For many newbies in this field, this may be the first bear market that they are encountering. Those new fanatics might even join the NFT boom in mid-2021 when the NFT market was very energetic and crazy with more than a 43 billion market cap. The frenzy of that period of hype around NFT had reached the point that everyone would want to create their NFT or buy any NFTs in order to hit the jackpot and get a piece of the pie in the NFT market. As such, there were many new NFT collectibles that emerged with some strange creations, descriptions, and utilities (or they even don’t have any utility at all like Ghozali every day — average price went up 4000% at peak).
Ghozali Everyday NFT
Unfortunately, the unexpected winter market had demolished the hype relentlessly and rapidly. This numbing chill has slowed down the NFT market, wiping out the chance for those scams and the low-quality NFT collectibles to take a breath. The NFT ecosystem recorded its worst performance of the year in June 2022 as the total number of daily sales fell down to roughly 19,000 with an estimated value of $13.8 million, which dips to one-year lows. With the fall in the price of crypto and the decline in NFT market volumes, making profits has become harder or even impossible during the winter. Under the witness of time, the garbage-like NFT collectibles projects are gradually exposed by the market and dumped by the holders, with no more illusions that people will be willing to pay a fortune for random scribbles. The obsession with the NFT avatar has slowly subsided. For example, the average price of CrypToadz, one of the famous NFTs last year with the gimmick of donating to environmental charities, is dumped from 22 ETH in October to 1.9 ETH now, revealing that if an NFT collectible project is not a blue-chip NFT collectible like CryptoPunks and Bored Ape, it better has a robust vision and ambition to sustain the development of the project. This will be the only way for the start-up NFT collectible project to come out of the crash unscathed and reinstate the faith and support from the Web 3 investors. This article will deep dive into the key elements of NFT collectible projects to cultivate a sustainable long-term project.
Number of daily NFT sales between June 2021-June 2022. Source: NonFungible
There is no doubt that the NFT trend has declined for months and investors are becoming more and more cautious as the NFT market has become more sophisticated and crowded than before. Last year, you might find a lot of news week by week about a particular NFT project that went craze with hundreds of percentage increases within a few days. Sadly, it is not the case anymore. The truth is that the large majority of NFT projects get little to no attention, and many of them completely fail. As such, it is critical to have comprehensive NFT development concepts to make sure the NFT collectible project is sustainable and blows up.
1. Enhance the originality of the NFT with a comprehensive vision
Launching an NFT project is just like a business; all the founders would want to recreate that same level of success as Bored Ape Yacht Club, which came out of nowhere a year ago and took a week to sell out the collection while still keeping the craze now with no sign of stopping. Therefore, they try to follow the steps of Bored Ape and create a roadmap with a lot of promises to the holders to spark everyone’s imagination. Indeed, a promising road map is crucial to give confidence to investors. Yet, when these successful approaches become a phenomenon, the specialty will turn to a common trail, breaking the rules that the rest of the NFT project needs to follow. When starting a new business, originality and intention are critical to attracting people’s attention and appreciation. A new product should fit the market demands and expectations in order to stand out in the competitive NFT collectible market. What is the purpose of launching this NFT project? What problems is this NFT hooking and solving? Ninety-eight percent of the NFT collectible projects in the market are just invisible scams to attract capital with exaggeration or a common plan on the roadmap. Most of the new NFT collectible projects will mention ‘Metaverse’ on their roadmap, but in fact, how many of them have created such metaverse with excellent experience for the holders? Less than one percent of the NFT collectible project has hit the headlines with this metaverse plan so far. When the first NFT collectible project mentions Metaverse on the roadmap, it will be a breath of fresh air for the investors. But when all the NFT collectible projects talk about metaverse in their future plan, that will be a point of consideration for investors. That is why originality and intention are very important for the start-up NFT collectible project to modify the perception of the market and investors.
As mentioned, investors do not really believe in every single detail on the roadmap as all the things are just some yet-to-be-determined date in the future after the project is been built. There is no binding force on the enforcement actually. We are not in a period of 2017 where people could basically sell anything if they could formulate a good white paper under the crazed atmosphere in the crypto market. Therefore, the project should not put so much consideration into their long-term vision and ignore the psychological desire that people would like to see something tangible now after they mint the NFT. The team needs to tell the world that your project is very promising and special from now on but not just in the future plan. For instance, CloneX and Bored Ape Yacht Club have released the control of their intellectual property to their community members. They special in granting commercial use licenses for the artwork to the holder of the NFT. This design choice serves to empower holders by giving them legal standing to appropriate their Bored Apes for other creative pursuits, whether it be digital art projects, merchandise, or billboards, granting holders the ability to profit from their ownership of the NFT collectible immediately. Indeed, there are many other ways the founding team can consider to tangible value of minting and holding the NFT collectible like physical rewards or exclusive meetings, just to make sure that the NFT holders can perceive the value of immediacy but not fully rely on the descriptive wordings on the roadmap.
2. Increase the functionality of the NFT collectibles
NFT collectible projects are everywhere. When we browse Opensea or Magic Eden, we will mostly have no idea about the NFTs on the marketplaces. Every project commits to becoming the next blue-chip NFT but in fact, however, most of them are just mediocre. Nowadays, it is not possible to create an avatar project like CryptoPunk, a total of 10,000-pixel avatars launched in June 2017 without any specific utilities and functionalities. Because of its historical position, originality, and scarcity, CryptoPunk collectibles are a symbol of status and position, but this kind of NFT style cannot be modeled anymore. The ground of being a potential blue-chips NFT collectible project has been set with the continuous evolution of NFT development. The premium brought by scarcity and the past artistic style is fragile to some extent. The NFT needs to have sufficient and unique utilities or functionalities to allure the investors and holders. Although it is too early to talk about the application of NFT in Metaverse, the potential value of NFT as a tool in reality or exclusive access to events or airdrop will be a big trend to the long-term incentive of the project. T10T, an NFT collection of 10,000 unique NFTs by TYGA and Kreation, allows the NFT holders to early access TYGA’s upcoming albums, participate in TYGA music videos and join the exclusive virtual concert, etc. Of course, it is not possible for all the start-up NFT projects to cooperate with celebrities or some famous people to enhance the attractiveness and the functionality of the NFT, but the pinpoint is to link the NFT with the reliable utilities in the physical world and digital world to create, as mentioned, tangible value to the holders.
Mirror NFT dialogue
On the other hand, most of the NFTs appearing on the market are simply static artworks, props, or JPEG avatars, which are lacking the dynamic elements to provoke people’s interest. Mini-game, Metaverse, or some animations/effects will be the most popular ways to ease the stereotype of the NFT collectible, but as mentioned, when all the projects are doing the same things, it is breaking the rules that the rest of the NFT project need to follow. In order to get the spotlight from the general public, the team should dwell on the design and the presentation of the NFT collectible. Take the NFT+AI project Mirror World as an example. Each Mirror NFT will have a virtual consciousness created through AI with different appearances, personalities, and dialogue reactions. The Mirror NFT holders can ‘train’ and upgrade their NFT’s intelligence via dialogue and interaction with the AI character. It is like a newborn baby, the holders are the ones to witness the growth of their NFT, forming a stronger bonding to the NFT collectible. Besides that, growth traits can also be considered in the NFT design where the appearance and the rarity of the NFT will keep evolving during the transaction like the Crystal Reef NFT. NFT collectible is not the same as the NFT in Gamefi. It needs more scenarios and is given more functions to arouse people’s curiosity and possessiveness.
3. Tokenization
Tokenization will be one of the main trends to drive the development of the NFT collectibles project. As we all know that community is a very important element in driving the development of the NFT project, it also forms a contradiction to sustainable development as the quantity of the NFT has been highly limited. The NFTs aren’t really standalone tools to expand the communities. In the usual case, only ten thousand holders can join the decision-making and contribute to the project’s development, which is very limited in size and contribution. For an NFT project, the rationale behind launching a native token is to expand access and reach. Not everyone can afford to purchase a pricey digital image, so issuing tokens provides projects with a more scalable way to expand and engage their community and DAO beyond just selling NFTs. Also, tokenization can incentivize participation from communities through token rewards. For example, the DAO members who hold the NFT can receive the token allocation as a return that they can immediately cash. Third-party developers may also be incentivized to build side-products like games or NFT tools around a particular NFT project in exchange for an allocation of that project’s tokens. Under the tokenization with governance purpose, the NFT project can profoundly reduce the degree of centralization while unlocking more interaction between the holders and the project to enhance the ecosystem of the NFT collectible project. NFT powerhouse Yuga Labs has demonstrated a very impressive step to tokenize the Bored Ape NFT with the ApeCoin. APE token holders take governance decisions collectively, casting their votes and enabling them to access exclusive features of the ecosystem, such as games, events, merchandise, and services, as well as payment. A fundamental challenge with NFTs is the value they offer holders. With tokenization on the NFT collectible project, the early holders can have bigger advantages while more and more and more people can be a part of the project easily.
4. Incorporate Defi into the NFT project
At present, the main problem facing NFT assets is still low liquidity. The actual value of the NFT collectible will be perceived only when an individual is interested in paying for it. The low liquidity with thousands of failed NFT projects has scared the confidence of Web3 investors, forcing them to go far away from the NFT sector mentally. Therefore, how to deal with the low liquidity when believing in the long-term value of the NFT collectible? The use of NFT and DeFi in unison, such as mortgage lending, is a perfect method for unlocking value and enhancing liquidity with broader application scenarios to carry out financial activities and capital utilization effectively. This Defi approach can also hook with the governance token of the project to increase the utility of the token. The borrower would request a loan amount of the governance token with the NFT that will serve as collateral. The lender would evaluate the loan amount alongside the collateralized NFT with consideration of different factors such as the owner’s price tag, a secondary market value, and their individual calculations. Repay the loan before it the contract expires, and get their NFT back. Yes, unlocking value from the NFT collectible is that simple and attractive. What can be used for liquidity? The borrower decides it!
There can be more DeFi derivatives to interact with the NFT collectible: NFT index, call and put options on the NFT floor price perpetual... but keep it in mind that all the DeFi products are accompanied by the risk. Hence, it is suggested that the Defi application can only be launched when the project is getting more mature. Meanwhile, transitioning NFTs into the domain of DeFi definitely seems like taking a reasonable step toward a sustainable future, easing the issue of liquidity and the feasibility of NFT collectibles.
Indeed, there are many other elements that can affect the long-term development of an NFT collectible project, for instance, community development and marketing. However, these are all household names in this era and the approach of each project can be very different from other projects, so we won't go into details in this article. NFT is just like a business, the founding side needs to fulfill the game of demand and supply in the market. Right now, the NFT market is oversaturated. Buying or building the wrong thing could end up going the wrong way. Accordingly, establishing a strong and outstanding foundation with strong intrinsic values will be the only way to a sustainable future for the project.