The NFT market has grown quite large in 2021. It grew from ~$330 million in 2020 to over $3 billion in 2021. And there are still three months left in 2021.
This has led many people to wonder what the NFT market will look like in a few years. It will likely look extremely great, which we will explain below.
3 Reasons NFTs Will Be Huge in a Few Years
As mentioned earlier, NFTs have gained a lot of traction over the past year. This is really just the beginning of the market.
The market currently stands around $3 billion, so we do expect the market to grow quite large in a few years. Here are some of the reasons the market will grow a lot.
The World Moves Digital
It is no secret that the world is moving digital. This has been occurring for the past few decades.
NFTs are simply the next step in the world turning digital. Basically, NFTs will serve as a digital representation of everything that exists in the physical world.
Everything from art to music to collectible items will become an NFT on a long enough timeline. We know that a bunch of JPEGs that anyone can save to their computer turning into a trillion dollar industry might sound weird at the moment, but the next section will go into more detail on how this can/will occur.
NFTs + Hyperrealistic VR
NFTs will merge with hyperrealistic virtual reality at some point in the future.
This is the real end game of the entire NFT industry. Owning a Crypto Punk or NBA Top Shot is cool and already quite profitable. And all that value has already come with an NFT simply sitting in an Ethereum wallet.
It is literally just a line of code proving ownership. It is not really possible to show it off in a real world setting where you can physically look at it.
This will change when hyper realistic VR is released. With that, the NFTs will have an actual use. You can think of it simply as in-game items, but the game is virtual reality so it looks a lot more cool and “real.”
In our opinion, this is when NFTs will really start to grow exponentially because they will almost become a part of our physical reality. They could replace collectible items in a world with hyper realistic VR.
A good example of work that discusses this is Ready Player One. The physical world is not particularly enjoyable, so people spend an increasingly large amount of time inside a virtual reality world.
The world in Ready Player One could be our world in a few decades.
NFTs Are More Than Art
NFTs have way more uses than art and other collectible items despite collectibles making up 99% of the NFT market at the current moment.
Remember, NFTs are non-fungible tokens that can be programmed with all kinds of rules. This means developers can use them for pretty much anything that uses some sort of contract or password.
We really do mean anything, too. Some examples include the following:
- NFTs as real estate deeds.
- The bank, or DeFi protocol, can own the NFT representing a deed to a house until the debt on the NFT has been paid off. At that point, the NFT will automatically transfer to the borrower.
- NFTs as a paywall.
- Instead of using a password to access a paywall area you could use an NFT. This could easily be validated by connecting MetaMask to the website.
- NFTs as a means of authentication.
- NFTs can be used to authenticate goods. Does the luxury item have an official NFT associated with it’s serial number? If not, then it’s likely a counterfeit.
- NFTs as event tickets.
- It’s no secret that counterfeit tickets are a thing. NFTs can change that because only official NFT tokens could be used to enter an event.
- NFTs in gaming.
- We touched on this in the last point with hyper realistic VR and Ready Player One. But it’s worth repeating that blockchain gaming (ie. play to earn gaming) will be the first market that sees mass adoption of NFTs.
Those are just some use cases for NFTs. It is at the point where almost everything in physical reality can be cataloged and converted to an NFT for authentication purposes. Of course, the larger market will still be artwork, but this point shows that NFTs have the potential to be more than just JPEGs.
Ethereum Gas Fees Will Decrease
NFTs exist outside of Ethereum. However, 99% of NFTs of any value are on Ethereum, so that is one we will discuss.
For one, the Ethereum gas fees to mint an NFT range from $200 to $500 depending on the complexity of the smart contract. That price does not include the cost of the NFT itself, either.
Our point is that the NFT market is huge despite this massive roadblock called gas fees.
The great news is that Ethereum gas fees will decrease to nearly nothing at the end of the 2021 or the beginning of 2022 with the rollout of Ethereum 2.0.
That is great news for the price of Ethereum and the price of NFTs. There will likely be a NFT bull run due to the lower gas fees.
How Big Will The NFT Market Be In a Few Years?
Now, there really is no way to know how big the NFT market will be in a few years. However, we can make an educated guess based on historic technology trends and the current explosion in popularity of NFTs.
For reference, the current NFT market is measured as the total monetary value locked in NFTs. The number does not include gas fees, which are quite high on Ethereum when minting NFTs.
Anyway, the current NFT market is around $3 billion dollars, but there really is no way to know the exact size of the market. It’s too big to measure.
NFTs have existed on Ethereum since 2014. The market was basically non-existent in 2014, though.
So, we have gone from a $0 market to a $3 billion dollar market in a little over 7 years. Furthermore, we went from a $330 million market in 2020 to a $3 billion dollar market in 1 year.
Yes, NFTs have had a 10x increase in market size in a single year. Those results likely will not be repeated in 2022, but it does show that large increases in market size are possible. That said, the rollout of Ethereum 2.0 does have the possibility to
Our estimation is that NFTs will become a $300 billion dollar industry within the next five years.
Yes, that’s an aggressive estimate. But this factors in stuff like the growth of blockchain gaming and continued interest in NFT art and NFT music.
It is important to note that the growth of NFTs will not be a straight line with no downturns. The market will likely crash at some point in the next five years, but the general trend should be 10x from in the next few years.
Tips For Making Money With NFTs
A market that increases by 10x in five years probably sounds like free money for any investment.
This might actually be the case with NFTs, but it’s unlikely. Here are some tips for making money with NFTs in the coming years:
- Stick to high value NFTs for investment purposes (NBA Top Shots, Crypto Punks, Bored Apes, etc.).
- Look for art projects that are trying to build a culture rather than just trying to cash in on the NFT boom.
- A good example is the Bored Apes project or Loot. It’s more than just a piece of digital in both cases.
- Hold your NFTs or sell them for Ether.
- This point is debatable, but it’s the same concept as people regretting selling Bitcoin in 2013 during one of the first major bull markets. At worst, you should sell your NFT for Ether and keep it as Ether rather than fiat.
That covers it for making money with NFTs. Basically, you cannot go wrong by purchasing popular NFTs like Crypto Punks or Bored Apes, but those are out of the budget of most people.
When looking for NFTs to mint, we recommend sticking to projects that are attempting to build something. This usually involves building a community that offers perks to NFT owners (ie. Bored Apes). The flipside would be something like Loot that is simply an NFT that will have the community attempt to build something around it.
Well, that explains what the NFT market should like in the next few years.
To summarize, the market will be huge and will likely have expanded far beyond just JPEGs. The NFTs that are high value and worth a lot will be worth an extraordinarily large amount of money in the next five years.
Beyond the next few years, NFTs will continue to expand as gaming on the blockchain becomes more popular. Furthering that will be further expansion of the market as hyper realistic VR becomes more of a thing.
Anyway, the future is bright for NFTs. Do not listen to the naysayers that do not really understand the potential for these and see them as nothing more than digital art. The use for NFTs goes far beyond digital art.