Dark clouds don’t seem to fade away completely when it comes to the digital asset sector. Though blockchain technology is considered to be the next revolution after the internet, some of the biggest blockchain based projects, including non-fungible tokens (NFT) are not getting what it takes to grow in the market. Moreover, the rise of artificial intelligence (AI) is becoming a challenge for the industry.
Biggest Variables in NFT Growth: Regulations and AI
Recently, Irreverent Labs, a game developer, announced that they are closing their NFT-based game in June 2023. The NFT game, MechaFightClub, was supposed to be driven by the non-fungible token sales. However, things did not go according to the plan and the decision for ‘indefinite hibernation’ was taken.
The company blames the Securities and Exchange Commission’s (SEC) tight regulations over the sector. As a US-based entity, it is getting difficult for them to operate amidst unclear policies. The organization says they cannot create an in-game economy in such a scenario. Added to that, AI is hindering the market growth as a whole.
Also, Irreverent Labs is laying emphasis on artificial intelligence. It could be an example of how AI could impact the NFT sector. The biggest names in tech including Microsoft, Google, Meta among others are experimenting with AI tools at an almost frantic pace. Google recently have increased its efforts to fight back after the failure of Bard, their answer to OpenAI’s ChatGPT.
Generative AI is being used to create artwork that is being turned into non-fungible tokens. It might be delivering mouth watering work, but it’s also taking away the creativity. Or at least, that’s the biggest debate right now with regards to AI and NFTs – creativity. AI could disrupt the NFT market as now unique art will not be restricted to experienced painters or musicians, but anyone who’s got an internet connection!
Ethereum is Still The Dominant Force in The Market
A recent report by Footprint Analytics, an NFT data aggregator, shows that the market volume has experienced a hard fall over the course of 4 months. Daily sales have descended from $98.78 Million in February to $9.87 Million in May 2023. However, the industry’s market capitalization has remained stable, moving between $17 Billion and $20 Billion during the time span. According to CoinMarketCap data, NFT market cap sits around $19.1 Billion at publication time.
While several blockchains have debuted over the years, Ethereum (ETH) continues to be the most preferred network. A majority of NFT initiatives prefers the Ethereum network. It became even more attractive after it migrated to its proof-of-stake based Beacon Chain to counter the carbon emissions, rendering it a perfect chain to deploy projects in a relatively clean way.
Similarly, OpenSea has maintained its position as the biggest NFT marketplace currently. However, the advent of Blur, another online market for non-fungible tokens, upped the competition in the market. While OpenSea has maintained its dominance in daily trades, Blur outshines it in terms of daily value.
Though the regulatory scenario may act as an obstacle to the NFT market, the fact that agencies including the Secret Service and Regional Enforcement Allied Computer Team or REACT task force believes that blockchain technology, due to its decentralized nature could be a force multiplier in the fight against crime. Enforcement agencies are appreciating blockchain’s ability to track transactions to lift the curtain on criminal activities taking place using virtual currencies.
The global crypto market capitalization was down by over 1.58% while Bitcoin has regained the $27K mark. As of now the crowned crypto asset was changing hands at $27,030 at the time of writing.
Anurag is working as a fundamental writer for The Coin Republic since 2021. He likes to exercise his curious muscles and research deep into a topic. Though he covers various aspects of the crypto industry, he is quite passionate about the Web3, NFTs, Gaming, and Metaverse, and envisions them as the future of the (digital) economy. A reader & writer at heart, he calls himself an “average guitar player” and a fun footballer.
Source: https://www.thecoinrepublic.com/2023/05/16/regulations-and-ai-are-hampering-the-nft-sector-growth-globally/