The concepts of fungible and non-fungible tokens are not new in economics. Coin-like objects were apparently traded as tokens for brothels or games as far back as the Roman Empire. During the Middle Ages, English monasteries used “Abbot’s money” tokens to pay for services rendered by foreigners.
Between the 17th and 19th centuries, merchants in the British Isles and North America frequently used fungible tokens as a commitment redeemable for commodities when state coinage was scarce.
Fast forward to more recent times, when fungible tokens that could be exchanged for cash were introduced into arcade games and casino slot machines. Tokens’ premise hasn’t changed in the crypto era: they represent something tangible (physical) or intangible (non-service) within an ecosystem. Cryptocurrencies such as Bitcoin are examples of fungible tokens in a blockchain (BTC). Non-fungible tokens are data units representing a single digital asset validated and recorded on the blockchain.
In this post, we will discuss non-fungible tokens (NFTs), the challenges that creators and SMEs face when dealing with NFTs, and why 99% of NFTs fail.
NFTs: An Overview
Let’s compare non-fungible tokens to non-fungible assets to better understand them. Non-fungible assets are unique and cannot be separated into separate units. Instead, they should be regarded as a type of deed or ownership title for an individual, non-replicable item. An airline ticket, for example, is non-fungible because it contains unique data that cannot be duplicated.
Non-fungible tokens, such as photographs or intellectual property, represent a distinct and indivisible entity, physical or intangible. Blockchain technology is the foundation for proving ownership of intangible digital property.
Non-fungible tokens have grown in popularity since the concept of colored coins first appeared on the Bitcoin blockchain in 2012. Instead of establishing alternative blockchains as sidechains, colored coins allow the attachment of metadata (additional information about the precise data used) to Bitcoin transactions.
Nonetheless, colored coins have not been widely adopted in the cryptocurrency world. The first non-fungible tokens were created on the Ethereum blockchain and were used to uniquely identify a product, service, or person.
CryptoKitties first appeared on the Ethereum blockchain in 2017. The game was the first real-world application of NFTs in the crypto sector, and it went on to become the most popular decentralized application for the Ethereum protocol.
For the first time, artists and content creators can use blockchain technology to monetize their work without the assistance of a third party. Physical galleries and auctions are also being phased out, allowing artists to transition to the digital realm for more convenient and smoother interactions. In addition, celebrities like Paris Hilton, Grimes, and Snoop Dogg have all helped to popularize NFTs by revealing their participation in the space.
Recently, American singer-songwriter John Legend has joined the ranks of celebrities flocking to the world of NFTs by assisting in the launch of OurSong, a new NFT platform for artists and other entertainers. In the first half of 2021, the NFT market was worth $2.5 billion. This should come as no surprise, given the astronomical selling prices of some of the artworks.
Digital artist Beeple sold “Everydays: the First 5000 Days” for $69.3 million at Christie’s auction. Meanwhile, Twitter CEO Jack Dorsey auctioned off an NFT of his first tweet for $2.9 million. People’s interest in the sector and how much they are willing to pay for an NFT, however, drive asset prices because NFTs are rare collectibles based on demand rather than fundamentals.
Why do Scams and Rug Pulls Fail 99% of NFTs?
An NFT project may fail because it was designed to fail.
The sudden rise in popularity of NFTs, combined with the elusive nature of the entire ecosystem, meant that many could get away with selling a hyped-up roadmap, influencer interest, and all kinds of ambitious promises. Then, after that, pulling the rug out from under investors after they put their money in.
Even seasoned veterans may struggle to avoid rug pulls, but people are becoming more adept at spotting red flags.
Financial Miscalculations
Planning to fail is planning to fail. Starting a project without a solid financial plan sets you up for failure later on. Therefore, every project phase should be properly budgeted, with the worst-case scenario accounted for at every stage.
Running out of fuel halfway through the launch could put an end to your efforts and result in a failed NFT project.
There is No Imagination
If your project is just another generic ape NFT with airdrops, merch, and exclusive access to this, that, and the other, you may need to spice things up.
Determine what you and your team are uniquely qualified to offer, and dive in. Do whatever it takes to distinguish your project from the thousands of other mediocre and failed NFT projects.
It is a young and evolving field with lots of room for creativity
There is No Passion
Most NFT developers are motivated primarily by monetary gain, which is understandable. However, if the development team treats their project as a dead-end job, it will reflect on your marketing, discord servers, and tweets.
If creators do not treat their project as their baby, it will most likely contribute to their failure.
Poor Marketing
NFT projects that failed to take off typically had a poorly planned and executed marketing strategy.
No matter how good your project is, it will fail if no one hears about it and you fail to capture their attention when they do.
Influencers paid ads, a well-crafted brand, active social media, and an engaged community can all help a marketing strategy succeed. Unfortunately, many NFT projects fail because they rely solely on one of these.
Artwork of Poor Quality
True, many NFT projects are more concerned with the token’s utility than the art.
However, you won’t get very far unless you have art that grabs the audience’s attention, wows them, and demonstrates the skill and capabilities of your project. Many people will not believe in your project if it is hidden behind ugly and half-finished artwork.
Unqualified Group
A good team of knowledgeable and dedicated experts is nearly half the battle won.
A poorly organized team with poor synchronicity is a major reason why many NFT projects fail immediately.
You can expect your project to fly with fewer setbacks and hassles if you hire the right people and professionals in their fields who can work as a team.
The Community Has Lost Interest
In the NFT space, your community is your backbone.
Maintaining an engaged and vibrant community of supporters is perhaps the most defining factor in a project’s success.
In the NFT space, rewarding your loyal followers with privileges and white listings, as well as organizing activities that provide some kind of fun or value, is the way to go.
Any and all of the factors are essential components of a successful NFT project. If you want to stand out among the sea of ambitious projects attempting to ride this new technology wave, you must understand at least most of these.
Last Thoughts
It’s unclear whether the 2023 NFT craze will last. If NFTs are here to stay, they will almost certainly create new legal issues. As a result, NFT issuers and buyers should keep a close eye on these developments, as many regulators have already taken note of NFTs’ rise. We expect intriguing copyright-related conflicts to arise, providing additional clarity on dealing with NFTs.
