Where are NFT Collectibles Going in 2022?
The NFT market has grown substantially over the past year, with total NFT sales for 2021 estimated to be around $17.7B. At that rate, NFT collectible and art sales in 2021 are roughly equivalent to 23% of all physical collectible, antique, and online art sales in 2020. This trend only looks to continue as education increases around NFTs. A recent report from Cointelegraph found that nearly 60% of surveyed participants had never used NFTs. With more users learning about NFTs, adoption is expected to continue, and NFT collectibles have consistently held as the entry point for NFT adoption.
Source: Cointelegraph Research, A New Frontier
As more people continue to understand NFTs and innovation in the NFT space continues to develop into the new year, there are two emerging trends that I believe will build, if not accelerate, NFT collectibles throughout 2022: POAPs and Fractionalized NFTs.
Emerging Trend: POAP NFTs. Proof of Attendance Protocol (POAP) NFTs are NFTs that are used to represent a user’s participation in a particular event. These NFTs have grown in popularity both in digital spaces, like minting events, and physical space attendance as a way to discover early and consistent followers without the use of personally identifiable information. Since the start of 2021, the total number of wallets holding POAP NFTs has grown over 5x.
Source: @greywizard, POAP Wallet Counts Over Time - Mainnet (Dune)
POAP NFTs have the potential to further the growth of NFT collectibles because they enable early holders to be recognized for their entrance to a project, even if they are no longer holders of the actual NFT. For a subcategory of crypto that rewards early adopters and market entrants, holding claim to be the first holder of a CryptoPunk or other future project will further drive NFT collectors to go for mints in hopes of the next successful project. Further, POAPs give NFT creators the ability to identify early users and reward them for driving the ecosystem.
Even though POAPs are still early and have only started being used by major companies like Adidas, I believe that the adoption of POAPs within the NFT collectible space will continue to bring the category into an uptrend in 2022. Particularly in the light of Adidas’ Into the Metaverse drop, where POAP holders were given early access to the NFT release, POAPs will certainly play an important role in NFT collectibles.
Emerging Trend: Fractionalized NFTs. One of the major concerns around NFT collectibles is what is known as the social token paradox. The social token paradox is an issue that is created when exclusive NFT communities need to gain new members by issuing more tokens but lose the exclusivity and value of their product by doing so. Some projects, like Bored Ape YC, have used spin-off projects like Mutant Ape YC to circumvent this issue. Yet, the membership is nonetheless to another affiliated group, and the paradox continues. A more novel approach that has emerged out of 2021 is the concept of fractionalized NFTs.
Source: Messari, The Financialization of NFTs
Fractionalized NFTs are NFTs that are split into smaller pieces by the original owner, typically in the form of ERC-20 type tokens, to represent ownership of a particular NFT. Protocols like Fractional.art have given rise to the concept and have led to the fractionalization of NFTs like the DOGE meme and the Ross Ulbricht Genesis Collection. Instead of falling into the social token paradox, fractionalized NFTs give NFT holders the ability to create new communities within an NFT collection without hurting the value or exclusivity of the project. In turn, more users can get behind particular collectibles within a collection and continue to participate in the broader ecosystem. As NFT projects like CryptoPunks and Bored Ape YC continue to skyrocket in price, fractionalized NFTs may offer a promising solution to continuing the inclusivity of NFTs while maintaining the growth of NFT collectibles seen in 2021.
