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CMC spoke to Sfermion investor Mo Patel to provide a detailed overview of how the NFT market will perform and grow in a challenging 2022, as well as its outlook for 2023.

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Q1: How to measure the success of the NFT market in 2022?

With the NFT market facing a sharp drop in volume in 2022 due to the bear market and overall downturn, there are fears that NFT is dead. However, if the bull-driven 2021 is excluded, the NFT market in 2022 is actually booming in many areas in terms of transaction volume and development. Compared with the decline in NFT transaction volume, the small decline in NFT transaction value shows that people are still using NFT, and the downturn is just a broader market trend.For example, the rapid adoption of L2 solutions such as Arbitrum and Optimism means the growth of new addresses holding NFTs, which is a sign of the increased amount of construction activity supporting the L2 space. At the same time, Polygon is also actively participating in NFT business development and continues to attract excellent Web 2 talents and customers to the blockchain.

Music NFTs have also seen success on various platforms, with high sales and increased minting.Web 3 social platforms using NFTs are also gaining traction, such as Aave's Lens Protocol, which has nearly 100,000 users since its launch in May 2022. In addition to a large amount of quantitative data, there is also a large amount of qualitative data showing that,The recent NFT boom has led to a large number of powerful Web 2 builders entering the Web 3 space and building with NFTs.

This highlights the success of the NFT marketplace and the global attention it has gained in a very short time.These new entrants include leading Web 2 founders and game studios who have established mature products in the Web 2 space and are now using Web 3 and NFTs to power new applications

, such as Netease, Pixel gaming, mobile game maker Wildlife, Japanese game giant Square Enix, Ubisoft and social game Zynga. Top brands such as Gucci, Nike, Adidas, and Prada have all adopted NFT in their marketing, using NFT as a medium to connect with customers. Instagram, with over 500 million daily active users, is now effectively an NFT marketplace. Reddit suddenly adopted NFT as the core technology of its digital collection avatar program this year, which brought a large number of new users and wallet holders.

Web 2 giants are also taking advantage of the world’s biggest sports and entertainment events, such as the World Cup and Super Bowl, to enhance real-life (IRL) experiences by utilizing NFT airdrops, such as Coca-Cola’s NFT airdrop we saw at this year’s World Cup. Web 3 gaming company Limit Break plans to offer free casting as early as next year's Super Bowl event. By scanning the QR code, you can get free NFT mint.

The aforementioned applications of NFT allow seamless transactions of digital property rights and interoperable assets. Despite current market volatility, the continued engagement and innovation of top builders and brands in the NFT space is laying the groundwork for strong future growth. These projects will come alive and ideally rise in tandem with the market.Although the overall crypto space is depressed under the current bear market, we are still optimistic about the adoption of NFT and many applications for online consumers.Whether it's a bear market or a bull market,Players will always play games, and consumers will always spend.

If NFT continues to unlock these digital property rights, allowing owners to use interoperable assets to trade in these games, it is only a matter of time before quantitative data is obtained. From this perspective, 2022 can be regarded as a fairly successful year for NFT.

1. The following is the list of "Top Ten Best-selling" NFTs in 2022:

2. Bored Ape Yacht Club - $1.57 billion

3. Mutant Ape Yacht Club - $1.14 billion

4. Otherside - $1.1 billion

5. Azuki - $849.9 million

6. Moonbirds - $613.4 million

7. CloneX - $605.0 million

8. CryptoPunks - $575.2 million

9. Doodles - $391.6 million

10. Axie Infinity - $291.1 million

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Q2: Which NFT verticals and use cases are the focus in 2022?

The main focus in 2022 remains on Web 3 gaming and related consumer services such as loyalty and ticketing systems, while metaverse experiences and Web 3 social applications are also receiving attention. NFT data analysis for tracking on-chain assets is also an ongoing trend and has been further built upon.We’ve also seen a “cooling off” of the DAO and Guild tooling narrative. In 2022, P2E gaming models collapse due to bear markets, poor token economics, and failure to provide a compelling enough gaming experience to retain players. It is clear,The industry is starting to realize that Web 3 games and the Metaverse will take time to become mainstream

. So our focus is shifting to building the right experience and infrastructure around that.

In 2021, the popularity of avatar-like NFTs has spawned a large number of new IPs, mainly including interactive pictures and images. The goal in 2023 will be to create more advanced gaming products and applications that help unlock and enhance IP through the potential application of AI-based utilities or in-game utilities.

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Q3: Why did NFT "derivatives" such as NFTFi and SocialFi fail to meet expectations in 2022?

Some 2022 NFT "derivatives" failed to live up to last year's massive hype.While "metaverse" is the buzzword of 2022, the industry now understands that the hype was premature and that fully immersive digital experiences will take time to develop. It's not even clear if the Metaverse will be PC-based, AR-based, VR-based, or a hybrid of the two, and that will ultimately be determined by the market.

So now the focus is on creating the infrastructure and experiences that make up the overall Metaverse experience, starting with small games for example.

The DAO tool (the set of software, applications and smart contracts that Decentralized Autonomous Organizations use to operate) was also heavily hyped in late 2021 and early 2022, but lost traction this year as the market realized it was building a products to satisfy needs that have not yet been effectively fulfilled. DAOs are still in their infancy, but are rapidly scaling and clear use cases have emerged. As DAOs continue to form and function, especially in bear markets, there is now a better understanding of which tools can support DAOs and meet their needs.Guild tooling suffers a similar fate in 2022, with investors and users realizing they captured this game-driven niche prematurely. In hindsight, it would be wrong to think that first-generation game modes like Axie Infinity provided the blueprint for all future games.

As more and more games come to market and utilize guilds in different ways, it will be important to be flexible and adaptable.

NFTFi also failed to meet expectations, mainly due to market downturn and reduced liquidity, which will take time to recover. Nevertheless, it has clearly demonstrated the great potential of NFTs to provide powerful financial applications, such as issuing tokens and representing bonds, as we have seen in projects such as Solv Protocol (a financial NFT platform for issuing bonds) like that.Over time, direct NFT financial services such as loans will improve with pricing, and due to better liquidity and more users than before, NFTFi will remain one of the focuses in 2023.The long-term prospects of NFT in financial services remain strong, and it is expected to be a few years before it is fully "fired."

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Q4: What is the development trend of NFT in 2023?

Many companies are building new NFT standards, using new economic models (such as free-to-own), and challenging new verticals such as on-chain experiences. These companies (both strong Web 2 companies and studios making enduring Web 2 games) are innovating rapidly, even porting Web 2 IP to Web 3. These companies bring something suitable for the Web 2 world, such as casual, mobile and PC-side console games, and use NFT as a technology to enhance these experiences.

We are also tracking how Web 2 brands and intellectual property (IP) entering the NFT field apply NFT, and the birth of new Web 3 native IP will remain a core focus in the NFT field.

The interaction of NFTs and AI, such as art and game asset creation, game design, using AI-based NPC games and the overall creation of cross-media content, remains a focus. The evolution of wallets and marketplaces towards premium services for specific users is also exciting. We see an upsurge in building wallets that are more suitable for Web 2, and add elements such as social factors and DeFi functions for DeFi users. Independent marketplaces for specific collectibles, such as those focused on gaming, are also emerging. Overall, focus on the NFT vertical and where it can be further developed and improved in the future.

Additionally, L2 advancements are attracting builder interest, especially in the field of zero-knowledge (ZK) rollup, which will “play big” in 2023. ZK-rollup is expected to make the access and use of NFT more convenient, which will lead to an increase in the number of builders who build and use NFT for social media experience on these tracks, thus bringing more users.

Web 2 social media platforms are also applying NFTs. Reddit allows avatar integration, Twitter allows avatar display. However, the avatar is actually just a "calf test knife". Instagram goes a step further and can publish and mint content as NFTs. These are just version 1 of the app and we are very excited to see where V2 and future iterations take NFT innovation. It will be interesting to see how NFTs are used to enhance the social media experience over time.

In 2022, we also see the emergence of a new generation of NFT marketplaces, such as LooksRare, X2Y2, Blur, and Magic Eden, which are challenging OpenSea’s dominance and reshaping the NFT landscape.

There are many strong players and well-founded marketplaces that are constantly innovating, including token-based airdrops, advanced social features, shared liquidity, focus on certain markets (such as hardcore traders), have optional royalties, adopt multiple chain or focus on a specific genre (such as games, music, or video). These products and applications are only just beginning to fully understand their user base and target them accordingly.

We look forward to how these marketplaces cater to users and enhance user experience with features such as multi-chain, multi-wallet support, fraud detection, and better recommendation tools. For example, after the emergence of NFT series, it has become more and more important to help users find the content they want more efficiently and create a more personalized market experience.

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Q5: Where will VCs deploy capital in 2023?Of the current NFT verticals, even though Web 3 gaming has underperformed this year, VCs are still most interested in it because it is widely believed that games will eventually bring the masses to Web 3. This extends not only to NFTs, but also to the field of encryption, such as using hardware wallets, software wallets, interacting with DEXs, and using on-chain lending resources. This adoption will eventually trickle down to other areas of cryptocurrency as users enter the crypto space through Web 3 gaming. therefore,

VCs are still looking for strong studios and builders in the Web 2 game space, as well as strong infrastructure.In addition, venture capital is also paying close attention to NFT IP.

Every year, there is the possibility of new IP emerging in the NFT space, as well as unlocking existing IP to enhance the community experience, which is what the Web 2 space lacks.

Web 3 social media is another exciting frontier where unrest on Web 2 social platforms (users angry about censorship and monetization of personal data) will draw users to Web 3 social platforms. However, it's still early days, with only a handful of platforms actively building and gaining traction.

There are many gaming options that cater to both Web 2 and Web 3 users. It is possible to have a game that is considered "Web 2.5" and Web 2 players (who may not be interested in using NFTs or tokens) can still experience the game while slowly making it to Web 3. This approach of prioritizing player intent makes more sense in the long run, rather than trying to force players to accept NFTs and tokens from the start.