What will NFTs look like in 2022?
Farewell, 2021. We saw NFT go from an unknown acronym to the word of the year — among the rest of the now-normal chaos that the world has endured. Entering year 3 of a global pandemic, let’s focus on what the word of the year has in store for 2022.
My crypto journey started in 2017, and then took a hiatus until the beginning of 2021. Shortly after that resurfaced, I discovered NBA TopShot (along with the rest of the world). Let’s take a minute to reflect upon the NFT world of 2021 and see how it sets the foundation for what will be happening in 2022.
What was 2021 like?
I would like to go on record by saying:
Oh, boy. It was a lot.
That’s not all bad though. It was a lot of fun and a lot of learning. We have a long ways to go, but we made lots of progress as a community. Let’s explore some of the trends with NFT projects that we saw in 2021.
All of these bullets could have their own article. Maybe, one day they will. For now, this article will be a high-level overview of the whole ecosystem. I am heavily involved with Ethereum and Solana, so the scope of this article will be limited to those two chains. I tried to figure out what’s up with the NFTs on Cardano and Tezos a few times, but… I gave up. Sorry about that.
2021 Trends:
“gm, wgmi!! nfa, dyor!!”
tldr: lies
NBA TopShot
NBA TopShot has done a better job bringing NFTs and Crypto to the mainstream than anyone else, ever — so far. Many people (like myself) were intrigued by TopShot, watched the demand shock send our 10-second videos to insane valuations, then dug more into this technology to chase that euphoria some more. Since then, we have seen a crazy up-and-down with the community sentiment of the platform. Dapper Labs has raised insane amounts of capital from traditional investors and professional athletes for this project and future endeavors. As a market leader in terms of total valuation and the sheer number of NFTs that are flowing through them, we have watched a small startup become an official NBA partner in less than a year.
I think TopShot is cool. It might not be the flipper’s dream that it was six months ago, but I love basketball, so I love it. I think it’ll do a great job of helping onboard more people to the WNBA as well — which is a net positive for everyone involved in basketball.
Profile Picture Projects (PFPs): Generative Art and “Community”
CryptoPunks pioneered the idea of a PFP NFT, and Bored Ape Yacht Club (BAYC) managed to successfully bring it into pop culture — so much so that the typical person will immediately picture one of those “ugly monkey drawings” as soon as they hear the word(?) NFT.
Generative art NFT projects and other PFP copycats took the market by storm. We saw hundreds, if not thousands, of people release projects trying to find the same financial success as the aforementioned. Some were legit, many were cash grabs. We went through a weird period of time where minting anything was a guaranteed 10x on your investment in less than a day. You can only have one profile picture at a time, so the flood of PFP projects realized they had to differentiate themselves somehow.
The term “community” is one of the most common to be thrown around. Access to a gated Discord server from one of these NFTs allows you to be part of a community that is somehow different than all the others.
Spoiler alert: it was a lot of the same people in all of these projects’ “communities” and subsequent Discord servers.
“We like the art!”
This became a catchphrase for all that advocated for their particular project of interest. We soon came to realize that most people, in fact, did not love the art.
“I would still love this NFT if it went to 0.”
This turned out to mainly be a coping mechanism in the form of a self-affirmation.
Rugs and Roadmaps
“Rug” probably should have been word of the year over NFT (which is not a word?). We saw many “rug-pulls” AKA scams that stole millions of dollars from gullible crypto investors. Yetis, Bears, you name it. Plenty of people were able to anonymously make off with fortunes because of the hype and FOMO that is so deeply ingrained in NFT culture.
Not all of these were from nefarious intent, though. A term known as “soft-rugs” became adopted after some time. We saw many people start NFT projects with the genuine interest of creating something valuable. However, once they realized it might be more work and less profitable than they imagined, a lot of founders abandoned their projects. While it was not the plan from the start, projects went to 0 in abundance because of this.
Project roadmaps that turned out too ambitious are often categorized as a soft rug. Copying the strategic plan of successful projects only works if you can deliver at the same level. Turns out not having a roadmap and taking the project in the direction that the community decides not only embodies the spirit of decentralization but also works out better.
Decentralized Autonomous Organizations (DAOs)
The idea behind a DAO is really cool. BUT, this became the next hype phase to try to sustain the wave of PFP projects. On-chain, automated governance to fully democratize decision-making a decentralize the process is a cool concept. It requires a lot of work to be done successfully, by everyone involved. Because of that, not a lot of people actually did that. Instead, we saw people make gated Discord channels where a mod would post polls such as “React with A or B to decide how we want to make this decision.” The spirit was there but, ultimately, the execution was not exactly on par and did not make the difference that it was envisioned to. Attribute-based, intra-project DAOs became a thing too. I’m not sure if anything of substance was ever brought from one, though.
Governance Tokens
Turns out, it’s really easy to launch your own cryptocurrency. Following suit with the “DAO” trend, governance tokens are being created left and right for project “utility.” Again, without the work put in by everyone involved, these become pump-and-dumps in their own regard — whether that was the intention or not.
Promises of Play-To-Earn (P2E)
P2E is a really exciting concept because it lets you live out your fantasy of the Matrix being real. All jokes aside, some projects truly have seen good economic models and success from this idea, but it got really easy for everyone to say that the governance token they just spun up will be used in the P2E game that will be spun up to make everyone rich. However, in the category of soft rugs, it turns out that building a game, much less one that doesn’t suck, is a lot more difficult than it seems.
Whitelists
We can blame Voltura for this one. Just kidding. The way Psychedelics Anonymous pulled off a huge, mysterious, project out of the blue is very impressive.
ETH gas wars became insane during high-profile mints. To the point where, regardless of the mint price, the only people that could get in on the action were those that could spare upwards of 1 ETH on a single transaction because of the block demand it created on the network. The solution? A whitelist.
Only allowing a certain amount of individuals to mint with no rush on doing so combats the gas war issue (other chains don’t have this issue 👀). However, in following the ridiculous run-up in the NFT milieu that was achieved by Voltura in anticipation of the PA mint (something like 6k followers to over 120k now?), many people started doing their own secret anonymous whitelists as a way of engagement farming on Twitter. It worked so well there are now swarms of Twitter bots finding the word whitelist and bombarding it with replies. That method worked too well — I did that as a joke and received over 1,000 replies in a day (that inspired me to make a real project around whitelists, but that’s a different story).
With all that behind us, let’s look ahead to the new year.
2022 Trends:
This could be entirely wrong. If history repeats itself, do the opposite of whatever I do and you will probably get rich or something.
Free Alpha: Teams that deliver more significant, infrequent updates are typically doing more work than teams that @everyone in the discord every day
Profile Picture Projects (PFPs)
I’m not sure this will survive without unique utility (outside of a few projects). HOWEVER, if Twitter/Instagram/Discord/Others integrate NFT profile pictures, that changes everything. People will do a lot for clout.
PFP projects that are providing value in the form of connections (like a country club, I guess) will survive. Things like BAYC or Solana Monkey Business.
Actual Play-To-Earn (P2E)
ACTUAL P2E games that come up will be big this year. This is my #1 bet for the big trend of the year in NFTs. A few collections are doing it “right” that I am aware of — Rumble Kong League on Ethereum, Chibi Clash on Polygon, Crypto Cavemen Club on Solana (there are a lot more, just a few I know of).
Hiring real, experienced game developers, creating a game that would be actually fun to play and not just an investment vehicle, and doing something unique — not just a Roblox reskin. People have been paying to play games, and even more on micro-transactions, as long as they have existed. Do you think people won’t pay to play a game that gives you a chance of ownership and revenue? I think it’s going to be a great experiment. Most large game companies will probably be watching, too. This experiment will either be huge or nothing — no in between.
Another consideration: most projects are launching an NFT collection before token launch, which is before game launch. Using this as an opportunity for community members to act as VC seed investors (a cool application of NFTs that I like) is a great way to raise capital, but I am interested to see if there are projects that come out with a playable beta before trying to raise money through an NFT collection launch. I understand the logistical barrier with this, but I am not aware of any big-name projects that have taken this approach. It would be a great way to solidify yourself as a real project and not a cash grab.
Securing/Building the Networks
Projects that are actively providing infrastructure, security, and scalability to the network they are built on are super rare and super valuable.
Ethereum Name Service (ENS):
They took off because of a governance token distribution that airdropped tens of thousands of dollars to everyone with a registered domain, but they are doing some great things for Ethereum. Providing a useful solution to complicated wallet addresses was the beginning, but the ability to create digital identities and brands with seamless integration across the Ethereum blockchain is standard set to truly unite everyone that uses ETH. Bonfida tries to do this for Solana. It doesn’t really work.
GenesysGo and Super Shadowy Coder (SSC):
Just after the closing of their public IDO for $SHDW token, we are seeing that the GenesysGo team is working very hard behind the scenes to provide value to the Solana network and make that available for everyone to use. They provide a free, unlimited Solana RPC for anyone to use (powers The Whitelist Project mint among many others). The release of $SHDW token is looking to provide a decentralized storage solution for the network. Arweave is currently the main player in this regard, but there is always innovation ready to happen. With the success this team has had with the IDO and SSC NFT collection, I see no reason not to expect them to continue building the future of Solana.
Those are just two examples of people building infrastructure and creating value for their respective chains. I would love to learn more about other projects doing something similar because those are the ones that make it possible for others to succeed.
Major Brand Adoption
We’ve already seen a lot of major brands get involved with NFTs in some capacity. Adidas, AriZona Beverages, you name it. HOWEVER, a lot of these have seen to be surface-level, joining-in-on-the-hype moves. Brands that are actually harnessing the business use-cases of NFTs are the ones that I am truly interested in. This might come most effectively from smaller brands and startups, honestly.
Royalty sharing was a trend in PFP projects for a blip — regulatory concerns shut most of them down. However, this is a legitimate business use case that cuts out significant overhead and the need for clearinghouses.
For example, one of my favorite musicians, Kyle, is going to be releasing an independent album, in which he will be releasing an NFT collection as a method of royalty sharing — instead of going through a major label to promote for its share of the sales. THIS is the kind of cool innovation that I think is really what the difference in NFTs can be.
Similar to that, will we see startups opt for governance tokens instead of stock offers? That will probably be its own, lengthy, article — later. For now, just thinking about how circumventing the typical gated process for seed funding and stock offerings by giving a truly open funding method will be a very plausible path for the next generation of companies. Like Kickstarter, but good.
I am on the lookout to see how more niche brand adoption and Web3 native companies start to emerge over the year. I like this better than Coca-Cola releasing an NFT collection. There are more investors in the space than true collectors.
Metaverse and “Digital Land”
I don’t like the word metaverse. It’s kind of cringe to me. I think that is Mark Zuckerberg’s fault. I also don’t know how I feel about the mass adoption of a VR-themed digital world. I understand that with the work-from-home cultural shift that we are progressing towards, there is a need for more effective virtual meetings. Putting on a headset and webcam for these meetings is still clunky and error-filled (user or technical). I can see how this would be better with a “metaverse” style meeting room.
HOWEVER
We will need a big upgrade in tech infrastructure before this is practical. Do I think putting on a VR headset is easier than a webcam and headset? Not right now — but it could be. There is a long way to go there. Also — trying to mirror the real-time value of in-person meetings is going to require everyone to have GREAT internet speeds. Does 5G work for this? Maybe not this exactly, but evolving internet infrastructure might make it a reality soon. I don’t think that is a 2022 goal, though. Internet, much less high-speed, isn’t even a default everywhere in the richest countries in the world. Until we see a shift like this globally, I don’t think it’ll be implemented widespread. 2025, maybe?
The artificial digital scarcity aspect of well, all of this, is kind of weird. That doesn’t mean it won’t succeed. Things like The Sandbox and NFT Worlds are already skyrocketing in this space and I don’t think it will slow down soon. Digital Real Estate is an interesting concept that feels backward, but creating a central hub for global meeting spaces could be a thing. An infinitely expansive world is cool, but if we are truly wanting to mirror the in-person experience and social aspect, it isn’t practical. Remember playing Minecraft without commands in a huge world and having to spend days traveling to find your friends so you could play together? I feel like that experience is one we don’t want to recreate. Cross-chain, cross-IP projects are probably going to be the big winners here. Honestly, recreating Smash Bros with NFT projects would be a huge success. Something like Galaxy Fight Club or Plush Fight League (I think that’s what they’re doing).
Market Cycles
Are we going to see cycles similar to crypto? maybe not — NFTs have more nuance (people don’t wanna sell images they have an emotional attachment to). The speculative correlation, so far, has been that “ETH/SOL go down, NFT price go up.” That hasn’t quite held, but during huge run-ups, we have seen NFT crashes. However, the inverse hasn’t quite matched. We haven’t seen a large enough crash in comparison to the huge run-ups we’ve seen, so that might change things.
Adding to that — we might not see 2018-size crashes again within the space (except, you know, like COVID). Crypto is becoming less speculative every year, and I think the popularity of NFTs is going to act like a stabilizing factor for cryptocurrencies. There will be ebbs and flows that mirror the larger market cycles, but we are experiencing how global this is. A benefit of this globalization is that it transcends any individual country’s economy. The influence is still there from the largest economies, but it isn’t the same as being tethered to the country your company incorporates in.
Anyone-Can-VC or Seed Investing
We talked about this a little bit, but I think it’s one of the true “wealth-distribution/financial-freedom” use cases, or however you want to classify it. The regulation on funding startups provides some security for them, but also makes the significant gains on investment only available to those that already have lots of money. I think a more normal distribution of wealth in the world would be sick nasty, personally. This might not be the thing that does it, but trying something out in the name of helping level the economic playing field is well worth a shot. This subtopic will be a big part of the other article I mentioned earlier.
I saw a great tweet that said something along the lines of “crypto is just speed-running the past 300 years of financial regulation.” I wish I could remember who it was from or where I saw it so I could give the creator proper credit, but that made me laugh because it is unfortunately true. Getting “rugged” is a weird rite-of-passage in crypto culture, but there is no reason for it to be. As a viable economic tool, there needs to be accountability and regulation for it all to make sense. Does that lead us to the same economic models and policies we have now, but digital? Maybe. Hopefully not, but maybe. I am hoping this all empowers a new generation of people; giving them economic leverage and voices that they would have otherwise not been afforded.
Community Lore Building
There are a handful of projects working towards works of literature that are contributed to by the community, whether it be shows, movies, books, or manga. Glue Factory Show, Jenkins the Valet, and plenty of others. Decentralizing the creative process crowdsources the “choose your own adventure” genre. Adding the social aspect, this can be something that ends up meaningful. Whether it is someone trying to exercise their creative muscles for fun, or a way for young creatives to make an entry into the industry. I’m not sure it will be the huge profitable investment that many are hoping for out of their NFT projects, but it will be one of the most tight-knit community experiences there are.
I’m excited for the upcoming year and what it holds for us all. If there are some big things you think I missed, I would love to hear them! Drop a comment or send me a message and let’s talk about it. Continuous learning is essential and I try to prioritize it always.
I mainly speak on projects that I have invested my time or money into because that is where my subjective knowledge comes from. I don’t try to hide anything — you can see everything I’m involved with through my main addresses: qualtagh.sol and qualtagh.eth.
