NFTs: What went wrong?
NFTs promised a future of digital ownership, but the hype faded and the market collapsed. But could these still have utility in the future?
Non-fungible tokens. Remember those?
The fun little JPEGs that exploded onto the scene, promising something truly revolutionary: true digital ownership.
The reality, though? Rampant speculation, reckless spending, and rug pulls aplenty.
The narrative went that, through blockchain, you could prove authenticity and trade digital assets just like physical art.
But it fell far short of those lofty expectations.
Trading platform OpenSea reportedly went from over $6 billion in monthly sales volume to dropping by as much as 90% in just a few months.
So, what exactly went wrong?
What exactly is an NFT?
An NFT, or non-fungible token, is essentially a digital certificate stored on a blockchain that points to a specific asset – often a piece of art, a song, a video clip, or even a tweet.
Think of it less as the thing itself and more as a digital receipt that proves you own a unique version of that thing.
What makes NFTs different from cryptocurrencies like Bitcoin is their uniqueness. One Bitcoin is always equal to another Bitcoin, but NFTs are one of a kind – or part of a limited series. That uniqueness – its “non-fungibility” – is the whole point; it’s what gives the token its supposed value.
In theory, it works. But in practice? You don’t actually own the art. You own a claim to it in a digital world. As a Hacker News user put it bluntly:
An NFT is just the “bragging rights” part of the original painting, and the JPG that anyone can access is the “thing that looks like a painting”
The token doesn’t usually contain the actual image or file. Instead, it links to it. The artwork or asset typically lives “off-chain,” stored somewhere else online.
The blockchain simply holds proof of ownership and a pointer to where the file is located. That’s part of what makes the concept confusing.
You’re not really buying the digital object itself, but a kind of verified record saying, “Yes, this one is yours.”
If you haven’t explored blockchain or digital wallets before, it can all feel somewhat abstract.
There’s a lot of jargon, multiple layers of technology, and plenty of noise. But, at its core, the concept is simple: it’s about using blockchain to confirm digital ownership in a way that can’t easily be faked, copied, or disputed.
However, the disconnect between on-chain ownership and genuine legal rights quickly tarnished public trust.
Why has the NFT hype faded away?
NFTs weren’t driven by genuine use – they were fueled by frenzy. In 2020, NFT sales were roughly $82 million. By 2021, that figure had exploded to $17.7 billion.
But as prices skyrocketed, so did fraud: wash trading, rug pulls, and phishing scams ran rampant.
The market began to look less like a place of innovation and more like a casino – one rigged with insider manipulation and empty promises.
NFT ownership exists in a legal gray zone. Holding an NFT doesn’t mean you own the copyright (unless explicitly stated).
High-profile disputes, including those involving Damien Hirst and Quentin Tarantino, exposed cracks in the system and forced regulators to take notice.
Then came the environmental backlash. Early NFT platforms ran on energy-intensive blockchains, and minting just one token could leave a carbon footprint equivalent to a short-haul flight across Europe.
For many, that ethical cost outweighed any potential benefit once it became widely understood.
Artists and collectors who had initially celebrated NFTs as a progressive step forward suddenly found themselves on the wrong side of sustainability conversations.
The irony was hard to ignore: a technology hailed as the future was fueling one of humanity’s greatest problems.
As media coverage intensified, headlines painted NFTs as not just speculative but irresponsible. And while Ethereum, for example, has since transitioned to a more efficient proof-of-stake model, the damage to public perception had already been done.
Where NFTs might actually work
For all the noise around NFTs, they did tap into a very real human instinct: the desire to own digital things in a meaningful way.
But if we strip away the blockchain hype and focus on what ownership actually means – security, rights, provenance, and control – there are simpler and more functional ways to achieve that.
In fact, the real utility of NFTs might not lie in digital art at all.
Here are a few areas where the underlying technology could prove more useful:
Gaming
NFTs can represent in-game items like skins or characters that are owned by the player rather than locked to a single platform.
In theory, these assets could be traded between games or resold by players themselves – giving gamers more control over their digital property.
Games like NBA 2K have already begun integrating branded digital goods from more than 75 partners. In the future, these digital items could evolve into NFTs that offer real-world value.
Ticketing
NFTs could serve as unique, tamper-proof digital tickets that verify entry and track resale conditions.
Artists and venues could set resale royalties or limit markups, gaining more control over pricing and access.
Loyalty and membership programs
Brands and creators could use NFTs to reward loyal followers with exclusive access, early product drops, private content, or special event invites.
Since NFTs are verifiable and trackable, the experience becomes personal and portable.
Credentials and certification
NFTs could store proof of achievements, such as university degrees, professional training, or identity verification, in a way that’s instantly verifiable and secure (and not reliant on third-party databases).
Unlike PDFs or paper certificates, these credentials could be publicly validated, reducing fraud and making them more portable across borders and between institutions.
What is the future for NFTs?
If NFTs are to survive, owning one has to actually mean something.
That means providing their owners with real rights, building on sustainable platforms, and delivering genuine value – not just cool-looking pictures.
It’s time to move past the hype and promises. Instead of chasing fast money and attention, the focus should be on making NFTs truly valuable in everyday life.
This could mean tickets, gaming items, digital art with enforceable rights, or verified identity.
These changes won’t happen overnight. Technology takes time.
Adoption may be slower and quieter than the 2021 boom, but the core idea of NFTs – true digital ownership – still holds promise.
But for that promise to be fulfilled, the people building the next phase need to learn from the mistakes of the first wave.