Non-fungible tokens (NFTs) have already proliferated as a form of ownership for previously unownable digital assets like digital art.
In short, they create scarcity for items by defining an ‘original’ version of a digital asset and recording their purchase and ownership on a public and transparent blockchain ledger.
Ballooning prices have prompted intense speculation on the nascent technology. With this visibility, NFTs seem poised to become a key component of the way digital ecosystems function with the exclusivity they give a buyer.
Marketplaces are already taking advantage of this opportunity. In March 2021, OpenSea raised $23 million in venture capital from a roster of investors that included Mark Cuban and Alexis Ohanian. OpenSea, and marketplaces like it, replace a disparate web of independent creators, centralising browsing and discovery of NFTs.
Though providing an enticing opportunity for artists and buyers alike, they walk a fine line. The decentralized nature of Blockchain — particularly in the case of Ethereum, hosting the majority of NFT services — means that marketplaces need to keep in alignment with open source principles, or risk falling afoul of the vocal online cryptocurrency community.
In this climate, some independent creators may find it more lucrative — or more in line with personal values — to sell NFTs independently, rather than pay a commission to a marketplace.
While the mutual benefit for NFTs and digital assets is readily apparent, the question of the long-term success of the technology is contingent on the ability of the platform to accommodate more than just digital art.
The video game industry presents an enormous opportunity for game developers to work with NFT creators and platforms. Mythical Games recently announced a $75 million funding round to bring NFTs to digital assets in games through an NFT trading platform.
Marketplaces are in a unique position for the trading of any digital asset — they offer a stage for the independent creator by providing a space for NFTs to be judged relative to one another. Gain popularity on a marketplace, and other successes might follow on from your visibility.
Here, some creators are bound to outshine others and gain recognition for their work. Others will fall out of the competition during this process.
In either scenario a marketplace profits. That is, provided they’re able to keep creators and buyers satisfied and remain the default for NFT vending.
There’s a real chance that some marketplaces could fold under the pressure of rapid expansion in a risky and ambitious space. Many in the crypto world still remember the foundering of Mt. Gox — and the hundreds of thousands of Bitcoin that went missing during its liquidation.
The precipitous rise of the NFT market makes it difficult to project growth or, indeed, failure.
Still, there remains an enormous opportunity for online marketplaces to capture much of the NFT trade in what is still a relatively early hour. We’ll be watching with interest, in any case.