The NFT space has witnessed a curious trend: while some mainstream brands are exiting, crypto-native companies remain deeply invested. This divergence presents some critical questions concerning the future direction of NFTs and the path forward for these two diverging camps. Why are heavy-hitter industry-leaders like Nike and Starbucks retreating? What does this mean for the rest of the NFT world?

The Great NFT Retreat: Why Big Brands Are Leaving

There are multiple reasons why the big brands of the world have chosen to exit the NFT space. As Alexander Salnikov from Rarible points out, this is NOT an indication of the NFT market disappearing. Rather, it is an unmistakable signal of its development over time. These brands could simply be recalibrating and gauging their next move. Or they could be realizing that NFTs aren’t the cure all they thought for their larger goals.

The number one reason cited is the drop in NFT sales and overall value. This is shown by the fact that NFT sales count has gone down by 10%, which means the average price is going down. This alongside the regulatory worries might have caused many brands to think twice about their participation. A class-action lawsuit settlements allege that NFT sales are “unregistered securities.” This confusion over the legal status of NFTs might be what’s leading Nike and Starbucks to be more conservative with their efforts.

Additionally, technical limitations and scalability concerns may have contributed. Starbucks attributed Polygon’s low transaction fees and scalability as primary motivations for their partnership. They suggested that technical challenges were a factor in their decision to scale back NFT efforts. Starbucks brand Steve Kaczynski disclosed that Starbucks is deeply looking into different ways to improve their brand and loyalty channels. He implied that the firm is distancing itself from NFTs as their primary answer.

Crypto-Native Companies: Still Building in the NFT Space

As traditional brands wade carefully into the NFT space, crypto-native brands, companies, and creators are out there continuing to grow and innovate. They are passionately committed to proving the technology. Like us, they are passionate about its potential to revolutionize digital ownership and help to foster strong, connected communities. These companies typically have a greater grasp of the underlying technology and a closer tie to the crypto community.

Perhaps the clearest example of this difference in approach comes when looking at partnerships and collaborations. Traditional brands like Gucci, Balenciaga, Nike, and Ralph Lauren have partnered with gaming ecosystems like Roblox and Fortnite to create digital branded skins or virtual experiences. Bored Ape Yacht Club These crypto-native companies have been making waves in the industry. They’re partnering with more conventional brands such as Adidas to create buzzworthy NFT collections. This just shows off various ways to use the technology to drive engagement and connect with audiences.

Additionally, crypto-native firms had produced and exchanged NFTs since 2017. Some digital artists, such as Beeple, have made headlines after selling pieces for tens of millions of dollars. Their life-long engagement and profound comprehension of the market offer them a great benefit. That competitive advantage makes them more formidable than any brands entering the space today.

Lessons Learned: The Future of NFTs Through Pudgy Penguins and Doodles

The last year’s worth of lessons from projects such as Pudgy Penguins and Doodles provide instructive lessons for what lies ahead for NFTs. These projects highlight the role of community, continuous engagement, and project evolution in maintaining long-term value.

Take Pudgy Penguins as just one example of how far these projects have come. It has even gone on to sell more than a million toys worldwide in the last year. In 2022, new leadership brought the project under their control in a multi-million dollar deal. Luca Schnetzler co-founded the brand for an astounding $2.5 million dollars. After this purchase, the floor price rocketed more than 400 percent in August 2022 and has remained on a steady upward ascent. The original NFT collection included 8,888 non-fungible avatars. In September 2021, one such collector paid 225 ETH for a single penguin, the equivalent of almost $1 million at the time.

These projects highlight several key factors for success in the NFT space:

  • Strong Community: Building a loyal and engaged community is crucial for driving demand and sustaining value.
  • Continuous Innovation: Projects must constantly evolve and offer new experiences to keep their communities engaged.
  • Real-World Utility: Integrating NFTs with real-world products or experiences can enhance their value and appeal.

Don’t let the exit of big players from this nascent marketplace lead you to believe that NFTs are a lost cause. Rather, it makes the case for a greater nuance and strategy. As the market matures, projects that put real emphasis on community, innovation and utility will be the ones that see lasting success.

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