The 4 stages of NFT evolution and future predictions

This article will refer to the historical development of the Internet, compare the past, present and future of NFT, analyze the four stages it has gone through, and make a brief prediction.

Written by: Plaid Cat

Introduction: Since the birth of NFT more than five years ago, its development has been relatively slow. At present, both the number of NFT castings and the transaction volume of the entire network are showing a downward trend, and NFT is in a downturn. For most people, NFTs are just small, worthless pictures. However, is NFT limited to this? This article will refer to the historical development of the Internet, compare the past, present and future of NFT, analyze the four stages it has gone through, and make a brief prediction.

The first stage: Turned out

In October 2017, when people were still immersed in the joy that Bitcoin was about to break through $20,000, a very interesting on-chain game-CryptoKitties came out quietly. CryptoKitties is a blockchain-based game where users can buy, breed, sell and collect virtual cats. These cats have unique attributes including eye shape, eye color, coat pattern, tail type, belly hair, eyebrows, mouth, chin, whiskers and expressions.

Even more intriguingly, the genetic algorithm used to reproduce these fuzzy cuties is similar to the principles of biological genetics. Using two kittens together can breed a new breed that is a combination of the genes of the parents. The lower the generation of cats, the higher the cost, because the first generation of cats was hatched in 2017, and the number cannot exceed 50,000.

In December 2017, the game became so popular that it even caused congestion on Ethereum. At the height of the hype, CryptoKitties was rumored to have 1.5 million users who contributed $40 million worth of transactions. The most expensive kitten, "Dragon", was sold for 600ETH (about $170,000). At the same time, major domestic manufacturers are also rushing in. Baidu released "Leitz Dog", 360 released "Rabbit", NetEase released "Planet Black Diamond" and other products, but due to domestic regulatory policies, these Domestic NFTs eventually became stand-alone versions and disappeared in the long history of the industry.

At that time, there was a lack of exchanges that supported NFT transactions in the market, and there was no decentralized NFT trading platform, which made many novices only rely on the guarantee of some reputable group owners or well-known people to conduct transactions.

However, in December 2017, almost at the same time as CryptoKitties, an NFT exchange called "Opensea" appeared.

This is the first stage of the NFT industry, and NFT simply exists without other additional functions. For the entire industry, the emergence of Opensea has only played a role in pioneering and initial development. By the second half of 2018, people seemed to have forgotten the existence of NFT, and Opensea was gradually forgotten.

Phase 2: Regression, Rupture

After two years of relative downturn, it can be said that 2020 is the year of the return of the NFT industry. However, this time the protagonist is no longer CryptoKitties, but new NFT works represented by CryptoPunks and Baby.

In addition, encrypted art is also booming, and many traditional artists have poured into the Web3.0 field. For example, the familiar Japanese artist Takashi Murakami released his work "MURAKAMI.FLOWERS 2022", while the famous American DJ 3LAU airdropped his latest album to his fans in the form of NFT, making fans Able to enjoy royalties. These examples show that more and more artists are beginning to realize the potential of NFT as a new creative and business model.

In this exciting market, of course, some Chinese products have also appeared. Platforms such as iBox, Magic Core and other domestic platforms have emerged one after another, and have given this type of NFT a very localized name-"digital collection".

Such localized naming reflects a unique understanding of Chinese culture and the market, and also plays a positive role in the promotion and recognition of digital collections in the domestic market. These domestic platforms provide more opportunities and choices for domestic creators and collectors, and bring new development momentum to the digital collection industry.

At the same time, the rise of chain games and the metaverse has also led to the application of various X2E (real world to virtual world), whether it is running shoes, game props or land and houses in the metaverse, etc., have become the bearer of NFT . As the infrastructure for NFT liquidity, Opensea's transaction volume has also grown rapidly.

People are finally starting to realize that NFT is not just a small picture or a piece of music, it should be a program that can carry asset attributes.

However, in the second stage, although NFT has made great progress in product innovation, application and liquidity, with the collapse of chain game projects like Stepn and the cooling of the metaverse, the value of the above-mentioned NFT has all returned to zero. People can't help feeling. Small pictures may also have a certain art collection value, but once the assets on the chain disappear, there is really nothing left. As of May 2023, the NFT transaction volume of the entire network has hit a new low, and NFT has once again entered an extremely sluggish moment.

The third stage: ready to go

The bursting of the NFT bubble in the second stage is just like the Internet bubble in 2000. At the same time, the NFT trading volume of the entire network has also dropped to freezing point. However, does this mean that NFT is really worthless?

After the experience of the NFT bull market in 2021, people have clearly realized that NFT is an indispensable and important part of metaverse, chain games and social fields. The function of NFT to carry assets in applications is crucial. In order to solve the liquidity problem of NFT, various NFT financial innovations (NFTFI) have also emerged, including leasing, peer-to-peer or peer-to-pool mortgage lending, fragmentation, and shared property rights. At present, these basic protocols have been launched and relatively mature.

On the other hand, in the fields of asset carrying and artwork, the NFT currently on the market has fully met the demand. Elsewhere, however, it appears to have reached a bottleneck. So, what does the future of NFT look like?

The author believes that NFT is not just a small picture, a piece of music or a piece of art. It should be like DeFi, with programmability, composability, and the ability to carry asset attributes. So, where will the future of NFT be?

Until the end of 2021, Chainlink released the vision of dynamic NFT, which shows that there is still a lot of room for innovation and development in the NFT field.

Simply put, dynamic NFT is a form of NFT that adjusts its attributes in real time according to changes in external data, which can be on-chain or off-chain. Compared with traditional static NFT, dynamic NFT has greater potential and application space. For example, suppose we play props in a certain game. Although they are the same kind of props, the attributes and values of each prop will be different according to the time, experience accumulation and maintenance data of different players in the game. will greatly affect its value.

Web 3.0 also represents a revolution in personal data, enabling users to take control of their own data and derive value from it. Taking personal medical and health data as an example, these data are changed and updated in real time, so dynamic NFT is needed to carry and realize benefits.

Dynamic NFT will show great potential and innovation in the next stage. They can adjust attributes in real time according to changes in external data, bringing more possibilities to the functions and applications of NFT.

Phase 4: The Great Explosion

At present, we cannot determine the arrival time of this stage, but the infrastructure and products of NFT and dynamic NFT are springing up in the form of bamboo shoots after rain, which is exciting.

So, what will NFT look like by then? I'm giving some guesses here:

• Liquidity infrastructure, such as lending, leasing, fragmentation, and co-ownership, will be further improved to provide participation opportunities for more retail investors.
• The dynamic or static NFT issuance agreement will be further improved, greatly reducing the issuance threshold for ordinary users.
• The dynamic data storage protocol will mature, greatly reducing the cost of NFT casting and distribution.
• There will be more on-chain and off-chain data capture protocols and interfaces combined with NFT.

In general, as the NFT track matures, it will surely become the next indispensable and important part of the encrypted world such as games, social, metaverse, X2E, etc., providing support and narrative foundation for the development of these fields.