NFTs: 2022 Overview, 2023 Outlook

2023-02-22 09:00:48 UTC

Thomas Bialek
A look at the NFT market, its marketplace landscape, as well as the core themes that impacted its overall development.

Quick Take

  •  2022 has been a seminal breakthrough year for NFTs that was marked by record-breaking growth rates, as well as devastating crashes.
  •  The Ethereum ecosystem skyrocketed to a monthly NFT trading volume of $5.6 billion, while the Solana ecosystem temporarily chipped away at Ethereum's dominance, peaking at 47.2% market share by trading volume.
  • The royalties debate unearthed a fundamental predicament for creators and will require major business model pivots.

State of NFTs in 2022

In 2022, the NFT market ran the gamut of emotions, swinging frantically from irrational exuberance to the depths of despair in the span of a few feverish months. Euphoria, greed, and delusion were all part of the explosive cocktail that made 2022 a seminal breakthrough year for the nascent industry.

From being touted as the ultimate safe haven asset class to the Otherdeed making a dent in the Ethereum universe to clashing worldviews in the quest to disentangle the royalties dilemma, NFTs took a tumultuous rollercoaster ride this year. However, this series of events has only scratched the surface of what might be possible in the future, acting as a dress rehearsal for large-scale adoption on the grand stage of the world.

After the plug was pulled on liquidity in the second half of the year, mainstream adoption was unmasked as a mirage – vestiges of an ideal that appeared tantalizingly close yet eluded the grasp of the industry. Meanwhile, the industry saw a structural metamorphosis unfold in front of its eyes that decisively affected marketplaces while forcing creators to adapt their business models to the shifting sands of the market.

General Market Overview

While the unprecedented explosion in use cases for NFTs in 2021 acted as a fertilizer for the entire industry, this year perfectly dovetailed with this evolution by providing the optimal breeding ground for accelerated growth. In this vein, experiments that were initially cultivated in the petri dish of Web3 escaped their echo chambers and spilled over into the public awareness.

Figure 238: Monthly Ethereum NFTs trading volume in 2022 
Source: The Block Research
In part, this development was reflected in the trajectory of the NFT trading activity throughout the year. Namely, in January, the monthly NFT trading volume on Ethereum reached a record-breaking high of $5.6 billion, 33.8% higher than its previous ATH. However, in June the market cratered, registering a 60.1% month-on-month (MoM) decline in NFT trading volume, and has since then continued to slide.

Figure 239: Number of daily NFT transactions on Ethereum in 2022 
Source: Dune Analytics (@hildobby)
Likewise, the number of daily NFT transactions on Ethereum plummeted to 40,345, down 82.2% from its ATH in April.

Figure 240: NFT Trading Volume by Chain 
Source: CryptoSlam
In general, this trend is mirrored by other ecosystems as well, but throughout September, Solana NFTs experienced a renaissance that underscored their relative strength, resulting in a temporary market share of 46.2%. Notwithstanding the transient impact of this comeback, Ethereum defended its title as the undisputed champion of NFT liquidity thus far, sitting at 72.5% market share as of this writing.

Figure 241: Daily Solana NFT mints in 2022 
Source: The Block Research
The rise of Solana NFTs in September was in part driven by a sudden bout of new mints. Mainly fueled by the long-awaited launch of y00ts, the number of Solana NFT mints spiked to an ATH of 312,375, marking a 295.4% increase WoW.

Figure 242: Seller-buyer ratio for Ethereum NFTs in 2022 
Source: Dune Analytics (@hildobby)
At the same time, the market's behavior was decisively swayed by an evolving interplay between NFT buyers and sellers. In fact, the equilibrium that prevailed at the beginning of the year has since transformed into a buyer's market, with the unraveling market downturn in the second half of this year tipping the scales in buyers’ favor. On top of this, the recent FTX implosion further spurred this downward spiral, playing into the hands of buyers.

Figure 243: Ethereum NFTs trading volume by payment token in 2022 
Source: The Block Research
In the wake of the mass hysteria that swept through the market following the FTX insolvency, NFT traders were also infected with the contagion of this debacle, which manifested itself in the skyrocketed percentage of accepted WETH offers on OpenSea. Traditionally, the share of accepted WETH offers has served as a barometer of the market's urgency in seeking liquidity and, by extension, of a panic-fueled market carnage. Following on the heels of a consistent uptick, the percentage of accepted WETH offers jumped to a seminal 50.8%, as traders rushed to scrape together every penny.

Although NFTs have made a significant splash this year, the industry vertical remains a small cog in a large wheel for now, considering its relative impact on the wider crypto sphere. When measured against the total trading volume on Ethereum, the NFT trading volume accounted for merely 2.6% in January, which coincided with its ATH. By contrast, the NFT sector is still significantly overshadowed by DeFi, which contributed as much as 60.4% to the total trading volume on Ethereum this year.

Figure 244: Percentage of total Ethereum trading volume by sector in 2022 
Source: The Block Research, DefiLlama

NFT Marketplace Landscape

Figure 245: Ethereum NFTs trading volume by marketplace in 2022 
Source: Dune Analytics (@cryptuschrist, @hildobby, @ilemi, @sealaunch)

In a whirlwind of changes, the ensemble of existing NFT marketplaces were rocked by major structural shifts. Although a plethora of emergent properties, such as token incentives, have been harnessed by NFT marketplaces, such as LooksRare, X2Y2, or Blur, this year, they only constituted the tip of the iceberg. More importantly, a race to the bottom governed by a pervasive dog-eat-dog mentality spurred a cutthroat competition among the contending NFT marketplaces.
Therefore, undercutting tactics in combination with creator royalty circumvention, which initially was mostly deployed by upstarts, allowed these competitors to siphon off enormous amounts of liquidity from OpenSea. Taken together, OpenSea's façade of impenetrable hegemony started to crack amidst a relentless flood of fierce competitors that went to great lengths to take over the reins.

Figure 246: Solana NFTs trading volume by marketplace in 2022 
Source: The Block Research
By the same token, Solana NFT marketplaces suffered the same fate, albeit to a lesser extent. As a consequence of the rise of the zero-fee marketplaces Yawww, Hadeswap and Solanart, Magic Eden's dominance appeared to be temporarily at risk, but the blow was cushioned after the giant retaliated against the metastasizing market practices by cutting its fees as well. As a result, it managed to recoup market shares, bouncing from a low of 71.9% to 99.6% as of this writing.
Figure 247: Average trading fee by NFT marketplace type 
Source: The Block Research
Furthermore, trading fees was a prickly issue that set the tone for the future of NFT marketplaces by enshrining cost leadership as the ultimate goal in the central tenets of these infrastructure providers. Despite this lingering threat, NFT marketplaces already adapted their trading fees to their market segments.
On average, proprietary marketplaces that are tailored to the specialized needs of specific niches, such as those integrated into virtual worlds like The Sandbox, tend to levy the highest trading fees. On the other hand, CEXs seem to be able to tap into their enormous resource pools to leverage their economies of scale to reduce fees.
As the brewing price war intensified, many NFT marketplaces threw the baby out with the bath water by not only slashing trading fees entirely but also disregarding creator royalties to gain a competitive edge.

Summary of Core Themes in 2022

In the constant tug of war for lasting relevance between various ecosystem participants, the speed of innovation continues to accelerate. As a result, the market has churned out major developments that dictated the direction of the industry. As such, new advancements entered the stage while ossifying industry structures perished.

Creator Royalties in Jeopardy

The divorce of NFT marketplaces from royalty payments sparked a heated debate about the ideological underpinnings of the industry, which soured the formerly symbiotic relationship between creators and marketplaces. Due to the lack of sustainable options to technically enforce royalties on-chain on the project level without concomitant drawbacks that stymie decentralization, many creators are ousted from their positions of power.
In turn, NFT marketplaces morphed into central gatekeepers for royalty payments. Since creator royalties cannot be hardwired into smart contracts on the project level without significant workarounds, unaware creators sleepwalked through their NFT journeys. Originally jumpstarted by SudoAMM, an avalanche of NFT marketplaces suddenly scrambled to bypass royalties or, at the very least, make them optional for the purpose of remaining competitive.
This environment has functioned as a springing board for upstart marketplaces seized market shares by primarily catering to the needs of traders instead of creators. Although traders can voluntarily honor royalties on most marketplaces, this option did not move the needle in terms of boosting the average royalty fee paid on these platforms.
Figure 248: Average realized royalty fee by NFT marketplace 
Source: Flipside Crypto (@jacktheguy)
OpenSea, which remains the last man standing in the battle for mandatory royalty payments, realized an average royalty fee of 5.46% for the present year. Unlike its competitors, OpenSea has gone out on a limb to reinstate its monopoly by means of punitive measures in the form of blacklisting marketplaces that intentionally bypass royalty payments.

Figure 249: Average royalty fee comparison by ecosystem 
Source: The Block Research
Barring OpenSea, the actual average royalty fee on various NFT marketplaces has been significantly below the average royalty fee that the top 40 projects on Ethereum would have commanded.
Interestingly, contributions from the tail ends of the royalty fee spectrum closed in on the middle ground, as paid royalty fees of both 0.0% and 10.0% or higher increasingly gained a foothold in the market. Especially since early August, the percentage of the zero-royalty trading volume jumped from 2.8% at the start of the year to 29.9% as of this writing.

Figure 250: Ethereum NFTs trading volume by royalty fee in 2022 
Source: Flipside Crypto (@rmas)

In pursuit of liaising between creators and traders, Blur devised a token incentive scheme that aims to disproportionately reward traders that voluntarily honor royalties. On the other hand, X2Y2 already backpedaled on its optional-royalty policy by reintroducing royalties as the imperative backbone of creators' monetization apparatus.
On that score, OpenSea doubled down on its endeavor to enforce royalties on-chain by means of its tool that excludes royalty-circumventing marketplaces from trading the NFTs implementing the tool. In response to this seismic shift, a couple of NFT projects already begun to reduce their dependence on the passive revenue stream of royalties.
For instance, Azuki dabbled with physical luxury goods already afforded the company an additional revenue pillar. Championing protocol-owned liquidity for NFTs, Nouns created an alternative solution that is immune to revolts against royalties and thus could perhaps enjoy greater adoption over time.

Consolidation of Market Power

Yuga Labs has proliferated into an omnipresent force to be reckoned with that turned it into an operation of epic proportions. Underscored by its acquisition spree, the juggernaut parlayed a few strategic investments into a colossal conglomerate that today encompasses a great deal of blockbuster IPs. Most prominently, its acquisition of the seminal CryptoPunks and Meebits IPs back in March shook the entire industry at the time and effectively allowed Yuga Labs to assimilate its main competitor into its growing empire.
Rounding out its expansion, the NFT giant recently acquired Wenew, the startup behind the 10KTF universe, which was co-founded by Beeple. Overall, this reinforced the idea that Yuga Labs has the Midas touch, considering its unparalleled ability to continuously emerge as the ultimate kingmaker of NFT brands.
As a result, Yuga Labs managed to consolidate market power by boosting its total market share from 33.3% at the beginning of the year to a peak of 69.6% in early May. As it stands, the downstream effect of these brand unification efforts that aim to merge the incubated and acquired IPs under the umbrella of Yuga Labs could enable the market leader to harness operational synergies to deliver enhanced content over time.

Figure 251: Yuga Labs market share by trading volume in 2022 
Source: Dune Analytics (@cryptuschrist, @sealaunch)

Golden Goose

Airdrops have been an essential instrument for informing the growth strategies of many NFT ventures this year. In essence, airdrops acted as a major catalyst for bolstering community engagement while nudging community members into becoming fervent brand evangelists. In the wake of an airdrop bonanza, many community members doubled down aggressively on the airdrop-issuing brand, given their heightened financial interests.
Moreover, it allowed NFT buyers to redeem a large chunk of their original investments that flowed into the genesis collections. For instance, the Beanz airdrop equaled 36.4% of the Azuki floor price at the time of the windfall. Considering that many holders minted their Azukis for fractions of the floor price at the time, the Beanz airdrop compensated for multiples of their incipient investments.
Figure 252: Airdrop value relative to genesis NFT collection 
Source: Dune Analytics (@cryptuschrist)
On the flipside, the conundrum of this growth initiative is that it inevitably attracts masses of free riders who exploit this loophole by purchasing the genesis NFTs exclusively for the purpose of skimming off airdrop profits before immediately disposing of the NFTs again. As mercenary market participants progressively gravitate toward these communities, this can quickly become a slippery slope because projects forgo crucial revenues by gifting the airdropped NFTs to their communities, which invalidates the main purpose of this initiative, that is, fostering sustainable brand growth.
In the noisy reality of the bull market, enriching community members through airdrops was a celebrated way to vie for scarce attention. However, eventually the music stopped and the frenzied airdrop mania came to a screeching halt, coinciding with doubts about the sustainability of this tactic. Slowly but surely, the market came to realize that airdrops form a fine line between diluting the underlying brand and authentically rewarding loyal supporters. In a sense, the pioneering collections paving the way for airdrops to become the norm have been reminiscent of a golden goose until insatiable greed eventually took over.

Uncoupling of Generative Art

Although the NFT market has been gripped by a widespread liquidity crisis since early May, generative art NFTs managed to defy this grim market environment by spinning off a thriving parallel universe. In particular, the Art Blocks curated series was able to weather the storm in spectacular fashion.

Figure 253: Full Art Blocks curated set floor price by curated series in 2022 
Source: Dune Analytics (@rantum)
In this regard, full Art Blocks curated sets solidified their position as indispensable status symbols for generative art connoisseurs. After the original curated series' discontinuation announcement, a race of prominent art collectors to secure full curated sets suddenly steered the overall market behavior, resulting in an explosive price rally. As of this writing, the floor price for a full curated set decreased to $567,900.

Figure 254: Floor price performance of Art Blocks curated series vs PFP projects since May 1, 2022
Source: Dune Analytics (@rantum)
From a valuation perspective, Art Blocks curated series averted the vicious floor price crunch that plagued the profile picture (PFP) vertical since the beginning of May. While the BAYC floor price plummeted by 82.2% during this period, the first curated series climbed by 14.9%, notwithstanding the FTX insolvency and the subsequent mayhem.
Interestingly, the remarkable resilience that Art Blocks demonstrated in recent months was dwarfed by the stellar rise of the Fxhash ecosystem. Hence, the uncoupling effect that has already been presaged by Art Blocks has dictated the direction of Fxhash collection even more strongly.

Figure 255: Floor price performance of Fxhash collections vs PFP projects since May 1, 2022
Source: The Block Research, Fxhash, Dune Analytics (@rantum)

In fact, the floor price for William Mapan's Dragons skyrocketed by a staggering 149.5% since May 1 while those of other popular collections jumped by at least 12.1% as well. By and large, it appears that generative art NFTs managed to shrug off major economic headwinds that hampered price recovery in other corners of the NFT market.

Storytelling NFTs

Integral to their tribal nature, storytelling has long been the lifeblood of organic growth in NFT communities. Although the cultivation of community lore to construct a comprehensive brand architecture has been part and parcel of growth strategies in the NFT market, it has traditionally taken a back seat in light of the preponderance of utility-focused roadmaps. By the same token, fabricated narratives often have been deployed as a smokescreen to mask a lack of concrete fundamentals.
However, a new breed of NFT ventures has repurposed storytelling by weaving interactive elements into a slowly unfolding narrative arc. Contrary to their predecessors, which mainly adopted storytelling as a means to foster brand acceptance, storytelling NFTs envelop their entire value proposition in dynamically evolving narratives.
In fact, crafting stories is their core value proposition. Hence, instead of applying this aspect only sparingly, an interactive storyline is used to steward community members to the mint event before any NFTs are even in existence. Completely shrouded in mystery in the beginning, details about a project are incrementally unveiled by embellishing a story on social media. Therefore, the main value accrual originates from a combination of cultural relevance and storytelling that stretches over a project's entire lifecycle.

Figure 256: Value accrual model for storytelling NFTs 
Source: The Block Research
At the forefront of this paradigm, Azurbala and Renga pushed the envelope of storytelling NFTs. Incubated by Web3 media startup Tally Labs, Azurbala is an outgrowth of the Jenkins the Valet universe. Originally commemorating the ecosystem's first book release, Bored and Dangerous NFTs serve as the entry ticket into the world of Azurbala. In exchange for Azur Roots, which will later be convertible to Azurian avatars, holders will be able to burn their digital books.
Alternatively, holders will be able to stake them to receive governance tokens in Hawthorn, a DAO embedded in the Azurbala ecosystem. On the downside, Azurbala highlighted that this interactive approach can be a double-edged sword that is prone to volatile market reactions. After a sneak peek of the Azurian art surfaced, the project faced an enormous backlash due to the community's discontentment with the perceived quality of the art.

Figure 257: Tally Labs ecosystem floor prices since August 2021 
Source: Dune Analytics (@cryptuschrist)

This controversy was immediately reflected in the floor price, which tanked by 72.9% since the event. To make amends for its backfiring creation of the Azurian art, the team took the criticism to heart and initiated an art council and a community council, which will collectively overhaul the existing Azurian art.
Renga has been another pivotal pacesetter in this domain that has taken the market by storm. Constituting the brainchild of artist Daniel Isles – who is otherwise known as Dirty Robot – Renga has been built on the back of Dirty Robot's The Art of Seasons (TAOS) NFT collection.

Figure 258: Unrealized profit and loss of TAOS minters in 2022 
Source: Dune Analytics (@cryptuschrist)
In June, TAOS holders were airdropped Black Box NFTs, which, by means of a manga that detailed the backstory of the Renga universe, breathed life into the enigmatic black objects. In September, Black Box holders finally had the opportunity to burn their NFTs for Renga avatars. Consequently, this slow-and-steady reveal process set the stage for the development of a storytelling powerhouse, which has been extremely lucrative for minters of the TAOS NFTs thus far.

War on IP Rights

Colliding opinions on commercial rights granted to NFT holders have fractured the industry this year. At first glance, this clash of commercialization strategies appears to rest on differing copyright approaches but actually runs deeper than that. In reality, this debate has been symptomatic of the deeper discussion about the ethos of crypto in the context of NFTs. Generally speaking, NFT projects can be plotted on a spectrum between Creative Commons Zero (CC0) and no commercial rights granted to NFT holders.
Notably, Nouns released its IP into the public domain by championing CC0, which means that everyone can commercialize the brand's IP as well as the IPs of individual Noun NFTs without any restrictions. On the opposite end of the continuum, a very restrictive approach prevents outside actors, including NFT holders, from using the IP for commercial purposes. Consequently, this has pitted NFT communities pertaining to one of the two opposing camps against each other, which resulted in a polarizing discussion.
Despite the fact that this intellectual dissonance finally culminated in a heated public debate, the writing for this trend has been on the wall for quite some time.
More precisely, once-ardent CryptoPunks aficionado 4156 declared that he jumped ship due to irreconcilable differences regarding Larva Labs' tight grip on IP rights at the time.
By contrast, Yuga Labs has, for the most part, taken a goldilocks approach to this topic by guarding the BAYC brand from external use while granting holders commercial rights for their individual NFTs. On the basis of this regime, a vibrant economy of businesses built around Bored Apes blossomed. To encourage a similar growth for CryptoPunks and Meebits post-acquisition, Yuga Labs enacted copyright policy reforms that closely resemble its approach for BAYC.

Free Mint Mania

In the fallout from the NFT market meltdown, free mints emerged as the unambiguous North Star, guiding market participants toward a reimagined business model that was tailored to the changing market conditions. At a high level, the reason for the advent of this trend has been twofold. First, its opportune timing made market participants more receptive to this market dynamic. At a time when the entire range of blue-chip projects was in free fall, the idea of minting an NFT at the mere cost of transaction fees was extensively embraced.
Secondly, this development followed in the footsteps of the market growing tired of the entrenched way of drumming up support for NFT launches, namely by means of roadmaps. This systemic roadmap fatigue was mainly driven by a torrent of projects that over-promised and under-delivered, leading to the gradual corrosion of the established playbook. Born out of this frustration, free mints started to take root as the preferred way of distributing new NFTs.
In the same vein, advocates of this modus operandi, by necessity, shifted their top line growth from a combination of primary and secondary revenue streams to an exclusive focus on secondary revenue. To be exact, many free-mint projects zeroed in on maximizing their royalty revenues by setting royalty fees that pushed the boundaries of the upper end of the fee range.
Trailblazing the free mint evolution as the movement's poster child, Goblintown managed to outpace many popular NFT projects in terms of royalty earnings due to its royalty fee of 7.5%, amassing an enormous war chest despite the absence of any primary revenue.

Figure 259: Royalty fee by NFT collection 
Source: The Block Research

Mechanism Design

Powered by the versatility of NFTs, innovation has percolated into many facets of the market. Nonetheless, this progress primarily pertained to the cultural domain while the evolution of mechanisms stalled, as existing concepts were regurgitated. In general, there has been a dearth of originality on the mechanism design front.
The notable exception of this trend has been Art Gobblers, which tinkered with cutting-edge techniques to institute an NFT ecosystem. Created by investment firm, Paradigm, and Rick and Morty's co-creator, Justin Roiland, Art Gobblers is an experiment that blends an on-chain game with an art factory. At its core, Art Gobblers is predicated on the notion of tapping into the potent flywheel effect that arises at the intersection between art, cultural relevance, and commerce.

Figure 260: The flywheel effect of the Art Gobblers ecosystem 
Source: Art Gobblers whitepaper
In addition, Art Gobblers is a treasure trove of new mechanisms that aim to kickstart a self-feeding ecosystem. In a nutshell, this system is bound together by Gobblers, Blank Pages, and GOO. The key objectives of Gobblers are to eat artworks and produce GOO.
Figure 261: Overview of the Art Gobblers elements 
Source: Art Gobblers whitepaper
For the purpose of immortalizing their artworks, users need to "glaminate" their creative outputs, which refers to the process of spending the utility token GOO to immutably store artworks on blank pages. Conversely, finalized artworks can be fed to Gobblers, which will display them in their bellies as part of a modern-day art gallery. On top of this, Legendary Gobblers can be summoned by sacrificing ordinary Gobblers.

Figure 262: Art Gobblers NFT issuance schedules 
Source: Art Gobblers whitepaper
Beyond the basic parameterization of the core components, users are forced to take the issuance rates of the ecosystem resources into account. To tailor the issuance rates to the changing demands of different growth stages, the issuance rates of Gobblers and Blank Pages are governed by logistic issuance schedules, which enable an explosive supply increase in the beginning while flatting off over time to prevent an excessive supply inflation.
Figure 263: Exemplary demonstration of the VRGDA mechanism 
Source: Art Gobblers whitepaper
Another piece of the puzzle is the concept of variable rate gradual Dutch auctions (VRGDAs), which allow for the customization of issuance schedules based on forecasted community growth trajectories. In short, VRGDAs fine-tune NFT prices based on deviations from a predetermined mint schedule by letting the issuance rate approximate the designated mint schedule over time. Based on an exponential curve that re-adjusts the price multiplier by collating the realized mint schedule with the planned one, the daily mint rate constantly auto-corrects for the delta to stay on track.

Outlook on NFTs in 2023

Convergence of Gaming and NFTs

The pantheon of popular PFP projects has dedicated a substantial amount of its energy to laying the groundwork for an interoperable metaverse. Evidence for this trend has piled up over this year, as a diaspora of NFT tribes into siloed metaverses has taken place.
Otherdeed, Space Doodles, and Cooltopia, to name a few, are likely only the tip of the spear of an upcoming wave of gamification that will enable those capable of mastering this complex storytelling skill to cross the chasm between bleeding-edge innovation and mass adoption. As the pace of this development accelerates, the eventual triumph of one metaverse over all the others might raise the cardinal question of whether the imminent metaverse is truly decentralized.

The Great Filter

If 2021 has been the year of birth of many PFP dynasties, then 2022 has been the year of empire-building and, by extension, 2023 will likely become the year of falling empires, which will be a litmus test of which venture can stand the test of time. Assuming a prolonged crypto winter, the market might progressively prune startups that exhaust their remaining funds and are unable to kick into high gear to offset eroded revenues.
Although the market has already washed out a large chunk of ventures in the aftermath of this year's crash, the looming era of austerity will separate the wheat from the chaff, as a non-negligible percentage of the remaining survivors disappears from the scene. While a few players will ascend from the ashes and cement their battle-hardened existence, others will not make the final cut.

Only the Paranoid Survive

Considering the barrage of landmark changes, NFTs moved in seemingly fast motion through the entire industry life cycle within the span of one year. As part of this explosive takeoff, the business acumen of many companies were undermined while critical decisions fell through the cracks.
On closer inspection, the market showed signs of complacency, which was further exacerbated by having to confront a strategic inflection point in the form of vanishing creator royalties paired with a cutthroat race to the bottom. This has not only posed an existential threat to creators but has also challenged the status quo of the incumbent marketplaces. OpenSea, specifically, saw its dominance dwindle rapidly, as masses of traders swarmed to royalty-circumventing marketplaces.
As a consequence, this raised the question whether the industry giant might become a victim of its own success, apparently unable to turn the tide. However, it began to retaliate against this attack by signaling a potential business model pivot. Likewise, NFT projects were stalemated as well, forcing them to think outside the box to break the deadlock of this battle through novel monetization avenues. What got them to point A will likely not get them to point B and beyond. Therefore, like Jazz musicians practicing improv, NFT projects will need to attune themselves to spontaneous shifts in the competitive dynamics of the market and experiment with new initiatives on the fly in order to extricate themselves from this precarious situation.

Rebranding Attracts Big Brands

As a corollary of the phenomenal attention that NFTs garnered this year, big corporations plucked up the courage to dip their toes in the water. Household names such as Nike and Adidas strengthened their efforts to expand the scope of their Web3 operations and marshaled massive resources to become a staple of the industry. For instance, just recently, Nike rolled out its Web3-focused platform .SWOOSH which strives to become the focal point for the future of digital creations in the sport domain. In combination with its RTFKT acquisition, Nike bolstered its position in the nascent market by nurturing a native Web3 community through its diverse product range. Interestingly, Polygon solidified its role as the backbone of corporate NFT endeavors by demonstrating its ability to mediate between big brands and the Web3 landscape.
This opened the floodgates for a wealth of corporations venturing into the NFT market through collaborations with Polygon. Against the backdrop of Reddit coining its NFTs "collectible avatars," the sterilization of NFTs through euphemistic language has been a crucial driver of the progressing corporate adoption.
In this way, an abundance of users were onboarded to NFTs without even being aware of this circumstance. In the near term, this evolution will likely continue as more brands pour into the space. Eventually, NFTs will simply be the natural extension of a brand's holistic digital experience that encompasses various dimensions.

Appendix: Timeline Event Related to NFTs in 2022

Source: The Block Research