The NFT market had a very different year in 2022 after bursting into mainstream fame and notoriety in 2021. It gained traction in the first few months of the year before collapsing in tandem with cryptocurrency prices, signaling the end of much of the speculative frenzy.
However, another year of NFT growth has introduced new wrinkles into the space. For example, we've seen widespread use of NFT artworks to create brands and projects, but we've also seen intellectual property consolidation for a decentralized world and disagreements about the nature of NFT creators' copyrights. There were both bright spots and major obstacles in the midst of the market's turmoil.
We've been covering the burgeoning NFT space as Decrypt's article all year, but if you haven't kept up, here's a rundown of the stories that will dominate the space in 2022.
Brands flocked to the NFT space, but Bud Light's Super Bowl play was truly unique. The Ethereum Nouns project, which creates open source IP through a DAO community, has awarded the popular beer brand with one of its high-value NFTs. In exchange, Bud Light used the project's square "name mugs" in their Super Bowl commercial.
Bud Light continued to put Noun cups in cans and allowed their own NFT holders to vote for them in the Names DAO with the help of Gary Vaynerchuk's Web3 advisor Vayner3. Anyone who didn't know the origins of the Super Bowl cameo wouldn't have yelled "NFT," but the alliance demonstrated the potential for big brands to embrace Web3 collaboration in a meaningful way.
While we didn't see any sales at the level of Beeple's record $69 million auction in March 2021, the February sale of a single CryptoPunks NFT for around $24 million changed the market significantly. your minds.
Deepak Thapliyal, the founder and CEO of Web3 startup Chain, paid 8,000 ETH for Punk, more than doubling the previous record set by Ethereum's iconic Profile Picture Project (PFP). Following the FTX crash that affected Chain in November, he tweeted that he was willing to sell NFTs, but Thapliyal ultimately decided to keep the crypto status symbol.
The NFT market would continue to expand for a few more months, but there was a clear sign of speculative frenzy in February. The game's official release came after collectors spent $70 million on tokenized monsters for Pixelmon, a game that appears to be nothing more than an unofficial NFT-infused Pokemon imitation. and it was awful.
The boxy, bulky-looking monsters didn't resemble the Pokemon in Pixelmon concept art, but instead seemed to cling together lazily. Even the founder admitted it was a "terrible mistake" to make the disclosure. Even after the new in-game art is released, NFTs are trading for a fraction of their initial price, as a new team tries to build a decent game around it.
Yuga Labs, the creator of Bored Ape Yacht Club, caused quite a stir in the NFT space in March when it announced the acquisition of Larva Labs' influential CryptoPunks IP as well as metaverse-focused avatar IP Meebits.
The move centralized control of the world's two largest NFT projects under a single house and came after some Punks owners were unhappy with Larva's handling of the project. Yuga has recently granted CryptoPunks and Meebits owners intellectual property commercialization rights similar to those granted to Bored Apes, while also working to build on the legacy of punks in the art world. Yuga also announced shortly after that it had raised $450 million, which is equivalent to $4 billion.
In March, the bored ape yacht club announced the launch of ApeCoin, an Ethereum-based token designed for metaverse applications. NFT holders made a lot of money with a valid token claim for both Bored Apes and Mutant Apes: Bored Ape holders could collect around $80,000 worth of coins on the first day.
Yuga Labs said it did not create the token, but the startup and its founders will receive about a quarter of the total supply when it's all said and done. ApeCoin's price has dropped by about 85% since its peak in the middle of the crypto winter, but NFT holders who cashed out quickly made huge profits at launch.
Axie Infinity, last year's largest NFT project, began 2022 with a whisper: the monster-fighting game's free-to-play ecosystem was in shambles, driving down NFT and token prices significantly. The icing on the cake was a hack in late March that stole approximately $622 million in crypto funds from the in-game Ethereum sidechain.
The Ronin Network hack was fixed due to insufficient decentralization and allowed attackers to send fraudulent transactions to Ethereum via its bridge. The US government blamed North Korea's notorious Lazarus group for the attack. Axie Infinity developer Sky Mavis has raised $150 million in new capital to help fully reimburse affected users, and around 10% of funds stolen from hackers have been recovered so far via exchanges.
While the NFT market continues to rise, a new player showed that it could make some big waves in April. Proof, a Web3 startup co-founded by tech entrepreneur and VC Kevin Rose, rolled out NFT access passes to a community of dedicated collectors in late 2021, then turned that move into a major PFP project with the Ethereum NFT Moonbirds collection in April. .
Moonbirds had primary and secondary trade volume valued at $280 million in just two days, then raised capital from Reddit co-founder Alexis Ohanian to create his vision for the Web3 community. The evidence sparked controversy when it went public with commercialization rights for Moonbirds in August, but it remains one of Web3's most popular initiatives.
Yuga Labs was set to make Moonbirds' debut with the release of virtual land titles for the upcoming metaverse game Otherside, and Bored Ape holders will once again receive a free drop of their prized crypto assets. Given the increasing value of Ape NFTs, there has been quite a stir in Otherside, and the value of Bored Apes has already increased.
In the first few days, the drop generated $900 million in primary and secondary sales, helping to set a one-day trading record for major marketplace OpenSea. However, the mint was widely criticized for its poor design and rising Ethereum gas fees (the cost of sending transactions over the network), with Yuga eventually returning some of it, owing to Yuga's "tone deaf" response.
Otherside's launch was the year's final big drop, as it quickly exited the NFT market amid the broader crypto crisis and macroeconomic turmoil. When comparing November to January data, trading volume was significantly lower, down 88% month on month, and the number of NFTs sold was significantly lower.
The minimum sale price of a Bored Ape has dropped from $429,000 in ETH at the end of April to less than $60,000 in November. The market generates over $500 million in trading volume per month, and major NFT projects see the occasional big-ticket sale, but enthusiasm has waned.
Some traditional gamers openly oppose NFTs, and it appears that Minecraft developer Mojang and parent company Microsoft share that sentiment. In July, the companies announced plans to prohibit NFTs from fan-run Minecraft servers as well as spin-off projects based on existing Minecraft game assets.
The move immediately established objectives for NFT Worlds, a Polygon-based fan project aiming to create a Minecraft server with player-owned NFT plots. NFT Worlds ultimately decided to start from scratch and create their own similar game. Rockstar Games, another major game studio, recently announced that it will also prohibit NFTs on Grand Theft Auto V servers.
Scams on social media increased in 2022, fueled by the speculative FOMO culture surrounding NFTs. We've seen accounts hacked on Discord and Instagram to spread fraudulent links that steal NFTs from users who link their wallets. However, the wave of piracy has ceased. Most people see it on Twitter.
Accounts of verified users (such as journalists) were hacked, renamed, and used to share fraudulent links at the start of the year.
In 2022, the Solana NFT space remained a strong competitor to Ethereum, with several notable projects such as Magic Eden and DeGods on the rise. When Solana's space became available in late 2021, Marketplace Magic Eden took over, driving that momentum to a valuation of $1.6 billion in June, preventing OpenSea from moving to Solana and opening up to Ethereum.
While the rise (and fall) in NFT valuation and free-to-own items dominated this year's Bored Apes story, another narrative emerged as NFT owners used their own Ape visuals to power art, projects, and more.
The concept of decentralized IP gained traction last year, but it really took off in 2022 with high-profile projects such as the Snoop Dogg and Eminem music video and the MTV VMA performance, Bored Ape, and the launch of restaurant and beverage brands. Announcements continue to be made on a regular basis, but this could change if the market decline continues into 2023.
In terms of market impact, the Ethereum merger was disappointing, but the shift to a much greener consensus model has significantly improved the perception of the NFT space. Because of the merger, the largest NFT blockchain now consumes over 99% less energy than before because resource-intensive mining has been eliminated.
Even before the assets printed on ecological networks were discussed, the environmental impact of Ethereum NFT had been one of the most common complaints of NFT critics. Now that all major NFT activities take place on platforms with a low energy impact and carbon footprint, more creators and brands can feel at ease entering this space.
When it comes to big brands entering Web3, no blockchain network has aided mainstream adoption more than Polygon in 2022. Starbucks, Meta, Nike, Reddit, and Disney have all built projects or platforms that rank higher than Polygon on the Ethereum sidechain network.
Their mass appeal is enormous, and early results are promising: A Reddit admin stated in October that more than three million of its users had created Polygon wallets to print collectible avatar NFTs. Most were insignificant gifts, but they were a significant step toward widespread acceptance. More people can benefit from Starbucks' NFT rewards platform and Meta's Instagram NFT mining.
The biggest story in NFT over the last few months has not been slowing sales, but the escalating decline in creator royalties. Many consider royalties, which are typically a 5-10% fee on secondary sales returned to the original artist or creator, to be an important aspect of Web3 because they allow creators and builders to share continued success.
However, some markets began ignoring them this summer in an effort to divert traders away from the major platforms, and they've amassed enough market share in Solana to persuade Magic Eden to make them optional. When OpenSea announced that it was considering a similar move, it was met with widespread criticism from the creators.
Finally, OpenSea stated that it would continue to collect royalties, and competitor platform X2Y2 followed suit, adopting OpenSea's new Ethereum enforcement tool. However, the story is far from over, with new NFT standards and tools enforcing royalties on works as creators attempt to safeguard an important source of income on the Web3.
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