Are NFTs Dead or Is the Market Just Evolving?

Non-fungible tokens, widely known as NFTs, experienced a significant surge in public interest and market activity a few years ago. These unique digital assets, often associated with digital art and collectibles, captured global attention with record-breaking sales and widespread media coverage. Following this period of intense enthusiasm, mainstream attention has notably receded, prompting many to question the long-term viability and relevance of NFTs. This shift in public perception has led to a common inquiry: are NFTs merely a fleeting trend that has passed its peak, or is the market undergoing a complex transformation?

Defining “Dead” for Digital Assets

Understanding what “dead” signifies in the context of a digital asset requires a nuanced perspective. The perceived demise of a digital asset often conflates a bursting speculative bubble with the fundamental utility or persistence of its underlying technology. A decrease in public hype or speculative value does not necessarily indicate the complete termination of a technology or its applications. For instance, zero trading volume or the absence of new projects could signify a market’s end, but a return to more sustainable, less speculative activity suggests an evolution rather than a complete collapse.

The underlying technological infrastructure supporting NFTs may continue to function and find new utility, regardless of market sentiment. Therefore, assessing the vitality of NFTs involves looking beyond fleeting price movements and considering their foundational technology and expanding applications.

Current Market Landscape

The NFT market has cooled significantly from its peak, yet it continues to exhibit persistent activity and shifts in focus. In 2024, the NFT market witnessed fluctuations, with total trading volume dropping by 19% to $13.7 billion, making it the worst-performing year since 2020. This overall decline from a peak of $57.2 billion in trading volumes in 2022 indicates a substantial market adjustment.

Despite the cooldown, the NFT market maintains a notable presence, with its market capitalization reaching $37.64 billion and a daily trading volume of $225.1 million. The number of users in the NFT market reached approximately 11.58 million in 2024, with a modest projected increase to 11.64 million by 2025, suggesting a stabilization in user growth. OpenSea, a prominent marketplace, accounted for 90% of the NFT trading volume, demonstrating its continued dominance. While the market has seen a decrease in the number of sales, the average price per NFT generally increased, consistent with rising token prices.

The Internal Revenue Service (IRS) generally treats NFTs as property, similar to cryptocurrencies, and requires them to be reported on tax returns. Transactions involving NFTs are subject to taxation, and gains from sales are typically taxable. For US taxpayers, the tax rate depends on how long an NFT is held and whether the IRS classifies it as a collectible. Short-term capital gains, from assets held for one year or less, are taxed at ordinary income rates, which can range from 10% to 37%. Long-term capital gains, for assets held over a year, are generally taxed at lower rates, from 0% to 20%.

The IRS indicated its intention to tax certain NFTs as collectibles, similar to art or gems. If an NFT is deemed a collectible through a “look-through analysis” by the IRS, long-term capital gains from its sale could be subject to a higher 28% tax rate. This analysis determines if an NFT’s associated right or asset is a collectible under Internal Revenue Code Section 408(m). For instance, an NFT representing ownership of a physical gem would likely be considered a collectible.

Minting an NFT may incur taxable costs, such as gas fees. Investors may also incur capital gains or losses when using cryptocurrency to purchase NFTs. Professional creators of NFTs are subject to ordinary income tax rates on their earnings, reduced by business expenses. Starting in 2025, NFT platforms are required to report transactions to the IRS, and Form 1099-DA will be mandatory for NFT sales and exchanges, aiding the IRS in tracking digital asset income.

Evolving Use Cases Beyond Collectibles

Beyond their initial prominence in digital art and collectibles, NFTs are demonstrating versatile applications across various industries, showcasing an evolution in their utility. In the gaming sector, NFTs are redefining digital ownership and enhancing player engagement. NFTs allow gamers to truly own in-game assets, such as characters, virtual land, or unique items, providing them with control over their digital possessions outside the confines of a single game. This enables players to buy, sell, and trade these assets on external marketplaces, fostering new economic opportunities within gaming ecosystems.

NFTs are also gaining traction in digital identity and credentials, offering a decentralized and secure method for managing personal information. An NFT can represent a person’s verified credentials, such as university degrees, professional certifications, or access rights to digital spaces. This approach provides individuals with greater control over their data, reduces reliance on centralized entities, and enhances privacy. Governments are even exploring the use of NFTs for digital identity cards and secure records like birth certificates, aiming to reduce fraud and improve authentication processes.

The ticketing industry is another sector where NFTs are offering solutions to long-standing problems. NFT tickets are unique digital tokens stored on a blockchain, making them nearly impossible to counterfeit and addressing issues like scalping and fraud that plague traditional ticketing systems. These digital tickets can also provide post-event utility, serving as digital souvenirs or offering exclusive content and experiences to attendees, thereby enhancing customer loyalty. Event organizers can also earn royalties on secondary market sales of NFT tickets, creating new revenue streams.

NFTs are being applied in supply chain management to enhance transparency and traceability. By assigning a unique NFT to a product, companies can record its entire journey from manufacturing to the consumer, including details about its origin, components, and handling. This provides an immutable record that helps prevent counterfeiting, ensures product authenticity, and allows for efficient recall processes by quickly tracing problematic batches. The use of NFTs in supply chains can also streamline invoicing and payments, as an NFT can represent a digital invoice, triggering payments upon successful delivery and quality checks.

Intellectual property rights and loyalty programs are also benefiting from NFT integration. Artists and content creators can mint their work as NFTs, establishing verifiable ownership and programming royalties into the smart contract, ensuring they receive a percentage of future sales. In loyalty programs, NFTs can offer exclusive access, unique rewards, and verifiable membership, fostering deeper engagement between brands and their customers. These evolving applications demonstrate that the relevance of NFTs extends far beyond speculative art, finding practical utility across diverse real-world scenarios.

Technological Underpinnings and Persistence

The persistence of NFTs is rooted in the blockchain technology upon which they are built. A blockchain is a distributed ledger that immutably records transactions, including the creation and ownership of NFTs. This decentralized and tamper-proof nature means that once an NFT is minted and its ownership is registered on the blockchain, that record is permanent and cannot be altered or removed, regardless of market fluctuations or public interest. The unique digital identifier of an NFT, along with its associated data, exists as long as the underlying blockchain network remains operational.

The “death” of an NFT is not about its fundamental existence as a digital record, but rather about its perceived value or utility. While the market price of an NFT can fluctuate dramatically, the record of its ownership and its unique characteristics remain intact on the blockchain. This inherent persistence distinguishes NFTs from traditional digital files, which can be easily duplicated or deleted. Even if the platform where an NFT was originally traded ceases to exist, the ownership record persists on the blockchain, allowing for potential re-listing on other compatible platforms. This technological permanence provides a foundational layer of resilience for NFTs, enabling their continued evolution and adaptation across various applications.