When we look back at 2023, it's clear that NFTs have just weathered a tough bear market. However, exploring in the midst of hardship has always been synonymous with Web3, and thanks to new technologies and new impulses, many NFT projects have not only survived here, but are thriving, and this article takes you through a review of the NFT market in 2023.
1. The rise of NFT L2
When I first started working on NFTs in 2019, the L2 scene for NFTs didn't exist yet. This year, we're starting to see a variety of NFT-friendly L2 developments.
Pioneers such as Arbitrum and Optimism are starting to gain more minting activity and are seeing their evolving tech stacks being used to launch new cultural hub rollups, such as Xai and Redstone.
Industry giants such as Coinbase and Zora have also joined the fray, deploying Base and Zora Network, respectively.
New up-and-comers are also joining in, such as Frame, an L2 that incorporates things like NFT royalties directly into its network.
In other words, the era of NFT expansion has officially begun!
2. PFP new capabilities
The profile picture (PFP) space for NFTs has been hit particularly hard in this bear market, with most projects seeing a decline in attention and floor prices in the first three quarters of the year.
However, some NFT collections bucked the trend and became dark horses in the PFP category, namely Openens and Pudgy Penguins.
Jack Butcher's Openens launched Set 001 in May 2023, providing a new blueprint for how to release a collectively curated NFT collection over time, and sparked the imagination of thousands in the process.
As for the Pudgy Penguins, the project was upgraded to a blue-chip PFF in 2023 after a series of major developments, the most important of which was the placement of Pudgy Toys in 2,000 Walmart stores.
3. The development of game NFTs
The entire NFT gaming scene has come a long way in 2023, but it's safe to say that the dominant games in the space – Axie Infinity and Parallel – are still doing well.
Not only has Axie's ecosystem grown with a number of new Axie-based games, the main game of the series has also received huge upgrades, such as the arrival of Axie Experience Points (AXP) and the Axie Part Evolution System.
Parallel, on the other hand, released new starter decks this year and launched a beta version of its game, which was widely acclaimed.
Both games are better than ever, and there's more to come in 2024!
4. Infrastructure rehabilitation
2023 has seen an incredible explosion of infrastructure around NFTs.
For example, Nouns V3 has just open-sourced the first DAO-native fork mechanism.
The ENS Name Wrapper has also been released, providing unprecedented flexibility and functionality for ENS domain name holders.
In addition, Zora, it launched Protocol Rewards, a system that rewards Zora users with ETH.
But these are just the tip of the iceberg. ERC-6551 has just turned each NFT into a wallet, mint.fun made minting easy, Privy introduced a user-friendly embedded wallet, and more.
Long story short, now is a great time to build around NFTs!
5. Multiple forces
While Ethereum now accounts for the vast majority of all NFT activity, Bitcoin and Solana NFTs have massively joined the NFT camp in 2023.
Since the launch of Ordinals in January, the Bitcoin NFT scene has been rejuvenated with a surge in activity. Similarly, Ordinals quickly inspired the standardization of other alternative Bitcoin tokenization methods, such as Stamps, which only accelerated the pace of recent Bitcoin NFT activity.
As for Solana, the network has become the next big airdrop frontier and has seen a massive uptick in its SOL token and activity stats in recent months, attracting a slew of new users who have flocked to the chain's top projects, such as NFT marketplaces like Magic Eden and Tensor.
As a result, Ethereum, Bitcoin, and Solana are now the current mainstream of NFTs, and this trend will continue for the foreseeable future.
6. On-chain revival
In 2023, on-chain NFTs and on-chain experiments are re-emerging.
For example, the minting of Chaos Roads and the recent Terraforms update have pushed the boundaries of what's possible in blockchain art. In addition, projects like BasePaint and Party pave new avenues for people to coordinate and co-create on-chain.
Of course, "on-chain" is inherently no better than "off-chain". It's just that blockchain is a new type of medium + infrastructure combination, and the horizons created here have never been so open and full of potential!
7. The boom in crypto social
Crypto social apps stand out in 2023, with typical examples being Warpcast and Lens.
With the proliferation of applications, NFTs have received new attention as these projects highlight and promote NFT minting.
So, now it's easier to find the NFTs your friends are minting and share with them the NFTs you've minted at any time.
In short, the crypto social scene that has been rising this year has made NFTs more social overall!
The arrival of 8.AI
In 2023, we witnessed the first significant projects combining AI and NFTs.
In the metaverse space, Upstreet, an NFT-integrated multiplayer world designed for interaction between humans and AI agents, has released a 28-page ChatWorld exploring the various potential applications of AI agents in Upstreet.
In addition, game experiments like Parallel Colony introduce the idea of a "1.5-player game" where humans will passively guide autonomous AI agents to perform a variety of different tasks, blurring the line between the end of a human game and the beginning of an AI game.
These efforts, while still in their early stages, suggest that the combination of AI and NFTs could change dramatically in the future.
9. RWA Tokenization
RWAs stand for "real-world assets" on the blockchain, and they can be anything from real estate to physical trading cards.
One of the main ways to bring off-chain assets on-chain is to represent them with NFTs!
In fact, in 2023, we got a high-profile look at the model of NFT-backed RWA through the example of Courtyard's tokenized Pokémon cards.
This is just one example of the cultural aspect, but more experimentation, both cultural and financial, is gradually coming.
10. Cross-chain development
2023 is also the year when it becomes more feasible than ever for NFTs to cross chains from one blockchain network to another.
This is thanks in large part to the rise of projects such as LayerZero, which pioneered cross-chain NFTs for transferring between blockchains, and Holograph, which developed Hologram NFTs that can maintain consistent IDs across all Ethereum Virtual Machine (EVM) environments.
In addition, Chainlink's Cross-Chain Interoperability Protocol (CCIP) was launched this year, paving another solid path for projects to enable NFT interoperability across a range of chains.
As a result, NFTs no longer need to be confined to one network. They can go where they need to go, and this is a newer possibility that will be widely developed in the coming years!