The frenzy that drove NFT prices skyhigh has fallen away during crypto winter, yet in many ways the non-fungible token market is maturing, with uses beyond collectible profile pictures.
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A lot happened in the NFT space this past year, but start here. In March 2021, crypto entrepreneur Sina Estavi bought a non-fungible token with an image of Twitter founder Jack Dorsey's first tweet.
For $2.9 million.
In April 2022, that person tried to sell it at auction. The top bid? About $14,000.
A pretty good summary of what happened to the NFT market in 2022, pricewise.
That said, NFTs are growing beyond their initial niche of profile pictures, or PFPs. They are being used as event tickets, membership cards, a medium to distribute music, and even sell fractionalized goods like real estate and art. Nike recently released Cryptokicks iRL, a limited-edition model sold as an NFT that also comes with the right to buy a physical pair of sneakers.
In addition, the growing backlash by critics has been blunted now that top NFT blockchain Ethereum has gone green with its Proof-of-Stake conversion after September's Merge.
Here's a look back at the top NFT stories of 2022.
January
The NFT bubble reaches its maximum size. Dune Analytics NFT trading volumes: $17.2 billion
With record-setting NFT sales volume more than quintupling from December, it's clear that despite the plunging crypto market — which was not yet seen to be the beginning of 2022's crypto winter — the NFT boom was at the top, with firms ranging from the Associated Press to The Gap jumping onboard. Top marketplace OpenSea sold $3.7 billion worth, and announced a $300 million Series C funding round with a $13.3 billion valuation.
NFTs invaded social media after news broke that NFTs were coming to Facebook and Instagram, allowing users to display them and eventually buy and sell them on an in-house marketplace. Shortly thereafter, Twitter became the first major social network to embrace NFTs, allowing them to be used directly as profile pictures, with ownership verified by a hexagonal border instead of the usual circle. Not everyone was on board.
Deutsche Bank later estimated that 44 million Instagram users would embrace NFTs by 2023.
February
NFTs are no game. Dune Analytics NFT trading volumes: $12.4 billion
Game publisher Team17 had to back down from a plan to offer NFTs based on one of its games after a backlash that included one developer threatening to stop doing business with it.
While that was based on the "environmental and social cost," many gamers see NFTs as little more than a way for weak players an unfair advantage by buying success. They're also viewed cynically as a way of squeezing more money out of gamers — the phrase is "pay-to-win" — that has been met with anger well before NFTs joined the conversation. Nintendo chimed in, saying very vaguely it would explore NFTs but only use them if they add "joy" to the experience.
The NFT rollout on Instagram was not without hiccups, even before they could be displayed in a way that confirmed ownership. Instagram account @NFT, with 1.7 million followers, was permanently banned after allegations of posting undisclosed sponsored content to push sketchy projects.
Meanwhile, the cooling NFT market was still pretty hot. CryptoPunk #5822 sold for 8,000 ETH worth $23.7 million — a PFP record by a long stretch — thanks to its rarity: an alien punk with one attribute, a blue bandana. The seller had paid $1,646 for it — a 1.4 million percent increase — several years earlier.
Two major record labels, Sony Music Entertainment and Universal Music Group, partnered with Solana-based NFT marketplace Snowcrash, founded by Bob Dylan's son. Its goal is to work with intellectual property owned on NFT collections including "primary drops, limited editions, streaming rights and digital goods, while providing the most efficient and eco-friendly experiences for buyers, sellers and creators."
Meanwhile, Grammy-winner RAC defended music NFTs after public criticism, pointing to Ethereum's coming switch to an eco-friendly Proof-of-Stake consensus mechanism. But he also focused on NFTs' ability to help free small artists from "exploitative" streaming business models. He said:
"I have 3.5 million unique listeners per month on Spotify, yet I made more income from five [NFT] collectors."
March
Zuck makes it official. Dune Analytics NFT trading volumes: $6.6 billion
Meta CEO Mark Zuckerberg announced that NFTs would soon be coming to Instagram, offering a big step into the mainstream. Eventually, he said, he hoped they would make their way into the metaverse he sees as the future of social media, work, and entertainment in general.
Time magazine got onboard with the release of a full issue as an NFT. The cover story, "The Prince of Crypto Has Concerns," featured Ethereum creator Vitalik Buterin on the cover.
One of the promises of NFTs is fractionalizing real property too large for small investors to get in on, like real estate and art. Grammy winner Diplo announced plans to use NFTs to fractionalize and sell 20% of the royalties to a new song, offering fans the opportunity to own a (very) small chunk for $99, with $999 and $9,999 tiers also available.
Ukraine's embrace of blockchain began with raising funds for military supplies, pulling in nearly $55 in less than two weeks after the Feb. 24 invasion by Russia from a variety of sources starting with the government's own site. In March it announced a "Meta History Museum of War" with the goal of preserving "the memory of the real events of that time, to spread truthful information among the digital community in the world." And also documenting war crimes.
NFT gaming met hacking when play-to-earn games like Axie Infinity — which created a huge market for NFTs needed to advance in the game — suffered a catastrophe. Sky Mavis' Ronin Bridge cross-chain payments project was hacked to the tune of $625 million — the largest such theft ever. Created to facilitate the exchange of ether and USDC stablecoins for the AXS tokens, the project's tiny number of validators let a hacker steal enough passwords to gain control.
April
Visa's everywhere you want to be buying NFTs. Dune Analytics NFT trading volumes: $8.6 billion
One necessary way of mainstreaming NFTs is to stop selling them only for ETH and other altcoins, because they risk limiting sales to the crypto-initiated.
Top NFT marketplace OpenSea jumped on that bandwagon, adding support for Visa, Mastercard and American Express debit cards, as well as Apple Pay and Google Pay.
Two new NFT marketplaces joined the fray. One, by Coinbase, had 2.5 million customers waitlisted (but started very slowly and with very low sales), and planned to allow credit card purchase of NFTs. It called simplicity a key feature, saying:
"Coinbase wants to simplify the user experience to allow more people to join the NFTs community. Just as we helped millions of people access Bitcoin for the first time in an easy and trusted way, we want to do the same for NFTs."
The other was Limewire, the resurrection of a streaming service used largely to pirate music and movies during the 1999-2001 internet bubble, when the web was young. Despite its past as record labels' one-time public enemy No. 1, LimeWire raised $10 million and said:
"We haven't really seen too much skepticism, even from the music industry. And we've been talking to artists and labels for the last three months. And the overall feedback we're getting is extremely positive. Most artists that are popular right now used the platform themselves in their teenage years. They kinda have a nice relationship with the brand in general."
May
Blockacchaino experiments percolate at Starbucks. Dune Analytics NFT trading volumes: $4.3 billion
In early May, Instagram launched a pilot program allowing users to hold and display NFTs minted on the Ethereum, Polygon, and Flow blockchains, with Solana coming next. What's more, Meta CEO Mark Zuckerberg gave a timeline for bringing them to Facebook.
Meanwhile, The Wall Street Journal proclaimed the bursting of the NFT bubble.
That didn't stop Starbucks from pushing the use cases of NFTs, showing how they can be "a programmable, brandable digital asset that also doubles as an access pass" that unlocks "exclusive experiences and perks." An early experimenter with Bitcoin payments, the coffee giant said:
"Starbucks also has a history of taking leading-edge technology, innovating and making it accessible and approachable for mainstream audiences. Our history with loyalty, mobile payment, mobile ordering and Wi-Fi has taught us how to engage customers at scale to unlock opportunities."
June
Ape entertainment goes big. Dune Analytics NFT trading volumes: $1.1 billion
The next big name to embrace NFTs was eBay, whjch jumped in with the purchase of NFT auction site KnownOrigin — just as top-selling Bored Ape Yacht Club (BAYC) PFPs' floor price tumbled with the crypto winter catastrophe that was May's $48 billion collapse of the Terra/LUNA stablecoin ecosystem. OpenSea had a bad month after a vendor's employee sold its email list in a massive data breach.
Celebrities started using BAYC NFTs for something more than PFPs. Eminem and metaverse booster Snoop Dogg dropped a music video in which they transformed into their Apes, while comedian and TV producer Seth Green showed the danger of hot wallets by losing a Bored Ape he was planning to use in a television show under production. In June, a month after the theft, he bought his own property back — and brought the question of ownership rights of NFTs broadly to the forefront.
July
Minecraft blows up NFTs. Dune Analytics NFT trading volumes: $825 million
Mojang Studios, developer of the massively popular Minecraft, became the latest big gaming studio to ban NFTs. They can, it said, create "digital ownership based on scarcity and exclusion, which does not align with Minecraft values of creative inclusion and playing together" which means that "all players should have access to the same functionality."
Meanwhile, hacking was becoming a bigger problem, with an influencer's hacked Twitter account used to launch a phishing scam promising phony NFTs.
British rock band Muse released their ninth album, Will of the People, with a "digital printing" among the formats on offer. Would the album join previous efforts in racing to the top of the charts, giving music NFTs some much-desired publicity? (Yes, in September.)
Big name PFP collections were seeing their floor prices drop, but that didn't stop all the conspicuous consumption, with a CryptoPunk selling for $2.6 million. Meanwhile, Tiffany & Co. offered CryptoPunk owners the chance to buy one of 250 custom-made pendants of their Ape for a mere $50,000. They sold out in 20 minutes a month later.
August
Legally speaking, what's an NFT? Dune Analytics NFT trading volumes: $760 million
With The Merge about to move the top NFT blockchain to a greener PoS consensus mechanism, OpenSea chimed in on the topic of hard forked NFTs, a topic getting more attention as Sept. 15 approached.
Bored Apes, CryptoPunks and every other NFT on Ethereum — which is to say, virtually all of them — would be duplicated on the Proof-of-Work spin-offs. What would happen to them, who would own them and what would they be worth were becoming big questions. OpenSea's answer to the latter was "nothing" as it announced plans not to allow the duplicate NFTs on its site.
Another big NFT question arose when an ex-OpenSea executive was charged with insider trading. He was accused of using his advanced knowledge of NFT collections that would be featured on the marketplace to buy up collectibles on the cheap. Nate Chastain's attorneys argued that NFTs "are neither securities nor commodities" and thus could not generate insider trading charges. The feds did not agree and, in October, neither did the judge. Chastain denies the charges and awaits trial.
Finally, Meta rolled out NFT support to 100 countries around the world across four continents, none of which were EU members. An important step in bringing NFTs before the masses beyond the U.S., the snub was likely the result of uncertainty about how NFTs would be treated — or even if they would be addressed at all — in the EU's Markets in Cryptoassets (MiCA) regulations.
September
NFTs go green at the Ethereum Merge. Dune Analytics NFT trading volumes: $527 million
After years of delay, the Ethereum Merge finally happened on Sept. 15. It switched the No. 2 blockchain — and far and away No. 1 smart contract blockchain — over to a much more environmentally friendly Proof-of-Stake consensus mechanism.
From an NFT perspective, this does for Ethereum-based NFTs what it does for every other project on the blockchain: free them from accusations that they are damaging to the environment. However, adding the sharding that will (it is hoped) dramatically reduce the transaction fees for minting and buying NFTs will not happen until well into 2023, at best. So existing PoS blockchains still have a big advantage from a fee perspective.
Questions of what's appropriate arose in a segment of crypto not really known for tastefulness arose when some anti-NFT fans of David Bowie complained about his estate's plans to release a collection celebrating his life — despite plans to donate 100% of the proceeds to charity, making the standard cash-grab complaint moot. That latter criticism certainly did apply to the dozens of unapproved NFTs released following the death of Queen Elizabeth II, some with titles like "RIP The Queen." They were called "a bad look for crypto."
Four months later, Bloomberg followed the WSJ in banging the NFT sales collapse drum, pointing that September's sales volume is 97% below that of January. However, reports of the death of NFTs broadly have been greatly exaggerated.
Meta finished its rollout, announcing that all U.S. users of Instagram and Facebook were able to post and share their NFTs — including cross-posting to both social media sites.
October
NFT royalties battle gets rougher. Dune Analytics NFT trading volumes: $491 million
Probably the biggest internal fight in the NFT space this year was the question of royalties. NFT tokens have the ability to be minted requiring royalties be paid to the creator — which artists generally set at 5% to 10%. But these "requirements" amount to little more than a request for marketplaces to collect and send them — there's no way to build it into the tech as a requirement (as the NFT doesn't know what it sold for.) Galaxy Digital estimated that $1.8 billion had been paid as of mid-October.
After some DeFi marketplaces began refusing to collect them unless the seller specifically requested paying it, a number of leading, mainstream marketplaces followed suit — saying they didn't like it, but were losing too much market share. Magic Eden and LooksRare succumbed in October, following X2Y2, which dropped royalties in August.
When Three Arrows Capital imploded, causing a wave of crypto lender bankruptcies and sending Bitcoin, Ether and just about every other token plummeting, it did NFT prices no favor either. But for the customers of crypto lenders bankrupted by bad loans to 3AC, more bad news came in the form of its NFT collection, built at a cost of an estimated $21 million: Its estimated value is now under $850,000. So tanking NFT prices are hitting millions of people who didn't buy them.
That said, some NFT collections remain popular. Reddit's Polygon-based NFT collection, based on its Snoo mascot, were selling well enough to get three million people to create digital wallets.
November
OpenSea weighs in on NFT royalties. Dune Analytics NFT trading volumes: $414 million
The NFT royalties fight heated up, with OpenSea launching an NFT tool that allows creators to blacklist exchanges that do not collect royalties, making them unsalable there. But it said it would not enforce them on old collections or new ones not using the standard, causing an outcry that forced it to retreat. (In December it tweaked this by decentralizing control of the blacklist.) Meanwhile, exchanges that dropped royalty collections have seen artists pull their works.
Meta's Instagram rolled out an "end-to-end toolkit" for NFT minting and sales. The platform's pilot will allow a select group of creators to mint NFTs on Polygon — with others to come later — and sell them directly to fans on an Instagram marketplace.
Miami's Institute of Contemporary Art revealed that it has added four NFTs, including a gifted CryptoPunk, to its collection. Noting the growing use of the format by artists including Damien Hirst and Beeple, ICA Miami's artistic director Alex Gartenfel said:
"Over the last two or three years, one of the most ubiquitous and transformative conversations has been around how artists explore and develop their creativity through NFTs."
Like Terra/LUNA and Three Arrows Capital before it, the collapse of FTX and Alameda Research sent NFT prices tumbling. Those on Solana fell hardest thanks to the blockchain's close connection to the disgraced (and recently arrested) CEO, Sam Bankman-Fried.
December
Just Cryptokick it. Dune Analytics NFT trading volumes: $409 million (forecast)
Nike, which has dominated the sale of NFTs by mainstream consumer brands, pushed its boundaries with the Cryptokicks iRL line. It's a collection of NFTs that provide both sneakers for NFT avatars to wear in the metaverse, but also a pair of limited-edition physical footwear. Details include special lighting packages and auto-lacing, as well as features like haptic feedback that would be most useful in a virtual reality environment.
Solana's Magic Eden announced a NFT royalty blacklisting tool similar to OpenSea's, suggesting the approach may be gaining traction. It also rolled out a user rewards program, offering points redeemable for things like discounts and access to exclusive NFT sales.
Apple is working on opening iOS to allow direct download of apps and in-app payments that don't go through Apple, which at present are mandatory and come with a fee of 30% of all sales. Those requirements are why most NFT marketplaces, including OpenSea, have apps that are browser-only if they have them at all. It only applies in Europe.
