been a key driving factor that has made NFTs a regular part of news cycles for the last few months. But with so many developments happening in a short time, will NFTs be a cornerstone for Web3, or a trend that is waiting to pull the rug on everyone involved?
Let us take a closer look at the condensed timeline, and check out the good, the bad, and the possible future of NFTs.
The good: Honeymoon period and earlier days
Riding the wave of the Beeple sale, we had savvy local artists who saw the potential for the NFT space to garner a wider audience for their style, and a space to push their artistic expressions beyond image-based NFTs. This push led me to be part of Singapore’s first-ever cross-border NFT arts exhibition “Broken Capitalism”, along with Bulgarian artist, Mihov.
NFTs were also a means to bolster the income of artists during the pandemic. A CNA report shared how local artist Hafiiz Karim, known as The Next Most Famous Artist went from averaging SG$1,000 a month from physical prints of his digital work to selling 100 NFTs in a day for US$100,000.
MetaKovan pressed his momentum to launch his B2.0 flagship project. The project involves 20 of Beeple’s single-edition pieces designed and turned into displays in a virtual museum accompanied by an original soundscape. The digital assets were fractionalised and sold as B.20 tokens, giving greater accessibility for individuals to have a stake in the project.
NFTs had sparked collaborations beyond artists and their audiences, towards associations and the government. The Blockchain Association Singapore (BAS) signed a Memorandum of Understanding with the NTUC-U Care Fund to use blockchain technology for fundraising purposes and jointly held the Blockchain for Good Event Night 2021, Singapore’s first NFT Charity Auction that raised SG$401,211. The result exceeded the original target of SG$250,000 and featured photos contributed by Speaker of the Parliament of Singapore, Minister Tan Chuan-Jin.
The honeymoon period saw many highs for NFTs, and it was a period of profit and experimentation.
The bad: Red flags and present day
Putting together the infancy of the NFT space and the large amounts of money transacted in such a short span of time have made it a prime target for scams and malicious attacks.
The Bored Ape Yacht Club (BAYC), known as one of the most prominent NFT collections fell victim to an Instagram phishing attack that happened on the one-year anniversary of BAYC’s launch on 25 April. Singaporean rapper, Yung Raja lost close to SG$100k worth of NFTs through a fraudulent Twitter link.
Axie Infinity, one of the top NFT games, suffered a hack that resulted in the loss of over US$600 million. The attack was revealed by Axie/Ronin, the company behind the network on 29 March, which happened to be a banner day for the company, and a full six days after the hacker ran away with the money.
The value of NFTs has been put to question with Jack Dorsey’s first Tweet as an NFT that transacted for US$2.9 million in 2021 being offered under US$30k as of date. Crypto entrepreneur Sina Estavi who owns the NFT mentioned that he may never sell following the low bids.
Presently, we see security issues, and the inherent values of NFTs forming the main challenges of the NFT space.
The future: Confidence, utility, connection
Security concerns have to be addressed above all else. In the case of the Axie Infinity, the team developed the Ronin sidechain and introduced their own digital token to avoid high transaction fees on Ethereum, the most popular blockchain used by play-to-earn games.
Experts have commented that the risk of a hack “grows exponentially” with such a move. Criticisms have been levelled at the company for prioritizing speed and usability over security and announcing the hack six days after it occurred.
The lapses in security, volatility of the NFT and cryptocurrency space, and the gaps in knowledge have made the Singapore government take active steps to regulate the space.
The Monetary Authority of Singapore (MAS) issued a statement discouraging cryptocurrency trading for the general public and implemented an NFT tax. Additional measures to the Travel Rule were implemented for cryptocurrency transactions for greater transparency.
Moving forward, there needs to be a balance where institutions have to keep their security measures up to speed, and users have to take responsibility on their end as well. The level of education of the space has to be picked up for everyone; for the individuals in the space to navigate safely with confidence, and for the public to have a base understanding to not be left completely in the dark.
Closing the knowledge gap will enable the NFT space to grow healthier, and for any future regulations to be well thought out, nuanced, and less reactive.
Despite the current setbacks, I feel they were necessary to bring the conversation about NFTs away from hypes and price bubbles. For NFTs to stay relevant creators have to provide utility and tie-ins for their projects.
Roadmaps with clear, achievable goals are starting to become a standard for reputable NFT projects. Knowing what the community wants for the project, offering something unique, and future developments for holders are parts of a good roadmap.
Singaporean NFT collection TTTreasures shared a roadmap with in-person events, and educational resources made available to holders. The roadmap reveals a strong emphasis on voting rights for holders to have a say regarding the partnerships with other businesses, and collaborations with other projects to steer the direction of their community.
In the context of a business and industry, the CryptoBaristas’ project elevates the coffee experience for NFT holders at their cafe, while giving avenues for sustainable production, and empowering those involved in the process.
For charities, the success of the Blockchain for Good event in 2021 has opened the doors to a second NFT charity event in collaboration with the United Nations High Commissioner for Refugees (UNHCR).
Just as MetaKovan’s purchase of Beeple’s NFT for US$69.3 million was the initial catalyst for the space, each roadblock encountered has served as a catalyst that scrutinizes and matures the space, bringing a little more to the table each time.
I believe that as NFT projects strive to offer more, we will see stronger communities with a drive towards utility and unique functions. NFTs can potentially become the hub that bridges Web3, Web2, and the real world.