Non-fungible token (NFT) trading has faced challenges in recent months, but the Web3 development community remains optimistic about the technology’s future.

According to Alchemy’s latest Web3 Development Report, NFT trading volume declined by 41% in the second quarter of 2023. However, during the same period, there was a significant increase in the deployment of smart contracts, with 5.9 million smart contracts being deployed across Ethereum Virtual Machine (EVM)-compatible networks like Ethereum, Arbitrum, Optimism, and Polygon. This marks a remarkable 302% rise since Q1 and an astonishing 1,107% increase compared to the second quarter of 2022.

Furthermore, Q2 saw the installation of 26.8 million Ethereum software developer kits (SDKs), a 7% uptick from the previous quarter.

While not all the new smart contracts or SDK installations are necessarily dedicated to NFTs, the continued development activity indicates positive momentum for Web3’s growth and its journey towards widespread adoption. Despite the bearish market conditions, Ethereum’s price has risen by 12% since the previous year.

According to Blake Tandowsky, a growth analyst at Alchemy, Q2 2022 witnessed a peak in NFT trading volumes among whales, but the number of new users entering the market has since slowed down. However, the emergence of various NFT use cases, such as in gaming, has fueled developers’ enthusiasm to build on the blockchain.

Tandowsky noted that while there was strong growth in new users during Q2 2022, sustaining that level of growth has been a challenge. This has prompted a call for additional use cases for NFTs beyond their traditional JPEG iterations, paving the way for innovative future applications.

The report highlighted several noteworthy use cases for Web3 during the last quarter. These included Nike’s Our Force 1 collection drop, the expansion of the decentralized social media platform Lens Protocol, and Google Play’s support for games integrating NFTs.

With the ability for developers to deploy certain integrations with decentralized apps (dapps), Tandowsky emphasized the positive impact on gaming, NFTs, and the entire blockchain ecosystem, as it reduces barriers and friction in deploying dapps.

Despite ongoing efforts to mainstream Web3 and NFTs, trading volume for NFTs has seen significant fluctuations since the start of 2023. In March, the trading volume reached a peak of $2 billion, which had not been seen since the Terra death spiral. However, in mid-May, the volume was on track to drop below $1 billion, the lowest level since January. Additionally, popular NFT collections like Azuki and Bored Ape Yacht Club have experienced substantial declines in value from their previous bull market highs.