Ben Strack

NFTs were once all the rage.&nbsp;



Though many still believe in their promise, industry executives point to the need to cut barriers to entry and educate prospective participants on the potential of digital collectibles as trading volumes have dropped.&nbsp;



The quick-profit mentality that has permeated the NFT segment is one factor contributing to a recent reputational dropoff, MakersPlace CEO Craig Palmer told Blockworks.&nbsp;



OpenSea Chief Business Officer Shiva Rajaraman said there’s still a lack of understanding of the full scope of NFT use cases — a fact that must change to attract the next 100 million users.



NFTs were one of the most talked about acronyms of 2021, as popular collections such as Bored Ape Yacht Club hit the scene. Others that had launched years earlier, such as CryptoPunks, gained mainstream recognition then, demanding purchase prices not seen before.&nbsp;



<h2 class="wp-block-heading">Sentiment slipping</h2>



The hype around NFTs cooled amid the 2022 crypto winter, as <a href="https://blockworks.co/news/november-nft-sales-volume-drops" target="_blank" rel="noreferrer noopener">sales volumes in the segment dropped considerably</a> later in the year.&nbsp;&nbsp;



NFT trading volume dropped 35% quarter over quarter, according to a Tuesday CoinGecko report — from $4.84 billion in the first three months of 2023 to $3.15 billion during the second quarter.



Though NFT lending jumped 453% in May due in part to <a href="https://blockworks.co/news/blur-blends-defi-nfts" target="_blank" rel="noreferrer noopener">the launch of Blend</a> — a peer-to-peer perpetual lending protocol for NFTs launched by marketplace Blur — strong demand for loans have hit so-called blue-chip NFTs hard.&nbsp;



Read more: <a href="https://blockworks.co/news/how-nft-lending-works" target="_blank" rel="noreferrer noopener">How Does NFT Lending Really Work? A Beginner’s Guide</a>



The ether (<a href="https://blockworks.co/price/eth" target="_blank" rel="noreferrer noopener">ETH</a>) floor price for Bored Ape Yacht Club NFTs and Azuki NFTs sank about 42% and 37%, respectively during the quarter, CoinGecko data shows. Though Chiru Labs, the company behind Azuki, sold out its new “Elementals” collection last month, <a href="https://blockworks.co/news/azuki-missed-the-mark-on-elementals" target="_blank" rel="noreferrer noopener">it faced backlash for making them too similar</a> to the original Azuki NFTs.&nbsp;



While Blur’s share of NFT trading volume increased from 56% to 65% quarter over quarter. OpenSea’s share declined from 33% to 23% in that period, according to the CoinGecko report.&nbsp;&nbsp;



&#8220;As with the rest of crypto, the NFT market hits bear and bull cycles,” OpenSea’s Rajaraman said. “We are using this current cycle to prepare and build for the next wave of adoption.”



<h2 class="wp-block-heading">How to attract prospective NFT users</h2>



Education around potential use cases of NFTs, and lowering barriers to adopt them, are critical, according to Rajaraman.&nbsp;



“We’re focused on improving the usability of our platforms and building foundations that enable new, more utility-based and mainstream use cases to launch,” he said.&nbsp;



OpenSea sees “enormous potential,” for example, in <a href="https://opensea.io/learn/what-are-redeemable-nfts" target="_blank" rel="noreferrer noopener">redeemable</a> NFTs and gaming, Rajaraman said.&nbsp;&nbsp;&nbsp;



The NFT marketplace joined forces with Puma and Gutter Cat Gang to launch a limited-edition digital collectible <a href="https://opensea.io/collection/guttermelo/drop" target="_blank" rel="noreferrer noopener">redeemable</a> for physical LaMelo Ball sneakers. It also partnered with <a href="https://parallel.life/avatars/landing/" target="_blank" rel="noreferrer noopener">Parallel</a> Avatars — representing holders in games and online activations — which minted in about 20 minutes and earned $1.3 million in primary sales.&nbsp;&nbsp;



“We’re constantly looking to partner with innovative brands and creators who are pushing the boundaries of the tech and bringing new, tangible use cases to life,” Rajaraman said.&nbsp;



The NFT space must try to distance itself from the narrative of <a href="https://blockworks.co/news/scammers-spread-fake-reddit-nfts-on-opensea" target="_blank" rel="noreferrer noopener">scams and financial losses</a>, according to the CEO of MakersPlace.



Palmer added that brands such as Starbucks and the NFL have done a good job of showcasing unique ways NFTs can drive engagement. The coffee retailer was <a href="https://blockworks.co/news/starbucks-airdropping-more-nfts" target="_blank" rel="noreferrer noopener">prepping an NFT airdrop for its rewards program in May</a>, while the pro football league launched a digital video highlight NFT platform with Dapper Labs last August.



“Over time, this will help reshape public perception and attract a wider audience,” Palmer said.&nbsp;



<a href="https://blockworks.co/news/7-nft-use-cases" target="_blank" rel="noreferrer noopener">Real-world NFT use cases</a> are in their early stages — from being used as tickets by concertgoers <a href="https://blockworks.co/news/nft-airline-tickets-revolutionize-travel" target="_blank" rel="noreferrer noopener">and airline customers</a> to <a href="https://blockworks.co/news/real-estate-investors-buy-nft-home" target="_blank" rel="noreferrer noopener">emerging within the real estate investing market</a>.



Read more: <a href="https://blockworks.co/news/mastering-nfts" target="_blank" rel="noreferrer noopener">Mastering NFTs: From Beeple to Starbucks to Digital Twin Cities</a>



MakersPlace launched its Phygitals category in February, NFTs that lets buyers unlock and redeem the physical component after purchase.



But beyond the evolution of what NFTs look like and can be used for, marketplaces are really looking to make the experience of buying these tokens easier.&nbsp;



MakersPlace allows collectors to use crypto or credit cards for payment and offers a Concierge Program to assist collectors with buying, selling and collection management.&nbsp;



“Even top-tier teams in the NFT space often lack well-defined plans and a long-term vision, which is concerning given the industry&#8217;s nascent stage,” Palmer said. “However, I firmly believe that this phase of quick gains and massive speculation will give way to a new phase that prioritizes sustainable growth and attracts new cohorts to the world of NFTs.”



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NFT execs: Cutting barriers, propelling use cases key to segment rebound

Morgan Chittum

<div id="highlights-block_623b4bbd4efac" class="highlights">
 <ul>
 <li>The NFT marketplace will partner with video game developer Square Enix and entertainment franchise Yoshimoto Kogyo</li>
 <li>Rakuten, a Japanese e-commerce company, announced its own marketplace for blockchain-based digital collectibles last month</li>
 </ul>
 
</div>



Japanese messaging giant Line Corp. announced the launch of its forthcoming NFT marketplace on Wednesday.&nbsp;



The marketplace, which is slated to go live on April 13, will run on the LINE blockchain — the company&#8217;s proprietary network. Users can hold their digital collectibles in the company’s LINE BITMAX wallet.&nbsp;



The platform, called Line NFT, will sell over 100 kinds of NFTs (non-fungible tokens), per a Coinpost <a href="https://coinpost.jp/?p=332888" target="_blank" rel="noreferrer noopener">report</a>. NFTs will be integrated as avatars for Line’s messaging services in the future. 



The marketplace will partner with various Japanese companies including video game developer Square Enix, entertainment franchise Yoshimoto Kogyo and Patlabor.&nbsp;



Z Holdings, another subsidiary of SoftBank, will <a href="https://www.thenationalnews.com/business/2022/03/11/softbanks-internet-unit-plans-nft-investments-to-expand-global-reach/" target="_blank" rel="noreferrer noopener">reportedly</a> build a similar marketplace, DOSI, in 180 countries. Line&#8217;s platform, however, is separate from Z Holdings’ NFT plans.



“It’s possible Web3 will herald a world where life is completely different, and we don’t want the company to miss out on the huge growth opportunity,” Kentaro Kawabe, co-chief executive of Z Holdings, said in an <a href="https://www.thenationalnews.com/business/2022/03/11/softbanks-internet-unit-plans-nft-investments-to-expand-global-reach/" target="_blank" rel="noreferrer noopener">interview</a>.



The formation of both subsidiaries of the Japanese conglomerate follow closely on the heels of e-commerce company Rakuten’s NFT plans.



Rakuten <a href="https://cms.blockworks.co/japans-e-commerce-giant-rakuten-launches-nft-marketplace/" target="_blank" rel="noreferrer noopener">announced</a> its marketplace for blockchain-based assets on Feb. 25 and will allow users to buy, sell and trade cryptoassets based on Japanese manga and TV shows.



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SoftBank Messaging Giant To Launch NFT Marketplace in Japan

<div id="highlights-block_620d350029d36" class="highlights">
 <ul>
 <li>Scammers allegedly impersonated OpenSea staff to steal funds from NFT holders</li>
 <li>Last month, opportunists exploited OpenSea’s platform for over $1 million due to a user interface issue on its platform, according to Elliptic</li>
 </ul>
 
</div>



OpenSea is launching a customer service server with Web3 communications platform Metalink in an effort to mitigate risk of fraudsters pretending to be members of the company’s staff. Alleged scammers have previously impersonated the marketplace’s employees to deceive NFT owners in OpenSea’s Discord, scamming them out of millions of dollars.



“OpenSea will be partnering with Metalink as we seek to engage more deeply with the NFT ecosystem,” Stevey Tromberg, OpenSea’s head of community, said in a <a href="https://mirror.xyz/metajake.eth/baLwh3UUzhvbDt0n_V9xmxaTsiaoGCb6gOR6KIW-CuA" target="_blank" rel="noreferrer noopener">statement</a>. “Our goal is to create a direct channel for you to interact with OpenSea to get support, offer feedback, receive updates, and to share any other information that will help us better serve you.”



The company hopes to mitigate user risk via Metalink, which operates a “token gated” platform so that only users that own certain NFTs (non-fungible tokens) will have access.



Once users connect their cryptocurrency wallets to the platform, Metalink said, they’ll be connected with an “authenticated” customer support staff from OpenSea. There will be three official channels for OpenSea on Metalink, which include support, announcements and user feedback.



For the time being, Metalink said, these services can be utilized by certain holders, including owners of popular collections such as the Bored Ape Yacht Club, World of Women, Doodles and Cool Cats.



“This is one of many initiatives planned to expand the reach and effectiveness of our customer support reach, beyond just Discord,” Tromberg said. The new channels will have “dedicated community support staff from OpenSea spending a few hours a day in Metalink, all of whom will be marked as verified OpenSea staff.”



The announcement from OpenSea follows <a href="https://cms.blockworks.co/opensea-responds-to-nft-loophole/" target="_blank" rel="noreferrer noopener">reports</a> of users having their digital collectibles snatched up and resold at far below market value on the platform.



A spokesperson for OpenSea told Blockworks in a Jan. 25 statement that the company has since refunded 130 wallets of affected users, totaling 750 ether ($2.31 million as of Wednesday noon ET).



The loophole was not a bug or an exploit, according to the spokesperson, but rather a user interface issue that occurs when a user creates a listing then transfers the NFT to a different crypto wallet.



The leading NFT marketplace also faces a new competitive challenge from LooksRare, which <a href="https://cms.blockworks.co/new-nft-marketplaces-make-grab-for-openseas-lead/" target="_blank" rel="noreferrer noopener">hopes to lure</a> OpenSea users by rewarding NFT traders with the new platform’s governance token, as well as a cut of the ether from each trade.



OpenSea did not immediately respond to Blockworks’ request for comment.



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OpenSea Looks To Improve Customer Support and Fight Fraud

<div id="highlights-block_6160d9b5fa760" class="highlights">
 <ul>
 <li>Visionrare said they would refund all users who put money into the game and relaunch the platform in the coming days</li>
 <li>The company said they “underestimated the legal complexities” once they launched, according to a released statement</li>
 </ul>
 
</div>



It was potentially one of the quickest pivots in startup history, a non-fungible token (NFT) marketplace with all of the eye-catching topics to draw in users — money, fandom and the potential to follow the fiscal journey of wildly accelerating startups — but it lasted less than one day.



<a href="https://app.visionrare.com/dealflow" target="_blank" rel="noreferrer noopener">Visionrare,</a> self-branded as a platform for “fantasy startup investing,” temporarily shut down its operations less than 24 hours into the beta launch of its core product, TechCrunch first <a href="https://techcrunch.com/2021/10/07/fantasy-startup-investing-nft-platform-visionrare-shuts-down-paid-marketplace-after-a-day-in-open-beta/" target="_blank" rel="noreferrer noopener">reported</a> on Thursday.



Founded by Jacob Claerhout and Boris Gordts, Visionrare launched with the idea of giving users the chance to bid on NFT shares of real-world startups at auction.



Comparable to a fantasy sports league, the game ideally enables users to bet and buy fake shares dubbed VisionShares — in <a href="https://cms.blockworks.co/the-investors-guide-to-nfts/" target="_blank" rel="noreferrer noopener">NFT</a> form — of startups they believe will be successful, according to the company’s <a href="https://app.visionrare.com/dealflow" target="_blank" rel="noreferrer noopener">white paper.</a>



Users then compete against others with their quasi-portfolio of synthetic shares. Success in the game correlates to the various companies’ legitimate fundraising cycles. Therefore, whoever builds the most profitable portfolio of shares comes out on top. If the actual startups rake in cash in real life, Visionrare’s users could do the same.



<h3 class="wp-block-heading">Legal complexities</h3>



However, it was an intriguing idea that quickly (and temporarily) came to halt on Thursday.&nbsp;



Criticism and pushback ensued over Visionrare’s platform, including questions about whether their product offering was legal, whether its shares were securities and more. The company said they “underestimated the legal complexities” once they launched, according to a released <a href="https://app.visionrare.com/dealflow" target="_blank" rel="noreferrer noopener">statement.</a>



Braden Perry, a former CFTC enforcement attorney and a partner at Kennyhertz Perry, said when users have to pay for a virtual investment it “adds massive regulatory complexity and scrutiny.”



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“When you start charging retail customers for a product, traditional theories of fairness and deception are in play. Visionare was using ‘virtual’ stocks from real companies without their approval, which asks for legal challenges,” Perry told Blockworks. “[Purchasing] fake shares in any company can only lead to confusion, with the potential for wrongdoing on many levels.” </blockquote>



Additionally, the company didn’t get approval from several of the startups they were selling synthetic shares for, TechCrunch previously <a href="https://docs.google.com/document/d/1sFWVeWnlwXnY8HRwWplefw6rZ8VaFe6bGTaoyUjiVog/edit" target="_blank" rel="noreferrer noopener">reported</a>.



Visionrare quickly responded to the pushback, stating that users would be fully refunded for the money they spent in-game, according to the company’s Discord channel. Additionally, they plan to relaunch as a free-to-play game in the coming days.



Joseph Lizyness, a user who registered for Visionrare’s beta launch, remains optimistic about the startup following the controversy. 



“Regardless, the ability to buy and sell NFTs of actual startups is awesome,” Lizyness told Blockworks. “[Visionrare] blends venture capital [and] gives retail investors an eye into something they normally wouldn&#8217;t be able to have, until a future IPO could be bought through Robinhood.”



Although the marketplace is temporarily shut down, Visionrare’s founders maintain that they aren’t done with the idea, but will have to pivot the structure of its platform.



In a statement to Blockworks, the company shared that “the overwhelming majority of founders reacted very positively to what we are doing,” adding that certain execs even asked if they could invest in the company.&nbsp;



“We feel empowered by a growing and encouraging community of people that want Visionrare to succeed, and are honoured to have fuelled a global debate on how to democratise startup investment through crypto,” the company said.