Article Source:opensea.io/blog/guides

Article Source:

Author: Devin Finzer CEO of OpenSea

Hash：QmbhV4Z6c2yjUiKWyLwZrFi5epCf78gTypQLaGq5bHqbQw

Translation: old land

Full text 17315 words, 32 minutes to read

Non-homogeneous token NFT is a unique blockchain project with blockchain management rights. Examples include ownership records for collectibles, game items, digital art, event tickets, domain names, and even physical assets.

If you’ve been living in the cryptocurrency world for a while, you’ve probably heard the term “non-fungible token” or “NFT.” Maybe you are a skeptic, a believer, or maybe you don't know what that non-homogeneous token is. Either way, this article is for you!

As an NFT trading market, OpenSea has a unique advantage: Since the NFT standard came out at the end of 2017, almost all NFT-related projects have been launched.

In fact, I'd bet you a GodsUnchainedCard if you asked us about NFT projects. We've heard about it, and chances are they talked to us developers at some point! The NFT ecosystem is made up of incredible innovators, everyone: from enthusiasts to developers, from players to entrepreneurs to artists, everyone. It is also an honor for us to be part of this community.

Table of contents

1. What are non-fungible tokens?

1.1 Blockchain-based non-homogeneous tokens

1.1.1 Standardization

1.1.2 Interoperability

1.1.3 Tradability

1.1.4 Liquidity

1.1.5 Immutability and Provable Scarcity

1.1.6 Programmability

    2.1 ERC721

    2.2 ERC1155

2. Non-homogeneous token standard

2.21 Composable items

2.3 Non-Ethereum standards

3. Metadata of non-fungible tokens

3.1 On-chain and off-chain

3.1.1 On-chain metadata

3.1.2 Off-chain metadata

3.2 Off-chain storage solutions

        3.2.2 IPFS

3.2.1 Centralized server

4. History of non-fungible tokens (2017-2020)

4.1 – 0 BC: Before CryptoKitties

4.2 0 BC: The Birth of Cryptokitties

4.2.1 Speculative Mechanics

4.2.1 Viral Stories

4.3 2018: The hype, the hot potato game and the second layer

4.3.1 The second layer of games and experience

4.3.2 Hot potatoes

4.3.3 Venture capital interest

4.4 2018 – 2019: Back to Construction

4.4.1 Digital Art

4.4.2 Traditional IP inbound

4.4.3 Leader in Japan

4.4.4 Virtual world expansion

4.4.5 Trading Card Game

4.4.6 Decentralized domain name service

4.4.7 Other experiments

4.4.8 Casualties and resuscitation

5. The myth of non-fungible tokens

5.1 Scarcity alone can drive demand

5.1.1 Smart contracts mean assets exist forever

5.1.2 Removing the chain will solve all our problems

6. The market for non-fungible tokens

6.1 Current Market Size

6.2 Market Growth

6.3 Sales mechanism

6.4 NFT distribution

6.5 What's next for NFTs? Our predictions for 2020

What are non-fungible tokens?

Non-fungible assets are just normal stuff. Fungible assets are weird!

Most discussions of non-fungible tokens start by introducing the idea of ​​fungibility, which is defined as "capable of being replaced or replaced by another item of the same project". We think this complicates things further. To better understand what non-fungible assets mean, just consider the bulk of what you own. The chair you sit on, your phone, your laptop, and anything else that can be sold on Taobao. It's all non-homogeneous stuff.

Fungible assets are actually proving to be strange assets. Currencies are a classic example of a fungible asset. Regardless of whether the specific $5 bill has a serial number of $5 or is deposited into your bank account, $5 is always $5. Currency swaps can be achieved by replacing the $5 note with another $5 note (that is, 5).

Note that swap is relative, it only works when comparing multiple things. Business class, economy class, first class tickets. Each ticket is presumably interchangeable on the same flight, but you cannot exchange a business class ticket for a first class ticket. Even the chair you're sitting on can be used interchangeably with the same type of chair, unless you've developed some special accessories for that particular chair.

Interestingly, the definition of fungible assets can also be subjective. Going back to the air ticket example: someone who is concerned about sitting in a window or aisle seat might think that two economy class tickets are not interchangeable. Likewise, a penny-less coin might be worth a penny to me, but is worth much more to a coin collector. As we will see, some of these nuances become important when representing these items on the blockchain.

Blockchain-based non-fungible tokens

Just as we had digital currencies (such as airline points, gold coins in games) before the advent of cryptocurrencies, we have had non-fungible digital assets since the birth of the Internet. Domain names, event tickets, in-game items, and even social networks like Twitter, Facebook, Weibo, are all non-fungible digital assets; they just vary in terms of tradability, liquidity, and interoperability. Many games are valuable: In 2018 alone, Epic Games achieved $2.4 billion in revenue selling apparel through its free-to-play “Fortnite”; the event ticket market is expected to reach $68 billion by 2025; the domain name market will continue Maintain steady growth.

We have tons of digital assets, but we never actually own them.

Obviously, we already have a large number of digital assets. But to what extent do we "own" these digital assets? If digital ownership simply means that an item belongs to you and no one else, then in a sense you own those assets. However, this is not always the case with digital assets, if digital ownership is more like ownership in the real world (which can be held and transferred indefinitely). However, you own those assets in a specific context, which may or may not be moved elsewhere. Try selling Fortnite skins on Taobao, and you'll find it difficult to transfer digital assets from one person to another.

This is why blockchain is here! Blockchain provides a coordination layer for digital assets, granting ownership and management rights to users. Blockchain adds unique attributes to some non-fungible assets, thereby changing the relationship between users and developers and these assets.

standardization

In the digital world, from tickets to domain names, traditional digital assets do not have a uniform expression. Games can represent in-game collections in a completely different way than event ticketing systems. By displaying non-fungible assets on the public chain, developers can build universal, reusable, and inheritable standards for all non-fungible tokens. This includes basic primitives such as ownership, transport, and simple access control. Other criteria (for example, how to display the NFT's specification) can be placed on top, enabling rich display in the application.

These are similar to other building blocks in the digital world, such as the file format for JPEG or PNG images, the HTTP protocol for requests between computers, and HTML/CSS for displaying content on the Web. A layer is added on top of the blockchain, giving developers a whole new set of stateful primitives with which to build their own applications.

A non-fungible asset standard allows them to move freely between multiple ecosystems. When developers launch new NFT projects, these NFTs are instantly visible on dozens of different wallet providers, tradeable in marketplaces, and have recently been displayed in virtual worlds. This is possible because open standards provide clear, consistent, reliable, and permissioned APIs for reading and writing data.

Tradability

Tradability

Especially for game developers, the tradability of assets represents a transition from a closed economy to an open market economy. Game developers no longer need to manage every link in the economy: from resource supply to pricing to money control. Instead, they can let the free market take some of the blame!

fluidity

fluidity

The extremely fast tradability of non-homogeneous assets will bring about an increase in liquidity. NFT marketplaces can cater to a variety of audiences, from serious traders to less sophisticated traders, making assets more widely available to more buyers. Just as the ICO boom in 2017 gave birth to a new class of assets driven by instant liquid currency, NFT has expanded the unique market of digital assets.

Immutability and Provable Scarcity

Smart contracts allow developers to set strict caps on the supply of non-fungible tokens and enforce permanent properties that cannot be modified after the NFT is issued. For example, a developer can programmatically enforce that only a certain amount of a particular rare item can be created, and no more common items. Developers can also enforce specific properties not to change over time by encoding the chain. This is especially interesting for art, which relies heavily on how to demonstrate the scarcity of an original work.

Programmability

Of course, like traditional digital assets, NFTs are also fully programmable. CryptoKitties (which we'll discuss later) are representative of direct breeding digital cats among breed technicians. The mechanisms of many NFTs today are more complex, such as forging, crafting, redemption, random generation, and more. The design space is endless.

Non-Fungible Token Standard

ERC721

Standards are the part that makes non-homogeneous assets robust. They assure developers that the asset will behave in a specific way and describe precisely how to interact with the asset's basic functionality.

interface ERC721 {

 function ownerOf(uint256 _tokenId) external view returns (address);

 function transferFrom(address _from, address _to, uint256 _tokenId) external payable;

}

ERC721 proposed by CryptoKitties is the first standard to represent non-homogeneous digital assets. ERC721 is an inheritable smart contract standard, which means that developers can easily import from it to create new OpenZeppelin libraries that conform to ERC721-contracts (we created the first useful tutorial on ERC721-contracts here). ERC721 is actually quite simple: it provides a mapping of unique identifiers (each representing an asset) to an address that represents the owner of the identifier. ERC721 also provides a permission method for asset transfer using the transferFrom method.

ERC1155

If you think about it, those two methods are really all that's needed to represent an NFT: one checks who owns what, and the other sends what. The standard has some other features (some of which are very important to the NFT market), and the core part of ERC721 is very basic.

interface ERC1155 {

 function balanceOf(address _owner, uint256 _id) external view returns (address);

 function transferFrom(address _from, address _to, uint256 _id, uint256 quantity) external payable;

}

ERC1155, pioneered by Enjin's team, proposes a semi-homogeneous solution for the NFT world. In ERC1155, the ID does not represent the asset, but the category of the asset. For example, an ID might represent a "sword" and a wallet might have 1000 of these swords. In this example, the balanceOf method will return the number of swords the wallet has, and the user can transfer any number of these swords by calling transferFrom on the "sword ID".

One advantage of this type of system is efficiency: using ERC721, if a user wishes to transfer 1,000 swords, they would need to modify the state of the smart contract (by calling the transferFrom method) to obtain 1,000 unique tokens. With ERC1155, developers only need to call transferFrom 1000 times, and then perform a transfer operation. Of course, this increased efficiency also comes with a loss of information: we can no longer trace the transaction history of a single sword.

Also note that ERC1155 provides a superset of ERC721 functionality, which means ERC1155 can be used to build ERC721 assets (you just need to set the ID and quantity for each asset separately). Due to these advantages, recently the ERC1155 standard has been increasingly adopted.

Analyze ERC20, ERC721, ERC1155 standards. ERC20 maps addresses to amounts, ERC721 maps unique IDs to owners, and ERC1155 has nested mappings that map IDs to owners and amounts.

Composable Items

Composable items led by ERC-998 provide a template through which NFT can own non-homogeneous and homogeneous assets. While only a handful of NFT combinations have been deployed on mainnet, we think there are many exciting opportunities to use them!

CryptoKitties may have scratching posts and food plates, and there may be some fungible "pig" tokens in the dish. If I sell this crypto kitty, I will sell all related assets.

Non-Ethereum standard

While Ethereum is currently home to most of the business, several other NFT standards have popped up in other chains. DGoods is the pioneer of the mythology game team, which started from EOS to provide a feature-rich cross-chain standard. The Cosmos project is also developing NFT modules, which are available as part of the Cosmos SDK.

Non-Fungible Token Metadata

As mentioned above, the ownerOf method provides a way to find the owner of the NFT. For example, by querying ownerOf (1500718) in the CryptoKitties smart contract, we can see that at the time of writing CryptoKitty#1500718, the owner of CryptoKitty is account address 0x6452.

OpenSea or CryptoKitties.co can be used by visiting their CryptoKitty verification files.

But how did OpenSea and CryptoKitties determine what a #1500718 CryptoKitty should look like? What is its name and unique properties? This is metadata.

{

 "name": "Duke Khanplum",

 "image": "https://storage.googleapis.com/ck-kitty

image/0x06012c8cf97bead5deae237070f9587f8e7a266d/1500718.png",

 "description": "Heya. My name is Duke Khanplum, but I've always believed I'm King Henry VIII reincarnated."

}

Metadata provides descriptive information for a specific token ID. For CryptoKittty, the metadata is the cat's name, cat's picture, description, and any other characteristics (cattributes in CryptoKitties). For something like a ticket, the metadata can include the event's date and ticket type in addition to the name and description. The metadata for the cat above looks like this:

The question is how and where to store this data so that NFT-focused applications can access it.

On-chain and off-chain

Developers first have to decide whether to represent metadata on-chain or off-chain. That is, do you place the metadata directly in the token's smart contract, or do you host it separately?

On-chain metadata

The benefits of representing metadata in the chain are:

1) It exists permanently with the token and remains unchanged for the life of any given application;

2) It can be changed according to the logic in the chain. The first point is very important if the ongoing value of the asset is far greater than the value it was originally created in. Digital art, for example, will continue to exist throughout the ages, regardless of the original websites used to create the art. Therefore, it is important that the lifetime of the token identifier must preserve its metadata. Also, on-chain logic may need to interact with metadata. For example, for a CryptoKitty, its "generation" affects how quickly the CryptoKitty reproduces, and all reproduction happens on-chain (higher generation cats reproduce slower). Therefore, the logic in a smart contract needs to be able to read the metadata in its internal state.

off-chain metadata

Despite these advantages, most projects store metadata off-chain, conditioned by the current storage limitations of the Ethereum blockchain. Therefore, the ERC721 standard includes a method called method tokenURI that developers can use to tell applications where to find metadata for a given item.

The tokenURI method will return a public URL. This in turn returns a dictionary of JSON data, similar to the example CryptoKitty dictionary above. The metadata should be consistent with the official ERC721 metadata standard so that applications such as OpenSea can use it. At OpenSea, we want developers to build rich metadata that can be displayed in our marketplace, so we added extensions to the ERC721 metadata standard that allow developers to include features, animations, and background colors.

Off-chain storage solutions

If you want to store metadata off-chain, you have two options:

centralized server

The simplest metadata storage solution is on a central server or cloud storage solution like AWS. Of course, this also has a disadvantage:

1) Developers can change metadata at will

2) If the project is offline, then the metadata may not exist anymore.

IPFS

To address problem 2, several services (including OpenSea) currently cache metadata on their own servers to ensure that metadata is efficiently served to users even if the original hosting solution fails.

A growing number of developers, especially in the digital arts, are using the Interplanetary File System (IPFS) to store metadata offline. IPFS is a peer-to-peer file storage system that allows content to be saved between computers, so files can be copied to many different locations. This ensures that A) the metadata is immutable as it is uniquely addressed by the file's hash, and B) the data persists over time as long as there is a single node willing to host the data. Now, with services like Pinata, developers can simplify this process (in theory) by handling the infrastructure for deploying and managing IPFS nodes and the high-expectation Filecoin network, which adds a layer on top of IPFS to incentivize nodes to host files .

History of non-fungible tokens (2017-2020)

Now that we know what non-fungible tokens are and how to build them, let’s take a deeper look at how they come about.

– 0 BC: Before CryptoKitties

Experiments in NFTs began when colored coins appeared on the Bitcoin network. Rare Pepes (Pepe, the earliest frog image based on the Bitcoin opponent system). Some were sold on eBay, and rare Pepes were later sold at a live auction in New York.

The first Ethereum-based NFT experiment is CryptoPunks, consisting of 10,000 unique collectible punks, each with its own unique set of characteristics. CryptoPunks, built by Larva Labs, has an on-chain marketplace that can be used with wallets like MetaMask, lowering the barrier to entry for interacting with NFTs. Today, with a limited and strong brand offering to early adopters, CryptoPunks is quite possibly the best candidate for a true digital antique. Additionally, punks live on the Ethereum network, which allows them to interoperate with markets and wallets (although they are less new assets than early days using the ERC721 standard).

0 BC: The Birth of CryptoKitties

CryptoKitties is the first project to mainstream NFTs. Launched at the ETH Waterloo Hackathon in late 2017, CryptoKitties features an original on-chain game that allows users to breed cats together, producing rare and distinctive new cats. The "Generation 0" cat is being auctioned off via a Dutch auction, and these new cats may also be available for sale on the secondary market.

Although some in the gaming community later labeled CryptoKitties as "not really a game," the team actually did a lot of work developing the game mechanics on-chain, given the design constraints of the blockchain. First, they built an on-chain breeding algorithm hidden within a closed-source smart contract used to determine the cat's genetic code (and thus identify the cat's "category"). The CryptoKitties team has even ensured random and predictable breeding through a well-developed incentive system, and these predictive kittens can be kept as tools for future promotions. Eventually, they launched the Dutch Auction Contract and became a major price discovery mechanism for NFTs. The CryptoKitties team is visionary and has provided a huge boost to the development of the NFT space.

We believe the reasons for CryptoKitties' viral outbreak can be attributed to:

speculative mechanics

The breeding and trading mechanics of CryptoKitties give us a clear path to profit: buy a few cats, breed them into a rare cat, and repeat (or just buy a rare cat in the hope that someone will buy it ). This fuels the growth of the breeding community: users dedicated to breeding and keeping rare cats. As long as new users join and play the game, the price will go up.

At the peak of the frenzy, CryptoKitties traded close to 5,000 ETH, while Founder Cat #18 ($110,000) traded at 253 ETH. Subsequently, Dragon #600 ETH exchange (September 2018) traded for $170,000, offsetting the Dragon transaction price, although many speculated that the Dragon transaction was illegal. This high price attracts more users into the gold rush.

viral story

The success of CryptoKitties lies in its story. CryptoKitties are cute, shareable, and fun, and the idea of ​​paying $1,000 for a Crypto Kitty is so ludicrous that it's good news. Plus, eager users of smart contracts "broke Ethereum," which is a story in itself. Since Ethereum can only process a limited number of transactions at a time (approximately 15 per second), the higher network throughput leads to an increase in the pool of pending transactions and an increase in the price of handling fees. The average number of transactions processed per day increased from 1,500 to 11,000. New would-be cat buyers pay astronomical fees and finally wait for time to be confirmed.

These factors lead to the "CryptoKitty bubble": new demand enters the CryptoKitty world, and rising prices bring new demand. Of course, all bubbles must eventually be eliminated. In early December, the price of the average kitten begins to drop, as do the numbers. Many people recognize that the CryptoKitties gameplay is very primitive compared to the "real game" and will not attract more speculators. Once the new product disappears, the market will also be affected. Now, the weekly trading volume of CryptoKitties is around 50 ETH.

2018: The Hype, the Hot Potato Game, and the Second Layer

Despite the market downturn, the launch of CryptoKitties was a magical moment for many. For the first time, a team has deployed a non-financial blockchain-based application that has gone mainstream, albeit only for a few weeks. After CryptoKitties, NFT experienced a second minor hype in early 2018, as investors and entrepreneurs started new ideas for owning digital assets.

Tier 2 Games and Experiences

During the period after CryptoKitties came out, this game was developed on top of CryptoKitties by third-party developers and had no relationship with the original CryptoKitties team. The magic of CryptoKitties is that these experiences can be developed "frivolously": developers simply place their own applications on top of the public CryptoKitty smart contract. In a sense, CryptoKitties can have a life beyond their original setting. For example, KittyRace allows users to win ETH by competing against CryptoKitties, while KittyHats allows users to decorate their own CryptoKitties with hats and paintings. Later, by exchanging your CryptoKitties with CryptoKitties for ERC20 tokens, various interesting results can be achieved on the CryptoKitty marketplace, allowing kittens on the CryptoKitty marketplace to interact with DEFI. Dapper Labs (the newly formed company behind CryptoKitties) took these projects to form the KittyVerse.

During this time, the game "Hot Potatoes" also appeared. If you already know what the "Hot Potatoes" game is, you really are an NFT OG. In January 2018, a game called CryptoCelebrities launched. The working principle is very simple. First, buy collectible celebrity NFTs. Immediately celebrities can buy (or "snatch") higher prices than ever before. When someone buys your celebrity, you get the difference between your purchase price and the new purchase price (minus the developer's purchase price). As long as someone is willing to buy your celebrity, you'll get something. But if you're the last celebrity, you get nothing.

Because of this speculative mechanism, the CryptoCelebrity virality mechanism is so scary that celebrities like Donald Trump can sell for sky-high prices (123 ETH or $137,000). While the CryptoCelebrity game could potentially disrupt the space, we actually think experimenting with pricing and auction mechanics in the NFT design space is part of the madness.

venture capital interest

In early 2018, venture capital and cryptocurrency funds also became curious about the NFT space.

CryptoKitties raised $12 million from top investors and another $15 million in November.

RareBits, founded by Farmville co-founders, raised $6 million in funding in early 2018.

LucidSight, a blockchain gaming studio, raises $6 million.

After that, Forte raised a $100 million blockchain game fund together with Ripple. Immutable (the company behind Gods Unchained) raised $15 million in funding, including Naspers Ventures and Galaxy Digital. Mythical Games raised $19 million, led by Javelin Venture Partners, a Javelin Venture Partners, to develop the EOS flagship brand Blankos Block Party game.

OpenSea has also made a modest seed round and strategic investments to further develop our vision of building a universal open marketplace. Big thanks to all our investors!

2018–2019: Back to Construction

After a small hype cycle in early 2018, the NFT project began to enter the construction phase. Team Elephant's AXIe Infinity and Neon Zone, CryptoKitties later became their starting point and doubled down to build their core community. NonFungible.com launched an NFT market tracker and incorporated the term “non-fungible” as the primary term to describe the new asset class.

The art of math

Around this time, the art world started getting excited about NFTs. Digital art has proven to be well suited for irreplaceable currencies. At the heart of what makes a work of art valuable is the ability to reliably prove its ownership and exhibit it somewhere, unprecedented in the digital world. Excited digital artists get to work.

Screenshot 2020-01-14 pm 2.18.04.png

Josie's "Tune In," a piece of CryptoArt, sold for 6 ETH on OpenSea

Traditional IP entry

Following CryptoKitties, traditional IP owners have entered various collection spaces. The Major League Baseball (MLB), in partnership with Lucid Sight, launched an MLB cryptocurrency in April 2018, primarily for games played on the baseball chain. Formula 1 has teamed up with Animoca Brands to launch F1DeltaTime, a $100,000 race to sell OpenSea-powered 1-1-1 cars. Star Trek has launched a series of ships in the Lucid Sight game CryptoSpaceCommanders, and a number of licensed football trading card companies have joined, including Stryking and SoRare. Recently, PaniniAmerica, one of the largest sellers of physical collectibles, announced the launch of a blockchain-based trading card collection. MotoGP has also partnered with Animoca to develop a blockchain game.

japanese leader

Japanese games pioneered more advanced game user models and attracted early players. RPG game MyCryptoHeroes, a complex economy in the game, and continues the ranking of DappRadar. MyCryptoHeroes was one of the first games to combine on-chain ownership with more complex off-chain activities. Players can use their heroes in the game, and when they want to sell their heroes on the secondary market, they transfer the heroes to Ethereum.
Here are some "secrets" about why "My Crypto Hero" has such a high sales volume on OpenSea.

The My Crypto Heroes Playbook – Episode 2: NFT Economics: https://t.co/Jvuu3etuob @mycryptoheroes_ #マイクリ

— Michael Arnold | akzent.eth (@marnold_mch) November 15, 2019

virtual world extension

Launched NFT in the new blockchain virtual world to obtain global land titles and assets. Decentraland has raised a $25 million ICO for the MANA token and started selling packages for $10 million in virtual reality metaspace. For most of 2018, Decentraland’s LAND NFT traded more than any other NFT. The Decentraland project has a public beta right now, and it has pretty good early experiences, like BattleRacers, a racing game that works globally.

Screenshot 2020-01-14 pm 2.17.42.png

The most exciting element of CryptoVoxels (and Decentraland) is the ability to showcase NFTs to the world. Collectors have created a CryptoKitty museum, a cyberpunk gallery, an NFT “advent” calendar, a tower filled with top NFT items, and a virtual store where you can buy wearables. The CrypoVoxels environment is rapidly growing among digital artists, especially Cent users as a new type of content platform for the crypto crowd. Some artists are even using the Roll app to build their own currency or "social currency," which makes it easy to deploy new ERC20 tokens and sell art for social currency.

Other virtual world projects have also emerged, including those from Second Life creators such as Somnium Space and HighFidelity. Most recently, the sandbox company sold off its similar land to the Roblox universe, with the goal of empowering builders and content creators. This is one of the most anticipated blockchain games.

trading card game

Card games have been a natural fit for NFTs since the beginning. A physical card game like Magic: The Gathering is more than just a game. It's a monolithic economy with dozens of partner sites and marketplaces for buying, selling, swapping, and exchanging. In theory, Magic's digital equivalent, like Hearthstone, could establish an in-game marketplace for their cards, but such an effort would be cumbersome and not necessarily consistent with the business model of selling new products. The blockchain provides an instant secondary market that can operate outside of the game.

@Blizzard_Ent just banned @blitzchungHS and stripped him of his Hearthstone bonuses because they care more about money than freedom. We'll pay for all his lost winnings and a ticket to a $500,000 tournament: No player should be punished for his beliefs.

The GodsUnchained team "locked" the cards for a long period of time before the game was released (allowing for deviations from the core functionality of ERC721). During this time, third-party marketplaces allow users to sell cards, but since they are not transferable, they cannot actually make purchases. When the card was unlocked in November, the GodsUnchained trading market suddenly opened up, capturing more than $1.3 million in secondary trading volume.

Other card games are quietly building dedicated adherents. Horizon leader Skyweaver raised $3.75 million in seed funding from Initialized and launched its public beta, Epics became the first blockchain-based collectible e-bidding trading card, and CryptoSpells became the first Japanese card The leader in the trading game.

Decentralized domain name service

The third "asset class" of NFTs (after games and digital art) are domain services similar to ".com" domain names, but based on decentralized technology. The Ethereum Name Service, launched in May 2017 and funded by the Ethereum Foundation, locked 170,000 ETH in names between 2017 and 2018 (as long as the bidder owns the domain, it will succeed bids are locked in the contract). In May 2019, the team upgraded the ENS smart contract to ERC721 compatibility, which means that names can be traded on the local open NFT market.

Due to standardization (more standardization this year -> more interoperability -> more network effects)

Many of the best projects this year are growing. Best example is @ensdomains being ERC721 compatible so they can use the @opensea auction name in Q4 pic.twitter. com/mN1K8FuEJn

— Brian Flynn (@Flynnjamm) December 31, 2019

Unstoppable Domains recently launched a decentralized domain name system that is backed by venture capital, raising $4 million in Series A funding from Draper Associates and Boost VC. UnstoppableDomains was originally built on the Zilliqa blockchain and recently released .crypto as an ERC721 asset.

other experiments

While most of the experimentation with NFTs has been done with collectibles and games, other use cases are gradually being added. NFT. NYC and Token Summit are both selling tickets to their events in NFTs and Coin. Kred for both teams. The Cored Kred team issued an "NFT Gift Bag" for the event. Binance recently started releasing holiday souvenir books, and Microsoft has released Azure Heroes badges for Azure ecosystem contributors.

CryptoStamps (a project of the Austrian Postal Service) allows those who buy genuine postal service and physical stamps to receive special QR codes so they can access private crypto stamps with rare random "crypto stamps" that can be sold on OpenSea. key. This project is particularly interesting because it connects the scarcity of digital assets with useful physical assets and appeals to the existing community of collectors.

DapperLabs, creators of CryptoKitties, has a tournament-style game called CheezeWizards. Interestingly, due to an initial bug in the smart contract, the fork of the game resulted in the "unpasteurized" and "pasteurized" wizards appearing. The project is a complex chain game, emphasizing the need for more standardization on NFT metadata, contract upgradeability, and ensuring that auction capabilities are properly updated when core attributes of items change.

casualties and recovery

These years have not been without casualties. Today, nearly all of the hot potato games of early 2018 are dead (although OpenSea still has assets to show). Interestingly, some of these projects have been brought back to life by community members. Regardless of whether CryptoAssault or Etheremon (now Ethermon) is restored. Attempts to bring CryptoCelebrities back to life through the celebrity breeding game haven't failed yet.

The Symbolic Myth of Non-Fungible Tokens

Now that we've given the broad overview, let's talk about misconceptions.

Scarcity alone drives demand

In the early days of the non-fungible token ecosystem, it was believed that users would care about the provable scarcity of NFTs and would rush to buy NFTs simply because they were on the blockchain. Instead, we believe demand is driven by more traditional forces: utility and sourcing.

The utility is obvious: I'm willing to buy tickets to an NFT because it allows me to attend a conference, and I'm more willing to buy a piece of art if I can display it in a virtual world, and I'm willing to buy an item if it If it can bring me a special ability in the game. The origin of the concept encapsulates the story behind the NFT. Where does it come from? Who ever had it? As the technology in the space matures, interesting NFT stories become more complex and begin to have a meaningful impact on token value.

Smart contracts mean assets live forever

It is also believed that assets can only last forever through the deployment of smart contracts. This ignores the fact that there are other entities (websites, mobile apps) that act as a portal for normal users to interact with these apps. If these portals fail, the value of the asset will be greatly reduced. Of course, in the future it may be possible to deploy decentralized applications in a fully distributed "unstoppable" way, but for now, we are in a hybrid world.

Removing the blockchain will solve all our problems

In 2018 and 2019, some projects adopted a "blockchain abstraction" approach to hide all NFT mechanisms from users, providing username and password authentication for hosted wallets. This is an interesting approach because it provides a simplified onboarding experience like a centralized application. The problem is that interoperability with the NFT (virtual world, wallet, marketplace) ecosystem has been lost. We found that projects entering the existing NFT ecosystem may sacrifice some usability in the short term, which is more attractive to current early adopters.

A Market for Non-Fungible Tokens

Due to the low price of spot assets, the market for non-fungible assets is still small and harder to measure than the cryptocurrency market. For the purposes of this analysis, we focus primarily on secondary transaction volume (i.e., peer-to-peer sales of non-fungible assets) as an indicator of market size. Based on this metric, we estimate that the current secondary market volume is around $2-3 million per month. The following projects have traded in the past six months:

market growth

market growth

The number of users interacting with the NFT, determined by sending, bidding, buying or selling. The market has taken shape and is growing steadily.

Following the CryptoKitties bubble in late 2018, the number of unique accounts interacting with NFTs increased from roughly 8,500 in February 2018 to over 20,000 in December 2019. The market appears to be driven by a core group of advanced users. For example, on OpenSea, a median seller sold something worth $71.96, and an item sold for an average of $1,178, which means there are a lot of sellers. Note that a large account like the official game account does boost the game average. OpenSea had an average purchase of $943.81 and a median purchase of $42.72.

sales mechanism

sales mechanism

At present, NFT is mainly sold on the decentralized ETH trading market. Stablecoins like DAI or USDC are surprisingly barely traded, most likely due to the friction of acquiring the currency. Dutch auctions and fixed-price sales are typically for low-priced items, while English (eBay-style) auctions are for big-ticket items like super-valuable Gods Unchained cards or Legendary games. Bundling is also a very popular sales method, and its percentage rose steadily to 20% in December.

NFT distribution

One might ask: Where is the overlap between the various NFT projects? Is the community around the project relatively isolated ("GU" players can only play "GU" games), or does the community overlap excessively? Is it also possible for CryptoKitties enthusiasts to own an ENS domain name and participate in the digital art ecosystem?

The NFT network graph is based on raw data on OpenSea, with about 400,000 addresses

Takens Theorem, an anonymous but very friendly Twitter account, provides some excellent analysis of the blockchain ecosystem (highly recommended to follow!) analyzing the overlap between the various NFT communities. The above network graph is based on the raw data on OpenSea of ​​about 400,000 addresses. On the outer ring, each network is composed of unique NFT-type addresses. The number of nodes in the graph represents the number of nodes in the actual data—for example, thousands of addresses with only CryptoKitties. The size of the nodes in the graph is determined by the size they have.

In "GU", you can see many cards on many addresses! . Light gray nodes connecting NFT items represent prominent patterns of co-ownership. On the right side of the whole scenario, you can see thousands of addresses that own two NFT games. However, there are also some smaller co-ownership systems between Cryptovoxels and Decentraland, and ENS and many others are represented by a decentralization of connections between different systems.

If you can see this, we congratulate you! We hope you learn a lot from the fun, quirky world of NFTs and inspire you to research some projects, or even build your own. In the next article, we will discuss the future of NFTs and make a series of predictions for the next few years. Subscribe us for more updates!

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Lao Lu's Blockchain Notes Luyaoyuan111