Can NFTs revive India's deflated digital trading market?

Amazon will be launching its NFT marketplace in April 2023, with 15 NFTs at the time of launch and an initial focus on US customers. Though it is not clear yet on which platform the sale is going to be. But the launch has garnered excitement and fresh speculation on the NFT market that had collapsed just 12-18 months ago.

In 2021, NFTs or non-fungible tokens garnered a big playing craze among Indian mainstream crypto enthusiasts. NFTs are rare digital assets that are written using computer code and registered on a blockchain ledger. They are one of a kind so can’t be interchanged like other crypto coins or tokens. They can be traded though. NFTs are ways to bring music, artwork and other collectibles to the digital market.

The Indian NFT market is predicted to have a sizeable spend of $3,394.2 million to $27,067.3 million by 2028. Though the trading volume is reported to have touched $2 billion in February globally, pick-up in India has been slow because the narratives against NFTs are multifold.

Since buyers’ speculation and activity make the market, a lot of wash-trading (buying their own NFTs to heighten the demand) creates hype and initiates scams too. The recent market-building bank crashes have further added apprehension and caution to traders. Above all, cryptocurrencies, used to buy and sell NFTs, do not have clear security regulations in India.

But, market enthusiasts claim NFTs might make a comeback and have a future if the use cases are utilitarian, incorporated as part of contract-based, value-addition opportunities, that enable one to hold value in such purely transactional items.

“For example, an IPL ticket as an NFT will be a collectible when the team wins that season, and as a fan owning the NFT can enjoy exclusive benefits- like time with players, match goodies, spectator to training sessions etc. It will add another layer of value and enable more ticketing revenue,” says crypto-enthusiast Nikhil Saxena, Creative Head, Ustraa.com, a grooming brand for men. In that sense, Amazon NFTs are expected to open a new door to trading- facilitate more marketplace engagement and user-friendliness.

But not everybody is as enthusiastic about a strong comeback. NFTs’ comeback and chances for a new play are hard in India, says Utkarsh Sinha, CEO, Managing Director, Bexley Advisors. Sinha attributes the earlier short-term craze to the heavy advertising hype, excessive consumer savings and time the punters had. “The bank crashes are further indications of the correction that we can expect in global markets on value and valuations, which has had an impact on cryptocurrencies, and is likely to depress the already bottomed out NFT market further,” points out Sinha.

As a broader technology, though in e-commerce and retail, NFT applications are dependent on how well the brands will integrate the digital tokens to offer an iterative experience. But, blockchain-based connectivity and interactivity are already gaining momentum as many are experimenting with both public and private chains.

“Blockchain and Web3 are not new to the world of retail and e-commerce. We have seen Proof Of Values (PoVs) being done since 2014/15. In fact, global supply chains and product provenance were one of the first use cases in e-commerce where blockchain/ smart contracts were deployed for tangible outcomes. Value-creation in the blockchain is happening already; if the whole ecosystem of partners is equipped to utilise this tech, it will certainly accelerate the growth of e-commerce,” says Abhay Tandon, Co-Founder and GP, 3to1 Capital.

A lack of awareness is keeping a lot of users at bay. The decentralisation and autonomy that web3 and blockchain engagement offer and metaverse, with its benefits as a seamless platform for businesses and consumers are not perceived fully well yet in India. But by 2026, 30% of e-comm brands are projected to offer metaverse products and services. Already it is considered a platform for gaming.

Saxena says a problem-solving approach would be helpful in removing the roadblock. “Like the UPI where the complexity of the technology is not looked at as an issue. But to bring about a mass appeal to meta verse, the hardware will play an important role and the technology needs to revolutionise and provide ease of access. By the same logic, mass crypto should come back with specific programming and purpose,” he explains.

Tandon is bullish that in the near future, “Metaverse would serve as a channel for enterprises with B2B and B2C use cases and as a much better and experiential environment provider for enhanced interaction and frictionless commerce for consumers,” whereas Sinha is sure that only some blockchain-based technologies that truly leverage the distributed and non-centralised characteristics of it for a real-world problem may emerge and survive, even thrive in the future. “Crypto today is a solution in need of a problem. Once that problem is convincingly identified, its viability and value can be assessed.”