NFTs? Aren’t NFTs a bubble? Didn’t the bubble pop? Didn’t all those people with monkey profile pictures lose all their money?
If you’re a participant in NFT markets and choose to share your interest with normie acquaintances, you’ll have no doubt encountered some variation of this questioning. They’ve got it all figured out, they’ve seen it all before, price went up a lot, people got excited, price went down a lot.
Classic bubble scenario, sorry CHUD but it's over, back to the wage cage!
Does a bubble always spell the demise of an asset, medium, or phenomenon, though? Before we attempt to answer that question, let's acknowledge that not all bubbles are created equal. When we think of bubbles, we typically envision financial assets like stocks and bonds, with historical examples like the dotcom bubble of the early 2000s coming to mind.
Yet, there's another dimension to bubbles—the kind that envelops cultural phenomena. Think of the video game frenzy in the early '80s or the comic book craze in the early '90s.
NFTs occupy a unique space. They are intentionally designed as carriers of cultural content. However, due to their inherent scarcity, their value in trade as a unique class of digital collectibles may fluctuate through hyper-financialization.
Just like any cultural artifact, they may be prominent today and forgotten tomorrow, or may have genuine staying power.
This dual nature necessitates a closer examination of what comes after the bubble bursts, both in the financial and cultural spheres. To understand the future of our industry, we must scrutinize the aftermaths of these two types of bubble.
Suits and Securities
Financial bubbles are a common point of discussion in this sector. Were “crypto twitter” a physical space it would be a challenge to step in any direction without tripping over somebody’s take about why blockchain now is like the Internet in the nineties.
Both detractors and advocates of crypto constantly point to the “dotcom bubble” of the 90’s as a pillar of their argument. These same arguments and allusions naturally carried over to the discussions of a bubble in NFTs.
Believers point to the dotcom bubble as an example for how a transformative technology can survive major market downturns.
Detractors draw comparison between the froth and excess of the dotcom bubble ( equity in thing.com trading for exuberant sums because .com) to that of the NFT market peaks (make everything into NFT, rug-core collections en masse, etc).
Both these comparisons likely hold shades of truth, but anyone can point to two things and say “this is like that”.
What are the actual implications of these comparisons?
The negative comparisons to the dotcom bubble are perhaps the most immediately apparent. Particularly looking at the period where NFT prices were peaking in 2021/2022.
If you could conceive a particular combination of adjectives and animal names, it's likely an NFT collection existed for it. Many of these projects minted and traded at massive valuations. We were regaled with anecdotes of influencers at crypto conferences offering to cover their portion of bills for things like bottles and tables with NFTs.
People were taking out loans with their JPEGs as collateral.
To many on the outside, it was already a disaster in the making.
In the time since this golden period, we’ve seen a substantial decline in so-called "blue chip" NFT floor prices. Mainstream news is regularly publishing articles about the death of NFTs, long-time detractors are taking victory laps on Twitter.
Believers rekt, total armchair skeptic victory.
Right?
Not necessarily.
The flipside of the Dotcom bubble comparison is of course that, while millions were lost and many individual assets/stocks went to zero, the underlying technological innovation that was the Internet lived on, became arguably the largest change for human society in a hundred years, and today Internet Companies dominate the stock market and investing industry.
Could the future hold a similar course of events for NFTs?
There’s probably not many out there prepared to argue that NFTs are going to change society to the same degree the Internet did. However the question of whether NFTs as a medium, as a protocol can transcend the current financial woes of its market participants and speculators, still warrants examining.
A notable element of the dotcom bubble’s aftermath is that building and development didn’t stop at all.
While venture capitalists and bloated companies were attempting to salvage what they could from the financial wreckage of a vast array of failures, new and innovative tools and applications continued to be built on the Internet, laying the groundwork for the beginning of the Internet’s takeover of almost every facet of human life over the next decade.
Can we see similar efforts in the midst of the ape carcasses and now valueless fiverr art?
There are certainly reasons to be hopeful.
Scatter is seeing new and exciting collections everyday, select dedicated NFT communities continue to thrive on twitter, and despite all the MSM doom and gloom, as seemingly endless list of major legacy companies, such as Square Enix, are publicly doubling down on their commitment to NFT development. These companies know that things never stay the same, everything always changes, and they have a vision of their financial place within the new Internet.
Despite all of the doom saying, every day new incredible technologies and art pieces are being built with regards to NFT infrastructure, AMMs, lending protocols, launchpads. Every day teams small and large are working to build a more stable future for not just NFTs, but art as a whole. In that way, perhaps there is some hope that, like the Internet itself, NFTs can outlive the misery of the overinvested and smug condescension of the skeptical do nothings.
It's about content, it's about being a gamer!
There’s more to NFTs than just the financial and technological elements of course.
They are not merely vehicles for betting on perceived future cultural dominance, they’re also intended to serve as a consumer product and usually a vehicle for content of some sort.
Does this make a difference? One hardly develops sentimental feelings for mere financial instruments as one would a masterwork painting, but NFTs have proven to hold a certain non-monetary social value to their holders. As such, we need to look beyond just financial securities in assessing life after the NFT bubble.
Between 1983 and 1985 video games, a then new and exciting technology experienced an industry wide recession.
Just a few years prior home video gaming had been among the most exciting profitable innovations in consumer entertainment.
Massive success however led to a saturation of low quality games, low quality consoles, and low quality developers.
Ultimately store shelves became saturated with low effort trash and the public became tired of being ripped off.
Companies went bankrupt, developers were out of work, and contemporary journalists were closing the book on video games as a flashy but frivolous fad that had come and gone.
Read below a New York Times article from October 17th 1983.
“The boom is over for the once high-flying world of video games. The electronic centipedes, outer space invaders and spooky goblins that only a year ago seemed to have an extraterrestrial grip on the play hours of America's children are consuming each other like so many Pac-Men. Dozens of the game makers that rushed into the field last year have dropped by the wayside, their visions of high profits proving to be as imaginary as the fantasy worlds pictured on the game screens. Though it once appeared that children would never stop zapping asteroids and blowing up tanks, industry people say that many youngsters seem to have become jaded by Donkey Kong and Chopper Command and have switched to home computers or returned to traditional, nonelectronic fun. The result has been a jolting upheaval for a leisure diversion that five years ago barely existed and one year ago seemed on an unstoppable roll.” - N.R Kleinfeld, New York Times
Sound familiar?
The terms and references differ, but with some tweaking this could easily read as a contemporary take on NFTs.
As we all know, video games did not die as a passing fad in 1983, rather just a couple of short years later Nintendo would release the NES, rejuvenating the industry and making video games a fixture in home entertainment.
In the ensuing decades, video games have grown into an almost 300 billion dollar industry.
Again, it is silly to simply point to something in the past and say “NFTs will do this because this other thing did”.
What can definitely be taken away from the 80’s video game bubble however, is that an effective entertainment medium that maintains its core contributors and consumers can transcend the inevitable boom and bust of business cycles.
In 1982 the investors and suits that had just lost all their money pumping out infamously low quality games like ET for the Atari 2600, could not imagine that in a few short years something like Super Mario Bros. would take the world by storm.
Similarly, as we comb through our portfolios of dormant NFTs searching for those last drops of liquidity, it can be challenging to stay aware of the vast future potential that NFTs and Web3 present. All that we are building together will inevitably be embraced by all as the crucial next step of the Internet.
We don't need to wait decades for new waves of excitement either. Once you enter this space, days can feel like weeks, and months can seem like years as we all continue to accelerate.
The Times Ahead
NFTs hold a unique position at the intersection of financial technology and cultural consumables.
NFTs also benefit from a decentralized development community.
In both scenarios above, the ‘products’ be they dotcom stocks or video games were pumped out by a handful of powerful centralized interests and late comer opportunists.
These sorts of entities of course exist in NFTs, but the nature of the Internet and web3 development allows for constant creation and innovation.
Where video games had to wait for the dust to settle from Atari’s failure for Nintendo to rise from the ashes, the next great NFT innovations may well be being built right now amongst the post-bubble carnage, hard to believe as that may seem.
The money is elsewhere right now but the innovation cycles are shortening and the passion is growing.
Here at Scatter, we see the incredible work being put in by teams and artists of all sizes and clout levels throughout time of both feast and famine.
The future is bright, but it won't be the same. It will be different. And at Scatter we are helping to build this difference for creators, collectors, and collaborators. We are driving forward innovations and partnerships that will help to create incredible opportunities for all participants in what is to come.
So we say, let the bubbles come and let them burst, or let them continue inflating indefinitely. The soulless will die, the cultured will live on. Either way, new, fresh, and subversive ideas will continue to burst forth from the Web3 egregore and sooner or later transform the Internet as we know it.
Having fun making art with your friends online is forever. Nothing can stop this.
The future you await is right around the corner.