NFTs in 2024: Evolution, Challenges, and Opportunities

As we close 2024, the OAX Foundation revisits a topic we analyzed at the end of last year: the state of NFTs. Much has changed in the digital asset industry since 2023, with bullish sentiment around Bitcoin dominating headlines and driving renewed interest in the broader crypto market. But amidst this excitement, it’s critical to recognize that NFTs remain a cornerstone of blockchain innovation.

This sector continues to drive significant usage of core blockchain protocols such as Ethereum, Solana, Base, and even Bitcoin itself. While skeptics have been quick to declare the “death” of NFTs, the data tells a more nuanced story: NFTs are not dead—they are evolving. Today, we provide an update on this evolving landscape, exploring where NFTs stand, the challenges they face, and the opportunities ahead.

A Snapshot of the Current NFT Landscape

The NFT market peaked at a staggering $414 billion market cap in May 2022, currently sitting at $35 billion, showing an uptick since Jun at $18 billion. Sales volume has also seen a surge, reaching $187 million weekly total sales in early December . While these numbers suggest a market far removed from its heyday, there are signs of resilience and adaptation.

November 2024 was a particularly notable month for the industry. NFT minting reached an all-time high of $1.5 billion, with 97% of this activity occurring on Base. Additionally, weekly sales volumes continued to show momentum, with Ethereum leading the charge at $92 million in sales during the first week of December, driven by collections like Pudgy Penguins and CryptoPunks. Despite Solana coming third in volume, they led in the number of NFT buyers.

Notable NFT Projects and Partnerships

The NFT space continues to be defined by standout projects that capture both market interest and cultural zeitgeist:

  • Pudgy Penguins: Once dismissed as a niche project, Pudgy Penguins achieved an unprecedented milestone in December 2024, with its NFTs valued higher than Bitcoin. The launch of the PENGU token, despite initial hiccups and volatile trading, injected fresh enthusiasm into the market. Sales volumes for Pudgy Penguins surged 346% in one week, and the collection’s floor price rose to 20.9 ETH (~$83,000).

  • McDonald’s x Doodles Partnership: The fast-food giant partnered with Doodles for its “GM Spread Joy” campaign, blending digital collectibles with real-world promotions. This collaboration showcased NFTs as a tool for bridging traditional brands with Web3 audiences.

  • Challenges with Magic Eden and RTFKT: Not every story was a success. Magic Eden’s ME token - one of the leading NFT marketplaces on Solana - stumbled on launch due to app bugs and a complex claiming process. Similarly, Nike-owned RTFKT NFT partnership announced it would sunset in January, marking a sobering reminder of the challenges even well-funded projects face in sustaining long-term viability.

Challenges Loom Large

Despite signs of recovery, the NFT market continues to grapple with significant challenges:

1. Market Saturation: The speculative frenzy of 2021 led to an oversupply of projects, many of which failed to deliver meaningful value or utility. This has left investors wary and increased scrutiny on new launches.

2. Royalties Debate: The shift toward optional royalties on NFT marketplaces has sparked fierce debate. While this move appeals to buyers seeking lower transaction costs, it undermines creator earnings, forcing the industry to reconsider how to sustain creative ecosystems.

3.Public Perception: For many, NFTs remain synonymous with speculative trading and financial losses. Overcoming this stigma will require demonstrating tangible use cases beyond collectibles, such as tokenized real-world assets, identity verification, and even healthcare applications.

4. Enterprise Exits: High-profile closures like Kraken’s NFT marketplace and Nike’s RTFKT reflect broader concerns about profitability and long-term sustainability. These exits highlight the need for better market fundamentals and more robust business models.

Opportunities on the Horizon

The evolution of NFTs points to untapped potential. Here are developments highlighting the growing sophistication of the NFT sector over the past year.

Status Symbols and Community Value: Digitally-Linked Assets (DLAs)

DLAs connect physical products to digital experiences via blockchain, opens new dimensions for NFTs by blending them with real-world products, fostering deeper consumer loyalty and interaction. For example, a luxury handbag linked to an NFT can provide buyers with proof of authenticity, exclusive rewards, or access to virtual experiences. By leveraging blockchain for transparency and programmability, DLAs expand the potential of NFTs beyond static digital art, making them integral to product ownership and enhancing brand engagement.

Scalability and Affordability: NFTX - Unlocking Liquidity for the NFT Market

NFTX addresses NFT market illiquidity by allowing users to mint fungible tokens (vTokens) representing NFTs through vaults. By introducing fungibility to an inherently non-fungible market, NFTX provides a smoother and more accessible trading experience. This innovation adds value by increasing market efficiency, enabling NFT holders to unlock liquidity without having to sell specific assets outright. It also attracts new participants to the space, as the ability to trade vTokens lowers the barrier to entry for those who may not want to directly engage with illiquid NFTs. Overall, NFTX enhances the ecosystem by creating more dynamic and fluid markets for NFTs.

Emerging use cases: Ordinals - Bringing NFTs to the Bitcoin Blockchain

Bitcoin Ordinals enable the creation of unique digital assets on Bitcoin by inscribing data onto individual satoshis. This innovation has attracted developers and users who were previously focused on Ethereum-based NFTs, diversifying the NFT landscape. Additionally, Ordinals introduce a novel way to tokenize assets, making Bitcoin more versatile and increasing demand for block space, which could contribute to the long-term sustainability of the network. Despite controversies regarding block congestion, Ordinals have unlocked creative possibilities on Bitcoin, adding depth to the overall NFT market.

The Big Question: Can NFTs Be Bigger Than Before?

Yat Siu, chairman of Animoca Brands from Hong Kong, remains optimistic, stating that NFTs are an investment in reputation akin to owning a Picasso. He argues that the market’s current challenges are part of a natural growth cycle, where some projects succeed while others fail. According to Siu, the future of NFTs lies in their ability to evolve into status goods and tools for empowerment, potentially surpassing their 2021 peak in both scale and impact. However, the journey ahead depends on addressing foundational issues, such as royalties, scalability, and public trust. The NFT market is maturing, with speculation giving way to utility-driven valuations. This evolution provides a clearer framework for assessing projects’ long-term potential, helping participants navigate opportunities and risks more effectively.

In Closing

At the OAX Foundation, our goal is to provide our community with a holistic view of the digital asset industry. With the increase of total digital asset market cap, we are eager to witness how the NFT sector would unfold. NFTs remain a key sector within this ecosystem, driving significant usage of blockchain protocols. As we reflect on the evolution of NFTs over the past year, it’s clear that this sector is far from static. Instead, it is adapting, innovating, and laying the groundwork for future growth.

Whether NFTs can surpass their former glory depends on the industry’s ability to redefine its narrative. For now, one thing is clear: NFTs are not just digital assets; they are a reflection of how we value identity, creativity, and community in the digital age.

Disclaimer: The above is an opinion piece written by an authorized author, but in no way represents the official standpoint of OAX Foundation Limited, nor should it be meant to serve as investment advice.