After exploding to prominence and mainstream notoriety in 2021, the NFT market had a very different year in 2022. Momentum surged in the early months of the year before crashing down to earth alongside crypto prices, marking an end to much of the speculative frenzy.
But another year of NFT growth brought some fresh wrinkles to the space. We saw expanded use of NFT artwork to build brands and projects, for example, but also consolidation of IP made for a decentralized world and disputes over the nature of NFT creator royalties. Amid the turbulent market, there were bright spots and significant roadbumps alike.
With help from Vayner3, Gary Vaynerchuk’s Web3 consultancy, Bud Light went on to put Noun glasses on cans and let holders of its own NFTs vote in the Nouns DAO on its behalf. The Super Bowl cameo wouldn’t scream “NFT” to anyone who didn’t know its origins, but the alliance showed the potential for major brands to embrace Web3 collaboration in a meaningful way.
Deepak Thapliyal, founder and CEO of Web3 startup Chain, purchased the Punk for 8,000 ETH, doubling the previous record for the iconic Ethereum profile picture (PFP) project. In November, he tweeted that he was open to selling the NFT following the collapse of FTX, which impacted Chain, but Thapliyal ultimately decided to keep the crypto status symbol.
Pixelmon reveal gone wrong
The NFT market would keep surging for a couple more months, but there was a clear top signal to the speculative madness in February. After collectors spent $70 million snapping up tokenized monsters for Pixelmon—a game that sounded like little more than an unofficial, NFT-infused Pokémon knockoff—the in-game artwork was released. And it was bad.
The clunky-looking, boxy monsters bore none of the Pokémon resemblance of Pixelmon’s concept art, instead appearing to be lazily thrown together. Even the founder admitted that the reveal was a “horrible mistake.” Now the NFTs trade for a tiny fraction of the mint price even after new in-game art was released, with a new team trying to create a proper game around it.
The Bored Ape Yacht Club continued its expansion in March with the launch of ApeCoin, an Ethereum-based token built for metaverse apps. With a token claim available to owners of Bored Apes and Mutant Apes, NFT owners cashed in big—Bored Ape owners could snag a haul of approximately $80,000 worth of tokens on day one.
In an apparent bit of decentralized theater, Yuga Labs said that it didn’t create the token, although the startup and its founders will wind up with nearly a quarter of the total supply once it all vests. ApeCoin’s price has fallen about 85% since its peak, amid the crypto winter, but NFT holders who cashed out quickly scored big on the launch.
The Ronin Network hack was pegged on insufficient decentralization, allowing attackers to send fraudulent transactions via its bridge to Ethereum. The U.S. government blamed the attack on North Korea’s infamous Lazarus group. Axie Infinity developer Sky Mavis raised $150 million in fresh capital to help fully refund affected users, and about 10% of the stolen funds have thus far been clawed back from hackers via exchanges.
Moonbirds take flight
With the NFT market still soaring, a new player showed that it could make serious waves in April. Proof, a Web3 startup co-founded by tech entrepreneur and VC Kevin Rose, debuted NFT access passes to an exclusive collectors’ community in late 2021, and then parlayed that move into a massive PFP project drop in April with the Ethereum NFT collection, Moonbirds.
Yuga Labs would soon top the Moonbirds debut with the launch of virtual land deeds for its upcoming Otherside metaverse game, and once more, Bored Ape owners got a free drop of valuable crypto assets. Given how valuable the Ape NFTs became, there was enormous buzz around Otherside, and Bored Apes surged in value beforehand.
The drop garnered over $900 million worth of primary and secondary sales in the first couple days, helping to set a single-day trading record for top marketplace OpenSea in the process. But the mint was widely criticized for poor design and for driving up Ethereum gas fees (the price to send transactions on the network), some of which Yuga ultimately refunded, and for Yuga’s “tone deaf” response to complaints.
NFT speculative bubble starts sinking
The Otherside launch was the year’s last truly massive drop, as the bottom fell out of the NFT market soon after amid the wider crypto crash and macroeconomic turmoil. Trading volume has fallen dramatically, with the monthly tally down 88% when comparing November data to January’s, with the number of NFTs sold falling sharply as well.
Prices on top collections have collapsed, as well, with the minimum asking price for a Bored Ape falling from $429,000 worth of ETH in late April to under $60,000 during November. The market is still yielding over half a billion dollars per month in trading volume, and top NFT projects see occasional big-ticket sales, but the buzz has faded.
Minecraft announces NFT ban
Some traditional gamers are vocally opposed to NFTs, and that ethos apparently extends to Minecraft developer Mojang and parent company Microsoft. In July, the companies said that they intend to ban NFTs from fan-operated Minecraft servers, as well as ban derivative projects built from Minecraft’s existing game assets.
The move immediately put the crosshairs on Polygon-based fan project NFT Worlds, which intended to create a Minecraft server with player-owned NFT land plots. Ultimately, NFT Worlds opted to start fresh and build its own similar game instead. Another major game studio, Rockstar Games, recently said that it will similarly ban NFTs from Grand Theft Auto V servers.
Twitter scams take over
Fueled by the speculative, FOMO culture around NFTs, social media scams accelerated in 2022. We saw examples on Discord and Instagram, with accounts hijacked to spread scammy links that stole NFTs from users who connected their wallets to them, but the flood of attacks was most apparent on Twitter.
Meanwhile, NFT profile-picture project DeGods grew from a rocky launch in late 2021 into a true titan across all NFT networks this year. The project’s NFTs became the most valuable on Solana, the community acquired a team in Ice Cube’s BIG3 basketball league, and then it parlayed that hype into the buzzy y00ts project launch this fall.
Bored Ape IP usage expands
While much of the story around Bored Apes this year had to do with rising (and falling) NFT valuation and freebies for holders, another narrative continued forming as NFT holders used their owned Ape imagery to fuel art, projects, and plenty more.
The Ethereum merge proved to be anticlimactic in terms of market impact, but the transition to a dramatically more eco-friendly consensus model brought significant benefits to the perception of the NFT space. Thanks to the merge, the largest NFT blockchain now consumes over 99% less energy than before, due to the elimination of resource-intensive mining.
The environmental impact of Ethereum NFTs had been one of the biggest complaints from NFT critics up until that point, even when discussing assets minted on eco-friendlier networks. Now that all significant NFT activity takes place on platforms that don’t have an outsized energy hit or carbon footprint, more creators and brands may feel comfortable entering the space.
Big brands pick Polygon for NFTs
When it comes to major brands entering Web3, no blockchain network did more to aid mainstream adoption in 2022 than Polygon. The Ethereum sidechain network managed to line up brands like Starbucks, Meta, Nike, Reddit, and Disney, all of which are building projects or platforms on top of Polygon.
Over the last couple months, the biggest story in NFTs hasn’t been slowing sales, but growing pushback to creator royalties. Royalties—typically a 5% to 10% fee on secondary sales, paid back to the original artist or creator—are seen by many as a key aspect of Web3, ensuring that creators and builders share in the ongoing success of their work.
Ultimately, OpenSea said that it would continue to enforce royalties, and rival platform X2Y2 followed suit and adopted OpenSea’s new Ethereum enforcement tool. This story isn’t over, however, with new royalties-enforcing NFT standards and tools in the works as creators attempt to protect a key source of revenue in Web3.
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