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Konvoy Ventures is a thesis driven venture capital firm focused on the video gaming industry. We invest in infrastructure technology, tools, and platforms.

Are NFTs Showing Adoption or Hype?

The role of NFTs and the importance of utility and gaming

Adoption or Hype? And Does it Matter?

The NFT boom was taking over headlines at the beginning of the year and when looking at the above chart you can see why. An explosion of capital entered the crypto space which created a direct injection of capital into NFTs. What is concerning is that it’s clear that the majority of the capital coming into NFTs was built on hype and not the adoption of a new form of digital ownership. NFTs are important to the future of video gaming and entertainment because it has the ability to transfer some of the power back into the player's hand through the form of enhanced ownership. Players who have enhanced ownership will demand better products from game developers because game developers will need to keep players incentivized to maintain their assets in their ecosystem.  

You can see that platforms like NBA Top Shot, CryptoPunks, and Sorare exploded in popularity; however, the vast majority of this growth was driven by individuals buying collectibles with the hope of quickly flipping the assets. It has little to do with the desire to enjoy the new revolution of digital ownership. People trying to make a quick buck by flipping their asset to the next user is not an indication of much more than speculation. Most NFTs, especially the accessible ones, don’t usually have any utility outside of being an NFT so when the demand subdues from speculators, people who were just in it for the hype are holding a worthless asset.

The test I often put to NFTs is can I as a user extract value from that asset without relying on another person to come and pay a higher price for it in the future. Stocks vs. Real Estate, I cannot do much with my Amazon stock other than hope it continues to rise and sell to another person down the road that is willing to pay a higher price. In comparison, I can live in my house or rent it out and create cashflow generating asset, all while owning the asset and hoping it appreciates in value. This matters because the hype appears to be driving speculation not adoption for most NFTs. I am hopeful that the speculators do not set back a productive movement for the true NFTs driving an ownership revolution.