NFT Recap 2023: What Happened in the NFT Space this Year? The Web3 ecosystem continued to rely on nonfungible tokens (NFTs) in 2023, as many community members fearlessly tackled new issues and explored uncharted territory. Users trading NFTs demonstrate that the space is thriving, even though skeptics frequently write NFTs’ obituaries. Demand is still high, as seen by the top ten NFT blockchains’ combined sales volume of nearly $1.5 billion in the past 30 days.
There were a lot of developments in the NFT space in 2023, but some were more noticeable than others. Among these, there have been significant events in the industry’s past, such as the birth of Bitcoin Ordinals, the first SEC case against NFTs, and the disagreement over creator royalties.
Bitcoin Ordinals are on the Increase
In 2023, software programmer Casey Rodarmor invented Bitcoin Ordinals. The program was released to the Bitcoin mainnet after the developer published it on their blog on January 21. The protocol formed these “digital artifacts” and is Bitcoin’s equivalent of NFTs. Metadata pointing to off-chain storage containing NFTs is typically all that traditional NFTs hold. On rare occasions, this method has resulted in problems like NFTs displaying blank images or, even worse, porn. When cryptocurrency exchange FTX went down in December 2022, it had an impact on NFTs that were hosted on its platform. The NFTs degraded throughout the company’s restructuring and began showing blank images in their place.
On January 4, NFT marketplace Magic Eden had its third-party hosting provider compromised. People felt the NFT thumbnails were obscene when they clicked on them. Bitcoin Ordinals record asset contents on the blockchain. This prevents Bitcoin NFTs from becoming blank images, but unscrupulous individuals can still upload corrupt images into the Bitcoin network.
Ordinals’ decentralized nature allowed a malicious player to inscribe a picture of a man manipulating his private parts quickly after its launch. NFT Recap 2023: Some say they occupy too much space in Bitcoin’s blockchain. The Ordinals erased the image soon, but the inscription will live on Bitcoin forever.
Many people still think that Bitcoin’s network benefited from a new use case appearing despite some unfavorable aspects. Bitcoiners debated the merits of Ordinals and their role in the network all year long. Nonetheless, the protocol’s uptake had begun. Due to ordinary transactions, the Bitcoin network surpassed Solana in monthly sales volume in May. With almost $744 million in sales in December, the network reached Ethereum’s $391 million in sales for the month, taking the top spot for most sales in 30 days.
Challenges to NFT Regulation
U.S. officials first heard about selling NFTs without registration in 2023. On August 28, the SEC they have levied charges against Impact Theory, Founder’s Keys, an entertainment corporation based in Los Angeles, for allegedly advertising unregistered securities in their NFT collection. According to the SEC, the company reportedly enlisted NFT purchasers to aid in its expansion. Since NFTs were investment contracts, the SEC viewed them as securities. The regulator’s action shows the company sold NFTs without registering, which is illegal. The securities authority issued a cease-and-desist order, which the firm followed.
Another firm was sued by the SEC for marketing NFTs after Impact Theory was charged. The makers of the Stoner Cats animated series, Stoner Cats 2 (SC2), were accused by the SEC of engaging in an unregistered issuance of crypto asset securities on September 13. Like the previous instance, the SEC served a stop-and-desist order on SC2, which the business dutifully followed. Several NFT creators worked with NFT Recap 2023: Hollywood actress Mila Kunis, who served as the project manager, to create the animated series Stoner Cats. Kunis, Kutcher, Rock, Vaynerchuk, and Vitalik Buterin, co-founder of Ethereum, were among the famous faces in the series.
The firm promoted the NFTs as having secondary market potential, as revealed by the SEC. According to the SEC, the advertisements also gave the impression that the NFTs’ value would increase due to the project’s participants’ impeccable credentials. Many people are against the SEC’s crackdown on NFTs. A dissenting statement against the SEC was published on August 28 by Commissioners Hester Peirce and Mark Uyeda. They countered the SEC’s claim that the buyer and business claims it cited did not constitute an investment contract.
NFT Creators Do Not Receive Royalties
NFT Recap 2023: One of the most significant advantages of NFTs for authors and artists is the ability to earn royalties by releasing NFT collections. The initial owners of NFTs would receive a portion of the proceeds from each sale and resale, thanks to royalties built into smart contracts. Everything changed once NFT marketplaces began testing the optional royalties model in 2022. Buyers can determine the amount of royalties they wish to contribute to an NFT project through optional royalties. Under this plan, creators risk not receiving royalties from selling their NFTs.
The optional royalty trend began to impact the market in 2023. On March 29, research data showed that creators on Web3 were not receiving royalties. According to the numbers, Yuga Labs lost around $20 million on only two flagship NFT collections—the Bored Ape Yacht Club (BAYC) and the Mutant Ape Yacht Club (MAYC) NFTs. Yuga Labs announced a reorganization in October and fired off workers, although the company did not mention royalties as the cause. With fewer employees, the NFT firm can concentrate on what it does best.
Some NFT marketplaces have adopted an optional royalty model, while others have prioritized creator support and royalty payments. NFT company Rarible has released an Ethereum Virtual Machine testnet that includes royalties in its code. At the same time, Enjin, a platform for NFTs, created a mainnet that incorporates royalty enforcement and NFT transfers into the blockchain’s core code.
Future of NFTs in 2024
Over the next 12 months, we should expect better goods in the NFT field as markets vie for a larger slice of the NFT market. After all, suppliers must provide more to survive in a highly competitive industry. Not to mention that the US SEC will keep cracking down on Web3, and new developments like Bitcoin Ordinals will make 2024 another colorful year in the NFT market. As long as NFT holders are preholdd to “hold,” the market will continue to fluctuate.