A new study from Juniper Research has found the global number of NFT (Non-fungible Token) transactions will rise from 24 million in 2022 to 40 million by 2027. At the same time the company cautioned that although NFTs present a new channel for growth, vendors must be cognizant to the risks of operating in an unregulated environment home to fraudulent activities and scams.
An NFT is a unique token that exists on the blockchain, meaning it cannot be replicated. This unique token could represent real-world items like artworks or music, with the ability to be traded with a transparent transaction history. In November of 2021, headlines were made when two virtual real estate plots sold for $2.4 million and $2.5 million on the Decentraland and Axie Infinity projects, respectively as it demonstrates how significant some investors perceive the opportunity of a digital metaverse with virtual real estate. In this instance, users would have the opportunity to profit from their virtual land and properties, as one might in the real world, by lending buildings (such as art galleries or offices) to others.
Juniper Research’s report stresses that vendors who partake in the NFT space may risk brand damage by association, due to the role NFTs have had in illegal activities, such as money laundering, scams, and fraud. Environmental issues were also raised as a major concern, with the current way transactions are facilitated on the blockchain creating massive energy usage. Hence, the report emphasizes the need for regulators to work with industry bodies to standardize processes with reduced environmental impact and built-in consumer protections to enable vendors to utilize NFTs as a medium to further engage with consumers.
The report predicts metaverse-linked NFTs will be the fastest-growing NFT segment over the next 5 years; increasing from 600,000 transactions in 2022 to 9.8 million by 2027. It highlights rising demand for immersive experiences as a driver of metaverse adoption.
To capitalize on this growth, the research urges consumer-facing businesses to create NFT-based content to meet changing demands from a younger, tech-savvy demographic, who are more ready to purchase novel forms of online and digital content.