In 2021, the NFT (non-fungible token) bubble grew by +21,000% year-on-year. The fashion industry immediately agreed to contribute to this new digital innovation (or provocation?). Today, however, the sector is experiencing a roaring slowdown. So much so that some people are beginning to suspect that all this frenzy was mainly the result of a certain type of speculative impulse: collectable, but above all lacking in control and regulations
Let’s start with an example that is not about fashion but also speaks to fashion because it explains what is wrong with the NFT bubble. On 5 March 2021, Jack Dorsey, the founder and former CEO of Twitter, auctioned off the NFT of the first tweet ever published on the social network in 2006. After 15 days of trading, Iranian entrepreneur Sina Estavi won the non-fungible token (tracked and non-replicable digital asset) for $2.9 million. Well, 13 months later, on 7 April 2022, Estavi put the same NFT back up for sale with an auction base of $48 million. According to news reports, the highest bid received was $12,000.
Golden year, horrible quarter
The time frame of the unfortunate affair of Jack Dorsey’s NFT is very significant. The first award came in 2021, the golden year of the NFT phenomenon. According to the NonFungible Observatory report, written by the Wall Street Journal, the market moved $17.6 billion in the year, or +21,000% year-on-year. In the period January-March 2022, when the bankruptcy auction by Estavi took place, the same observatory records a collapse in NFT sales. While the number of daily transactions contracted dramatically (as much as -90% compared to the peaks of September 2021), the initial investment value lost an average of 50% compared to the last quarter of 2021.
When the NFT bubble was not yet showing such sharp signs of abating, keen observers were already warning. Beware, the so-called ‘web 3‘ (of which NFTs, the Metaverse, and the blockchain are part) is based on a fragile premise. Very fragile. That is the idea of artificially recreating the principle of scarcity in a system (the network) where it does not exist. Once the enthusiasm is over, the effects of the forcing are recognised.
On the subject of NFT auctions, for example, expert Fanny Lakoubay explains to Le Monde that “collectors do not participate based on real passion”. On what basis then? At most, ‘the desire to proselytise overlaps with the desire to make a profit: they buy NFTs like shares and then sell them at a higher price or a loss’. The problem is that the average collector/speculator has not been able to find any followers for some time.
Soon for final budgets
Some people feel like drawing conclusions already. And take advantage of the contextual difficulties of related technologies (such as cryptocurrencies) to spell the end of NFTs. Perhaps it is better not to rush to judgement: there are still economic bigwigs (especially fashionable ones) who are entering the sector and can overturn its fate.
Certainly, the Web 3 ecosystem (which in numbering follows the first Internet, that of the mass explosion in the 1990s, and the second, that of the new millennium, of Google and Facebook) shows the need for an overhaul for the first time. They celebrated Web 3 as a way to liberate the Internet from the tech giants that now control it,” writes the New York Times. “Instead, we see the opposite: polluting the digital world with a thick smog of mistakes, scams, and costly, largely unregulated financial speculation that ruins whatever shred of trust still remains about the digital world.
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