As with most things in crypto, there is always a better option (the exception is Bitcoin and Ethereum, I suppose). The same is happening with NFT, as innovations are introducing more utilities to the revolutionary digital assets.
In this article, I will talk about the current state of the NFT market and what NFT 2.0 will look like.
“Gathering digital dust”
As revolutionary as NFTs are (replicating scarcity from the real world), we have to admit that they do not do much. All you can do is store them in your digital wallets to look at or list them on a marketplace so that someone can buy them back (at a higher price, I hope). This is why Bruno, the CEO of RMRK, said that they just “gather digital dust” and that RMRK 2.0 will bring a new wind to the NFT industry (more on this later)
The difficulty and price of minting one NFT have also significantly gone down, thus leading to the saturation of the market. With the rise of alternative Layer-1 blockchain such as Solana, Near, … and improved UI/UX, just anyone can create an NFT and decentralization means that no one is there to check for copyright infringement or intellectual property theft (decentralization is not always perfect). Right now I can easily download the logo of WidiLand, turn it into an NFT, and sell it on Opensea for 1 ETH with ease.
Looking at the below chart, you can see that after the NFT craze in the autumn of 2021, the volume and sales of art and collectibles have significantly decreased (though still higher than the level at the beginning of the year).
The same can be seen in Open sea, where data suggests that the level of users, volume and transactions fall nearly 20 - 30% from June - July high, although the number of users has recovered faster than the other two.
On the bright side, interest in the NFT industry remains high, as shown in the number of Google searches.
So, how will NFT come back to life?
Here comes the savior
NFT 1.0’s chief weakness is a lack of utilities, so NFT 2.0 improve on this. In the future, you can hold NFT to boost yield farming, reduce gas fees, receive new NFT from the artists, earn a cut of future sales, … The possibilities are truly endless, but for the sake of time, we will just explore some really cool features in this article.
NFT x DeFi
DeFi and NFT are the two biggest sectors in the crypto industry, so what would happen if you combine them?
In this scenario, the project can airdrop NFTs for early adopters and supporters, which not only carry financial value due to their scarcity but also utilities. For example, token holders can be given more voting weight if they also possess these NFTs.
NFTs holders can also stake them to earn more tokens, boost farming yield, reduce transaction costs, … The smart contract will recognize the unique feature of these NFT and automatically grant the holder these special privileges. Therefore, you can also expect that NFT 2.0 will have a higher price tag.
A DeFi project which has successfully implemented this system is Orca, where you can stake their NFT collectibles to earn ORCA tokens.
Conditional Rendering
This idea is borrowed from RMRK, an NFT 2.0 protocol on Kusama. Essentially NFT will change if a condition is met.
For example, you have a picture of Mona Lisa, and if it receives 100 “Heart” emojis on-chain, it will blush, or if you drop 200 “Skulls” emojis, she will disappear and only the background remains.
Now, if you combine this with DeFi, if a person performs enough transactions in a project, his or her NFT can change as well, and because only a small number of users can do this, the rarity of NFT will increase and so will its price, thus encouraging users to interact more.
Equippable NFT
NFT 1.0 is just a standalone pixel picture, they can not interact with anything. So imagine with NFT 2.0, you can equip NFT to another NFT, say putting a hat on a CryptoPunk collectible. Once again, the sky is the limit, but this is a feature we are most excited about (as game developers) because it will make the GameFi industry so much more complex.
Let’s look at RMRK. In the autumn of 2021, they launch Kanaria, an NFT 2.0 collection of birds that are multi-resourced and equippable.
What’s next?
What’s next is that NFT 2.0 will truly unlock the imagination of humanity and bring in renewed interest from retailers and institutions. Implications for traditional industry such as art, music, movie, … is massive too.
GameFi and the metaverse
A cool part about humans is that we are unique, we have different personalities, we have different looks, clothes, etc. We want to be unique and this should be replicated in the metaverse as well.
People can buy rare accessories, clothes, or buy limited cars in the metaverse. In turn, this car can be equipped with different tires, paint colors, artwork, …
The same can be said for regular GameFi, like WidiLand. You can equip farmers with a rare shovel that boosts the farming rate or equip your chickens with a legendary necklace that makes them produce more eggs.
Of course, NFT alone is complex, and with NFT 2.0 the level of coding just gets to a whole new level. Even though the crypto industry is moving at a fast rate, we may not see the wide adoption of NFT 2.0 until Q2 - Q3 of 2022. At WidiLand, we are always actively looking for new innovations that can benefit our gamers, and NFT 2.0 is one of them. However, for now, we will just focus on delivering the game in January 2022, cool innovations will have to wait after that.
The Music and Art Industry
Imagine a static JPEG NFT that turns into a video when a music NFT is applied to it. This can be used in several ways. For example, a collection of PFP characters that are bored. These are the parent NFTs. When a dance song is applied to them, the bored picture characters become vibrant video versions, moving to the music.
Going more abstract, a white dot on a black canvass that paints lines according to the tempo/mood of the music NFT applied to it.
In this manner, multimedia art can be turned into legos that are reusable across the works of various artists. Now that would be truly radical. Everyone’s individuality is allowed to remain, but the interactions between those individualities are made richer. A generative art marketplace could be built with a feature that interprets the rich data in music (tempo, mood, lyrics, etc.) and uses that to control the distribution of light and color on the canvass (whatever it may be).
The DeFi industry
A simple way for a DeFi project to attract liquidity is to offer a high farming yield, although this is not sustainable by any means. Therefore, DeFi 2.0, pioneered by Olympus DAO, has emerged.
Now, combined with NFT with new utilities, these DeFi projects will have many options. They can airdrop a certain collection to early users, another collection to those who contribute a fixed amount of liquidity, another one to users who stake token for a certain number of days, … Once again, the sky is the limit.
We have seen this with Zapper, a DeFi Hub which offers NFT as a reward for those who finish tasks.
After the announcement of Season 2 of NFT attendance, Zapper's MAUs (monthly users) increased tenfold. This shows that the appeal of NFT is still there, and this is just NFT 1.0.
Final thought
Excited as we are, we must see the reality that NFT 2.0 is still a long road ahead of us. However, this shows you two things:
Crypto never sleeps
Check number 1
New innovations will continue to emerge to fix the weaknesses and downsides of the previous generation, this makes crypto one of the most fascinating markets to participate in.
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