The NFT hype train is running out of steam as speculators dry up

Poised to be the next big thing, nonfungible tokens or NFTs were having a moment earlier this year.

But the buzz around the once-hot commodity now appears to be fading.

An ET report citing data from nonfungible.com stated that a 77 per cent plunge has been seen in terms of dollar traded between Q2 and Q3 of 2022 with a global NFT volume of $1.7 billion in Q3 of 2022.

As per the report the period also saw NFT investor profits take a hit by 84 per cent at resell.

For the uninitiated, an NFT is a unique digital identifier that cannot be copied, substituted, or subdivided, that is recorded in a blockchain and that is used to certify authenticity and ownership. The ownership of an NFT is recorded in the blockchain and can be transferred by the owner, allowing NFTs to be sold and traded.

NFTs can be created by anybody, and require few or no coding skills to create - one of the main reasons behind the initial hype. The traditional art scene, too, was quick to hop onto the bandwagon. However, today NFT sales at auction houses are dwindling.

Read | Are NFTs the future of art?

Like every other fad, NFTs went through the motions of popularity. "First when everyone gets excited; then the trough of disillusionment; next is the slippery slope of enlightenment and finally plateau of productivity," Avivah Litan, vice-president and distinguished analyst at Gartner said.

NFTs peaked in popularity as "crypto-rich speculators, looking for new ideas to invest, fell for NFTs." However, as Praphul Chandra, an NFT platform for brands and creator economy said, the problem was that most NFTs were being looked at as an investment opportunity. Moreover, the crash in cryptocurrencies (in which NFTs are traded) appears to have accelerated the decline of NFTs.

While most analysts and investors are predicting that the end for NFTs is fast approaching, some believe that the future may not be all that bleak.

Ashootosh Chand, partner, digital and emerging technologies at consultancy firm PwC has stated that people are looking at NFTs beyond the hype. "It’s not about just an overvalued coin, painting, cricket bat or celebrity autograph, but about everyday things. That’s where NFTs will see a mass adoption.”

In the future, NFTs may also find application in how brands engage with their end customers, said Chandra of Koinearth.

On the other hand, Ashish Singhal, co-founder, CoinSwitch, a crypto platform, sees NFTs being used for "mundane things such as warranty cards for home appliances" or to issue government documents such as driving licences or passports. Companies are also looking at more practical applications of NFTs.

“I believe in this technology, and it will be a much larger play than just a marketplace (for art or collectibles),” Singhal added.