Non Fungible Tokens (NFTs) have only recently burst into the scene, and seen exponential growth, but some say the shine is wearing off.
NFTs are digital tokens stored on a blockchain – a type of digital ledger that records ownership.
Like any commodity, these can be traded.
Artists were early adopters of the technology, with some collections, such as the now famous Bored Ape Yacht Club collection developing a cult following.
Each of its 10,000 NFTs can fetch hundreds of thousands of dollars.
Celebrities and big brands were also getting on board.
“In 2021 we saw north of US$40 billion sent to these NFT marketplaces. In 2022, those numbers are close to it already,” said Chainalysis economist Ethan McMahon.
“The issue is we have seen some slowdowns and things seem to be steadying off.”
One of the biggest forces, he said, was the downturn in cryptocurrency values – you need cryptocurrency to buy NFTs.
Cryptocurrencies such as Bitcoin and Ethereum have plunged dramatically compared to highs near the end of 2021.
Cryptocurrency Luna was worth US$116 in April and is now almost worthless.
But McMahon said there were also “internal forces” at play.
“Sentiment is a huge part of the NFT space, especially because it's only about a year old, so a fairly new market," he said.
“And because of that, sometimes there's some weeks, you may see a huge influx of dollars, and that can largely be contributed to the release of a new project and people thinking that, ‘Oh, this is the right time to get involved’, or people thinking ‘NFT's are dead’ and therefore people selling off quickly.
“But in addition to that, I think we're starting to see aspects of the NFT market mature.”
Twitter user @OKHotshot is one of the most respected NFT analysts on the internet.
“In the past few months, lots of greed has come into the market - and they're getting shaken out right now,” he told 1News.
“So, people that thought they were going to make a million overnight, they figured out, that's not the case.”
He said there were lots of notable events happening, such as the record sales seen in the Bored Ape Yacht Club.
“But there's also been a lot of bad things happening," he said.
“Which I think is also apparent to the influx of greed coming into the market, to people taking advantage of sincere people, lots of scams - increasingly so.”
And authorities are beginning to crack down on scammers.
In the US, two 20-year-olds were charged with fraud by the Department of Justice (DoJ) after they allegedly “executed a $1m NFT Fraud scheme” in January 2022.
The DoJ alleged the pair sold "Frosties" NFT art, with the promise of holder-rewards, giveaways, access to a metaverse game and more.
It said they abruptly abandoned the Frosties NFT project within hours after selling out of Frosties NFTs, deactivated the Frosties website, and transferred approximately US$1.1 million in cryptocurrency proceeds from the scheme to various cryptocurrency wallets under their control.
“NFTs have been around for several years, but recently mainstream interest has skyrocketed. Where there is money to be made, fraudsters will look for ways to steal it,” said US Attorney Damian Williams.
Copyright infringements were also a problem.
Twitter is along with Discord, the preferred social media platform for many NFT users, and is filled with countless pleas from artists to not buy from people who have taken a screenshot of their work and sold it as an NFT.
But NFT expert and University of Auckland professor, Alex Sims, said the NFT technology was not necessarily the problem, the people were.
“In the offline world, if you buy a painting, you just buy the painting - you don't buy the underlying copyrights, and that, for example, you couldn't take that painting, take a screenshot, and use it on your website. And so, the same thing is happening with a lot of NFTs."
But she said the technology had opened up a world of opportunities for some.
"I know lots of artists and recording artists who are actually doing this themselves, who are actually for once in their life making some money," she said.
“They're building communities as well, so it's not going away."
Auckland-based financial adviser Darcy Ungaro agreed.
"It's the people behind the technology, and the systems that govern or regulate those people behind the technology, I think that we're going to need to trust more,” he said.
“I think that's just what's happened here is that there has been this big wave of adoption because of this, almost like a hysterical adoption curve.”
Ungaro has advice for those wanting to invest in NFTs.
"I’ll never say don't. But I will always look at what the overall intention, what the purpose is behind it?"
“If they like art, NFTs are a great way to store art and to prove ownership, nothing wrong with that.
"But if it's an investment thesis, and they're trying to figure out where it sits as part of a diversified portfolio, I'm currently struggling to find a use case for it.
"That will change I'm certain of it, but in its current form, not really.”