Last week, the cryptoworld was thrown into chaos as a report from Hategan (2023) showed that the vast majority of NFTs had become almost completely useless. In the report, Hategan (2023) mentions that currently 95% of NFTs have a market cap of 0 ether, and thus are worthless, while only less than 1% of NFTs is worth more than 6000$. This downturn in the market was mainly caused by the increasing supply of NFTs while the demand remained to be the same (Hategan, 2023). It eventually resulted in a buyers’ market where NFTs are more critically assessed by investors (Hategan, 2023).
The increase in supply can partly be explained by the development of visual generative Ai tools like ChatGPTs’ DALL-E 2 which is able to create realistic images based on a text description (OpenAi, n.d.-a). This meant that creating an artwork to sell as NFT became easier and more accessible for the majority of people. Take, for example, the image down below which was created in DALL-E 2 and could be easily converted to a NFT and sold on the market.
Figure 1 | OpenAI (n.d.-a)
This evolution of visual generative Ai tools will continue to develop as OpenAi will introduce their new version of DALL-E in the near future (OpenAI, n.d.-b). DALL-E 3 is said to need less text prompts than its previous version and also be able to generate images of far better quality (OpenAI, n.d.-b). It will therefore be able to create artworks that are even better and easier to generate than currently possible which will drastically increase the supply and quality of NFTs.
Figure 2 | OpenAI (n.d.-b)
Eventually, I think this will transform the NFT market from a highly volatile and speculative market to a market where NFTs are valued on the genuine artistic value and the utility it holds. Furthermore, I believe that it will also boost the exploration of other applications of NFT technology like using NFTs to verify certain certificates and academic degrees instead of being used mostly for artwork.
References
Hategan, V. (2023, August 29). 95% of NFTs are Dead – Trends, Predictions & Statistics 2023. dappGambl.com. https://dappgambl.com/nfts/dead-nfts/
OpenAI. (n.d.-a). DALL·E 2. Retrieved September 26, 2023, from https://openai.com/dall-e-2
OpenAI. (n.d.-b). DALL·E 3. Retrieved September 26, 2023, from https://openai.com/dall-e-3
I have always been quite sceptical of the NFT market since I was convinced that very few early adopters were able to make a lot of money. However, I felt that the majority of the people were too late. I feel that this blog post is spot on regarding the unlimited amount of supply of NFTs using text-to-picture generative AI like DALL-E. In addition to this, the demand for NFTs has significantly dropped since its initial hype, and the use of generative art will, in my opinion, lead to further saturation of the market.
Very interesting post!
While you say that the downturn of the NFT is derived from the imbalance of supply and demand, don’t you think that it might also come from the fact that there was an immense hype and a lot unrealistic speculation over this new domain?
Considering the fact that AI may dominate the NFT market, it would’ve been nice if further discussion about its regulation in the market could’ve been elaborated.
Lastly, with this new assessment of the NFT in the art market, I am excited to witness the versatile role that NFT can play in new domains as I still believe that NFT has a lot of utility-based potential.
Very interesting post!
While you say that the downturn of the NFT is derived from the imbalance of supply and demand, don’t you think that it might also come from the fact that there was an immense hype and a lot unrealistic speculation over this new domain?
Considering the fact that AI may dominate the NFT market, it would’ve been nice if further discussion about its regulation in the market could’ve been elaborated.
Lastly, with this new assessment of the NFT in the art market, I am excited to witness the versatile role that NFT can play in new domains as I still believe that NFT has a lot of utility-based potential.