What is waiting for NFT in 2023?

Key points: 

• NFT transactions have dropped 88% since the third quarter of last year. 
• NFT collectibles that have a chance of succeeding in 2023 will be those that "foster community" by focusing on smaller collectibles and storytelling.
• NFT holders' interests can come from its utility in the form of land deeds and home ownership, or be tied to exclusive experiences like concerts, restaurant reservations, parties, and more.
• Maja Vujinovic, CEO of Web3 investment firm OGroupLLC, said that future Web3 activations must involve "human-level creativity" rather than serving as a marketing strategy for companies.
• As the new year approaches, one thing is clear: the relatively young NFT space still has room to grow.

Non-fungible tokens (NFTs) are exploding in 2021 as rising cryptocurrency prices encourage new traders to explore the space. Stunning NFT sales like Beeple’s Everydays: The First 5000 Days add to the hype, with favorable market conditions giving traders the ability to flip NFTs for a profit. Ethereum, which powers most early-stage NFT projects, is thriving, with prices for the blockchain’s native cryptocurrency hovering around $4,000 just a year ago.

Fast forward to today and the environment has completely changed.

Gone are the casual traders and the plethora of NFT projects from Web2 brands looking to capitalize on what they perceive as a mass market trend. An extended cryptocurrency winter has pushed cryptocurrency prices lower from previous highs, leaving previously enthusiastic traders withholding their previous gains. At the time of publication, the price of ETH dropped to around $1,200.

NFT transactions have dropped 88% since the third quarter of last year, according to data released in October by Web3 developer backend Alchemy. Crypto industry disasters — such as the collapse of the crypto payments ecosystem Terra, crypto lender Celsius, crypto hedge fund Three Arrows Capital, and most recently Sam Bankman-Fried’s FTX empire — have exacerbated an already dire situation.

Still, all hope is not lost for avid NFT holders, whose numbers may have dwindled but whose loyalty has grown. Data from Alchemy shows that the number of smart contracts deployed on Ethereum has grown by more than 40% since the end of the first quarter, underscoring long-term confidence in the digital asset space and the continued progress of Web3 projects despite the cold weather development.

More can come from NFTs. From utilities to community buildings, here are just a few of the trends that will continue to define spaces in 2023.

Commitment to the Community

According to the editors of the Oxford English Dictionary, the word of the year was "goblin mode."

Popular dictionaries define the word as "an uncompromisingly smug, lazy, sloppy, or greedy act, usually in a way that violates social norms or expectations."

Nothing illustrates the Goblin pattern in 2022 more than the unexpected success of the Goblintown NFT series.

Featuring quirky memefied goblin characters, the Personal Profile Picture (PFP​​) series is titled a colloquial nod to the somewhat chaotic state of the crypto market. The entire series was cast for free, seemingly out of the blue.

By May 2022, when the project launches, ETH has lost a significant portion of its 2021 value, falling to around $2,000. Still, the project earned 3,800 ETH (approximately $7 million) after going live, and its base price rose to a peak of 7.3 ETH (approximately $13,000 at the time) in June.

Alex Taub, the co-founder of Truth Labs, the Web3 creator collective behind Goblintown, told that a big contributor to the success of the series is the sense of community it fosters through its artwork and narrative.

“The thinking was that everyone ‘went to Goblintown’ because they were losing money.” He called the artwork “ugly but well done,” which resonated with the collecting community. "If you have great, compelling characters and a story, you can do anything right," Taub said.

He predicts that the NFT collectibles that have a chance of succeeding in 2023 will be those that "foster community" by focusing on smaller collectibles and storytelling.

“You’re still going to have winners here and there,” Taub said, referring to the one-off series that surged during the 2022 hype. "But for the most part, it's high-quality [community-building] efforts that pay off."

Focus on long-term benefits

This year, other projects have found success by embedding NFTs into utilities, implying real-world use cases and value beyond just digital collectibles. NFT holders' interests can come in the form of land deeds and home ownership, or be tied to exclusive experiences like concerts, restaurant reservations, parties, and more.

Matt Medved, CEO of digital asset publication NFTNow, told that over the past year, we’ve begun to see new use cases for non-fungible tokens that could continue into 2023.

"Utility-based projects can take many different forms, but they will involve human behavior, human psychology, human desire, and diverse communities," Medved said. "You'll be innovating at the forefront of what [blockchain] technology can offer."

NFT collective PROOF released their collection of pixelated owl NFTs in April, called Moonbirds, which grossed $200 million in primary and secondary sales within two days of its release. “Each Moonbird unlocks private club membership and additional benefits,” the project explains on its website, coining the term “nested” for holders of long-term locked assets.

Justin Mezzell, PROOF's co-founder and chief product officer, explained that building a community of passionate collectors and incentivizing long-term owners to contribute to the project's success is part of his plan for 2023 a part of.

"We want community tools to exist as a product," Mezzell said. "We're interested in building a social platform to explore not only how moonbirds meet, how they discuss things that excite them, but ultimately how we can engage other people in the conversation."

Build a real Web3 strategy

Web3 is definitely the buzzword of 2022, and for a while it felt like every brand wanted to incorporate NFTs or the Metaverse into their business strategy.

Maja Vujinovic, CEO of Web3 investment firm OGroupLLC and NFT investor, told that it is important to analyze what brings these assets on-chain, rather than looking at the goods or services that are already there and simply using them as a performance gesture, it’s important to analyze what putting these assets on-chain means for consumers and the project’s long-term growth.

She notes that while the Starbucks Odyssey NFT rewards program, which recently began closed beta testing, is a big step for the national coffee chain that could aid mass adoption, she questions the intrinsic value of putting a stamp of loyalty on the chain rather than sticking to it. 

Vujinovic said future Web3 activations must involve "human-level creativity" rather than serving as a marketing strategy for companies.

NFT projects as creative ecosystems

With the state of the cryptocurrency market remains uncertain for the year ahead, projects need to work smarter — not harder — to succeed.

Many successful projects use intellectual property (IP) licensing agreements to create new revenue streams for owners and accelerate the growth of their brands.

Yuga Labs, the NFT startup behind the Bored Ape Yacht Club, has released the intellectual property of all of its items, including CryptoPunks and Meebits, to owners, allowing their NFT characters to be used for branding of food trucks, TV shows, music groups and more. 

Other projects, like Moonbirds and Goblintown, have adopted CC0 licenses, which essentially allow their characters to be used publicly, even for commercial purposes.

NFT creators also go beyond art to build entire worlds around their characters. In 2023, Yuga Labs will shift its focus to building The Otherside, an interesting narrative metaverse project that will allow users to turn their NFTs into playable characters.

“It’s really exciting that we’re leading the way for a new generation of builders,” a Yuga Labs spokesperson told. "Otherside is an extremely ambitious project that will require a lot of innovation and all eyes will be on us to get it right."

Given the pace of development of the NFT market, it is safe to assume that new trends will emerge in 2023. The use cases for NFTs will continue to grow, with builders creating new tools for experimentation and creative collaboration. 2021 is all about the hype, and 2022 is all about introspection and examination of why builders are turning to Web3 in the first place. As the new year approaches, one thing is clear: the relatively young NFT space still has room to grow.