Can NFT collectibles reinvent themselves?

Can NFT collectibles reinvent themselves?

The Azuki scandal highlighted that only the collections capable of producing real value will stay here to shape the next generation of NFTs. Our take on the present and future NFT champions: CryptoPunks, BAYC, and… FLUF World 🐰

It’s been a while since we heard any jaw-dropping news from the NFT world.

The larger NFT sector seems to have moved on from the collectibles craze to other, more “practical” use cases, such as music, domain names, social media handles, diplomas, or consumer goods’ digital twins.

Does it mean that NFT collectibles are dead? Maybe not just yet.

Every other day, a CryptoPunk gets sold for an equivalent of around $300k, Bored Apes hover around $150k, and the rarest DeGods can reach $100k.

However, it is clear that the golden age of NFT collections, when users were ready to buy virtually anything at any price, is over.  Average weekly trading volume has plummeted from $158 million (July 2021 and May 2022) to $33 million, and people stopped blindly hoping that their NFT will one day take off and make them rich.

Now, more and more NFT holders are determined to keep the development teams accountable, and the recent Azuki Elementals drop scandal shows just how serious they are.

All this gives hope that the space can evolve.

To better understand its perspectives, let’s remind ourselves what constitutes the value of an NFT collection, on the good examples of CryptoPunks, Bored Apes Yacht Club, and the emerging FLUF World. The latter is worth noting not only thanks to its collaboration with Ripple, but also because it is building something very interesting.

In contrast with these projects, Azuki’s troubles can highlight the current problems with the NFT collectibles and show the ways they could regain their glory.

NFT collectibles and their value

Strategically speaking, there are two main types of NFT collectibles: those with inherent value and those reliant on a roadmap and development team.

The likes of CryptoPunks fall into the first category. They primarily serve as status symbols, indicating that their owners belong to an exclusive club (such as early crypto adopters in the case of CryptoPunks).

On the other hand, most other NFT collectibles are not sufficient on their own. They need to provide a clear roadmap, demonstrating how the project will evolve and generate value for the community.

For instance, consider Yuga Labs, the team behind the Bored Apes Yacht Club collection. They are developing a web3 gaming metaverse called The Otherside. Within this online role-playing game, BAYC NFT holders will be able to enjoy various perks and monetize their NFTs (or so Yuga Labs promises).

Yuga Labs has already conducted two closed demos of the playable metaverse, which received a positive response from the community, allowing them to maintain faith in the project.

CryptoPunks and BAYC are among the finest examples of NFT collectibles. Nevertheless, even these projects have experienced significant drops in their floor prices, plunging from their peak levels of around $420k in May to $90k and $64k today, respectively. This decline clearly demonstrates how heavily the prices relied on FOMO.

Emerging collections: FLUF World

Ripple’s legal victory over the SEC undoubtfully made history, and it reminded us that this rather conservative “blockchain for banks” actually has a side collaboration worth speaking of.

The Root Network is conceived as a new metaverse-oriented blockchain, which Ripple is building together with Non Fungible Labs, the team behind the FLUF World.

This project’s plans go far beyond the cute bunnies, bears, and fluffy spiders it features now.

Non Fungible Labs has founded a not-for-profit Futureverse Foundation, which gathers a group of companies, all contributing in one way or another to the advancement of an interoperable multi-purpose Open Metaverse based on the Root Network.

Riplpe’s $XRP will be the native gas and staking token for the Root Network (which is already running), and now that we know that it is not a security in the US, the project can dismiss a potentially big legal burden.

The specialists within Futureverse – infrastructure, music, payments, DeFi, gaming, and AI companies – are already building. The latter – the crypto-AI company ASM (altered state machine) has already produced an AI-powered football game AIFA.

Whether The Open Metaverse will deliver on its promises is yet to be seen, but so far Non Fungible Labs shows an admirable set of traits: having a clear plan, gathering talented people around it, and delivering real product.

The FLUF World stays a relatively small collection, with $54 million market cap (vs BAYC’s 2 billion or Azuki’s 526 million), which can present a nice opportunity.

The Azuki ordeal

Azuki serves as a glaring example of diminishing hype and unmet expectations. Launched by Chiru Labs in January 2022, this collection quickly gained popularity, boasting beautiful artwork and teasing grandiose plans for future metaverse developments.

However, since then, the company has struggled to make any substantial progress, producing only a golden skate 🤭 and a collaboration with a small fashion brand. However, it got its share of embarrassing incidents such as a Twitter hack that led to over $750k being stolen from users’ wallets, or  its founder admitted to abandoning previous NFT projects – a big no-no in the crypto world.

But Azuki troubles didn’t stop there. Chiru Labs recently released a new collection called “Elementals,” which not only failed to provide additional utility but also featured repetitive artwork. Some Azuki NFT holders concluded that these additional NFTs diluted the value of the existing Azuki collection, prompting them to take action. They formed a decentralized autonomous organization (DAO) and demanded a refund of over $38 million from Chiru Labs.

To make matters worse, a vulnerability in the DAO’s smart contract allowed a hacker to steal approximately $68k from them 🤦‍♀️ Nevertheless, despite this setback, the DAO still plans to take legal action against the Azuki founder.

Unsurprisingly, these events have caused the floor price of Azuki’s main collection to drop from $27k before the drop to a mere $13k, a far cry from its all-time high of $90k. Elementals NFTs are currently being traded at 1.2 ETH, well below the initial mint price of 2 ETH.

What future for the NFT collections?

The Azuki ordeal has once again exposed the vulnerabilities of NFT collectibles that rely heavily on external developments. In the crypto community that values the principle of “don’t trust, verify,” such projects place excessive trust in the founding team.

Ideally, the failure of NFT projects should inspire the crypto space to devise new methods for securing a project’s roadmap and keeping its founders accountable. These methods could include implementing better community governance (DAOs with real power), mandatory smart contract audits, stronger legal protection, and more.

In the meantime, the best way to evaluate an NFT project is to look at its collaborations and achievements.