(Bloomberg) — The end of crypto winter has been heralded by rising token prices and the long-awaited approval of Bitcoin exchange-traded funds. But a key segment of the digital-asset universe has lagged behind, despite previously being one of the sector’s hottest corners.
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Nonfungible tokens, which are based on blockchain and represent unique ownership of assets like images or even physical objects, saw global sales plummet 63% to $8.7 billion last year, according to data tracker CryptoSlam. That’s even with volume more than tripling to $918 million between October and November. Meanwhile, industry bellwether Bitcoin surged almost 160% in 2023.
That’s a sharp change from when multi-million dollar sales of NFTs helped define the crypto bull market in 2021. The tokens, known for collections like Bored Ape Yacht Club, were billed as a fun, more accessible way for mainstream consumers to access crypto, as well as a status signal for those willing to drop small fortunes on a cartoon ape in order to make it their Twitter profile picture. X, the social media platform formerly known as Twitter, ended support for NFT profile pictures last week.
For Devin Finzer, chief executive officer of NFT marketplace OpenSea, it makes sense for the industry is move beyond seeing NFTs simply as collectible images. He says he looks at more than sales numbers when defining success for the NFT industry and his own company.
“One of the things we’ve been most excited about is not necessarily how do you drive the most volume, but rather, how do you build sort of the most compelling use cases for NFTs,” he said in an interview.
New York-based OpenSea had been the most dominant NFT marketplace during the crypto bull market and commanded a $13 billion valuation after raising $300 million in January 2022.
But after the onset of the most recent crypto winter, the startup saw its fortunes flounder. In August, OpenSea’s former head of product was convicted of insider-trading and the company drew heavy criticism for eliminating mandatory royalties for NFT creators on its platform. The startup laid off 50% of its staff in November and newer entrants like Blur, OKX NFT Marketplace and Magic Eden have posted significantly higher trading volume than OpenSea over the past 30 days, according to crypto data tracker DappRadar.
When asked about the shifting trend, Finzer said that “trading volumes can be a little bit misleading at times,” since some marketplaces incentivize activity on their platforms using their own token as a reward.
“We tend to not focus too much on kind of the short-term, marketplace dynamics,” added Finzer, who co-founded OpenSea in 2017.
Instead, the company is working on a platform upgrade known as OpenSea 2.0, which Finzer said will provide users with a better user experience and improved differentiation between NFT categories as more use cases for the tokens develop. He said currently, NFTs are displayed the same on OpenSea and other platforms, whether they’re a gaming token or an event ticket.
“We really want to have a marketplace interface that can be better customized to suit each type of use case,” he said, noting that OpenSea is working on displaying ticket NFTs on a calendar and sorting them by date.
NFT marketplaces like Blur and Tensor have also gained traction by offering what they claim is a more professional trading experience, where users can profit off of quick price changes. Finzer said that OpenSea’s upgrade will make it easier for customers to access its pro trading platform and toggle between “a collector view and a more advanced view.” He said the company has also improved its detection of fake NFT collections and harmful URLs—scams in which users connect their wallets to malicious websites and then have their crypto and NFTs stolen have plagued the industry.
Finzer declined to comment on the company’s termination of required royalties for NFT creators or whether OpenSea planned to reinstate a mandatory royalty program in the future.
As for other trends, Finzer has been tracking the rising usage of the Solana blockchain for NFTs, as well as the surging popularity of Ordinals, which are NFT-like assets on the Bitcoin blockchain. He said he’s still most optimistic about Ethereum being the blockchain of choice for NFTs, especially considering that its layer-2 chains have helped make transactions cheaper and faster. Even with the ETF craze spurring a price rise for Bitcoin, he doesn’t consider the blockchain to be a major NFT option moving forward.
“I really do think that the sorts of applications that you can build on Bitcoin will probably be limited to art-type use cases as opposed to more diverse stuff,” he said.
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