1 Introduction

1 Introduction

Non-Fungible Tokens (NFTs) empower creators with a new business model and provide consumers around the world with a new way to support, own and share the upside of creativity on the Internet.

When the Bitcoin blockchain was launched in 2009, cryptocurrency was the first application of the time. Bitcoin shows us what can happen when an open, permissionless ledger can prove the authenticity and true ownership of digital information without third-party intermediaries. existSatoshi NakamotoMore than a decade after BTC was released to the world, it hasn't stopped at BTC either, with NFTs proving blockchain's many other uses beyond cryptocurrencies.

This year's NFTs boom covers a wide range of fields, such as visual art (visual art), games (gaming), photography (photography), music (music), fashion (fashion) and consumer brands (comsumer brands) and so on. In 2017, a wacky idea on Ethereum (A virtual cat that trades and mates on-chainimage description

Disclaimer:

Disclaimer:1confirmation is an investor in many leading NFT projects (OpenSea、SuperRare、Catalogetc.) and the creator(Pak、Beeple、Hackataofirst level title

2. Overview

2.1 What？

NFTs are tokens that represent true ownership of scarce, independent assets on an open, permissionless ledger (aka blockchain). The importance of an open, permissionless ledger cannot be overstated. Companies have been creating digital goods online for decades, but in 2021, as anyone in the world can participate without permission and no one controls the database where the digital goods reside, NFTs are starting Explosive growth.

NFTs give users true ownership. Tokens are owned on-chain by controlling private keys stored locally (no centralized server required). When you own an NFT, you can verify it to anyone in the world by signing transactions with a private key you control, and no third party can take it away from you.

Publicly created on the Ethereum blockchain in 2017ERC 721 agreement, is the main catalyst for the growth of NFT. ERC 721 is a standard that allows anyone to mint and transfer NFTs. Before Ethereum and ERC 721, NFT has been tried on the blockchain in various forms. But the user experience, interoperability, and ease of use that Ethereum and ERC 721 offer developers are game-changing. Since 2017, there has been an enthusiastic builder community experimenting with the protocol, and in 2021, all of this experimentation has been rewarded with massive growth for the category.

NFTs now represent the bleeding edge of the cryptocurrency industry, bringing users to the space by virtue of their spread faster than any other category within cryptocurrency. Today, not only ERC 721 on Ethereum is thriving, but alsoERC-1155andRonin、Polygon、Tezos、FlowandSolana。

2.2 Why？

There are many use cases for NFTs - any creative activity on the internet can be tokenized as an NFT and sold to backers.

text

Visual Art

Generating a sustainable income as a digital artist has historically been difficult. Visual artists reach consumers by using centralized social networks like Facebook, Instagram, and Twitter, but they don't give you much freedom, and it is very difficult to make real money through web2 business models (advertising) difficult. Top artists can build their names in web2 and generate freelance work, commissions, and brand deals, but these are generally constraints on creativity (and not all that lucrative). NFTs offer a fundamentally better business model for visual artists by giving them more freedom, allowing them to mint authentic, provably scarce works and sell them directly to consumers.

There is a global market of more than $50 billion for traditional art. Before the advent of NFTs, digital artists could not participate in this market because they did not have an easy way to certify the scarcity and originality of their work. Traditional works of art are difficult to copy and difficult to certify. On the contrary, the emergence of NFTs makes the copying and certification of digital works of art very simple.

Easy certification of original work has allowed digital artists to sell more than $2.BT worth of art on Ethereum this year (source:Cryptoart.ioandPak、Beeple、XcopyandDmitri Cherniaktext

Profile Picture Projects (PFPs)

One specific type of visual NFT that has exploded this year are profile picture projects (PFPs). These are collections of a fixed number (most commonly 10,000) of digital characters that all share a similar art style but have varying characteristics. Larva Labs created in 2017Cryptopunks andBored Ape Yacht ClubandNounsandCrypToadz，World of Women、Long Neckie Ladies、Lost PoetsandQueens + KingsBoth are other recent noteworthy PFPs.

PFPs represent a new way of building brands from the bottom up rather than the top down. For over 100 years, consumer brands have been built from the top down by corporations. We believe that over the next 100+ years, brands will be built from the bottom up by PFP programs and their variants. Why is PFP a fundamentally better way to build consumer brands in modern society? It's for the same reason that pioneering cryptocurrencies is a better way to build money: global user ownership.

text

Cultural Collectibles

Every aspect of Internet culture can be tokenized and sold as NFTs, and in this report we define sports, music, photography, video, and other NFT collectibles as"Cultural collectibles"text

Gaming

Online games (Online games) and NFTs are a natural fit because NFTs give players true ownership of their in-game items. Games have historically been closed-loop ecosystems controlled by large corporations (Activision Blizzard, Electronic Arts, Epic Games, Tencent, etc.), but NFTs are changing that by allowing game developers to take advantage of open protocols and global liquidity for Players create truly attractive and sustainable long-term ecosystems. In-game NFTs allow players to turn their achievements into real-life real money in the game, while developers can also grow their game ecosystem on the basis of the original creation.

so far,Axie Infinityis leadingplay-to-earngame movement. Allowing players to earn NFTs in-game and then turn those NFTs into cash is a game changer and opens up new earning opportunities for people around the world. We see Axie Infinity as just one example of the first generation of earn-to-play games, and expect to see an explosion of compelling games and experiences in this space over the next few years.

other

other

secondary title

2.3 How？

Each collection of NFTs has a smart contract that creates tokens, processes transactions, and keeps track of balances. Most modern NFT smart contracts are on Ethereum. Before the creation of the ERC721 standard, each NFT contract was fragmented. This makes it difficult to build applications that can interact with all NFTs (for example, likeOpenSeasame market), as custom code must be written to interact with each contract.

The ERC721 standard is the most prevalent and the main catalyst for the global liquidity we are seeing now in marketplaces like Opensea. But some projects use the ERC1155 standard, the difference is that it can create both homogeneous and non-homogeneous tokens. In ERC1155, an ID represents not just a single asset, but an asset class. ERC1155 contracts are more gas-efficient for transferring multiple items of the same class, but they record less ownership information, making it harder to track the history of individual items in a class.

Over the past few years, new blockchains have been launched that are more centralized but boast faster block times and lower fees than Ethereum. Many of these chains later followed Ethereum to create their own NFT standards. Some are built on top of Ethereum"Layer 2s", still rely on Ethereum for consensus, such as Polygon and Ronin. Still others are independent and competing"Layer 1s"existQuixoticexistOptimismsecondary title

2.4 When？

text

2012-2013：Colored Coins

Colored coinsIt was Ethereum's first attempt at launching both fungible and non-fungible tokens on top of Bitcoin. Yoni AssiaPublished a Colored Coins specification in 2012text

2014-2016：Counterparty

andRare PepeandSpells of Genesistext

2017-2018：Punks，Kitties and OpenSea

andJohn WatkinsonandMatt HallcreatedCryptoPunks, a collection of 10,000 unique pixel characters stored as NFTs on the Ethereum blockchain. Anyone with an Ethereum wallet can claim a Cryptopunk for free, and once they are all claimed, a robust secondary market emerges. This gave birth to the PFP movement.

ERC721 was also created in mid-2017, and in October,CryptoKittiesis the first notable project launched using this standard. CryptoKitties quickly gained traction and media attention as some players made six-figure profits on transactions.

textOpenSea。

2019-2021:The Awakening

Beginning in 2019, NFT experiments have reached a climax. Until the end of 2020, the trading volume of NFTs was small compared to the trading volume of cryptocurrencies, and the experiment was largely out of the mainstream. However, a small but enthusiastic community of true devoted believers is working hard to grow the ecosystem.

andPakandBeepleandSuperRareandNiftyGatewayEye-catching work was placed on. In 2021, PFP will experience explosive growth(Bored Apes、Nouns、Toadz)，andandChristie'ssuch as traditional auction houses andnikeandnikefirst level title

image description

3.1 Visual Art

（Superyó by Frenetik Void）

$2.5B Market Cap

Methodology: Total market capitalization of Visual Art traded on SuperRare, Opensea, Nifty Gateway, Foundation, Hic et Nunc, Art Blocks, MakersPlace, KnownOrigin, and Async Art in 2021.

66.6k Active Traders

Methodology: Total number of unique wallets buying or selling visual art NFTs in 2021 on SuperRare, Opensea, Foundation, Art Blocks, MakersPlace, KnownOrigin, and Async Art.

$2.5B Trading Volume

image description

3.2 PFPs

（cryptoadz pfps）

$13.9B Market Cap

Methodology: Total value of PFP collectibles traded on Opensea and Rarible in 2021.

376.6k Active Traders

Methodology: Total number of unique wallets buying or selling PFP NFTs on Opensea and Rarible in 2021.

$8.7B Trading Volume

image description

3.3 Cultural Collectibles

（cryptoadz pfps）

$13.4B Market Cap

Methodology: Total value of cultural collectibles traded on Opensea and Rarible in 2021.

482.1k Active Traders

Methodology: Total number of unique wallets buying or selling cultural collectible NFTs on Opensea and Rarible in 2021.

$4.4B Trading Volume

image description

3.4 Gaming

（Axie Infinity gameplay）

$1.6B Market Cap

Methodology: 2021 total game NFT value on Axie Infinity, Aavegotchi, and Zed Run.

1.5M Active Traders

Methodology: Total number of unique wallets buying or selling game NFTs on Axie Infinity, Aavegotchi, and Zed Run in 2021.

$4.0B Trading Volume

Methodology: Total game NFT transactions on Axie Infinity, Aavegotchi, and Zed Run in 2021.

3.5 Bird's eye view

2 million active NFT users on Ethereum

Methodology: Total number of unique wallets sending or receiving NFTs on Ethereum in 2021.

The total market value of NFT$31.4 billion

NFT trading volume is$19.6 billion

3.6 Annual NFT transaction volume

Methodology: Total transaction volume generated on SuperRare, Opensea, Rarible, Nifty Gateway, Foundation, Hic et Nunc, Art Blocks, MakersPlace, KnownOrigin, Async Art, NBA Topshot, Axie Infinity, Aavegotchi, and Zed Run.

3.7 Disclaimers

• The number of active traders is based on separate wallets. Some users operate from multiple wallets, so the number of real active traders will be even lower.

• first level title

4.The Platforms

4.1 OpenSea

OpenSeaandDevin FinzerandAlex AtallahSaw the early CryptoKitties movement and the need for an easy-to-use marketplace that would enable people around the world to buy and sell NFTs. Until December of that year, they launched the OpenSea beta, and today, they are one of the fastest growing online marketplaces ever, andThe most widely used non-custodial cryptocurrency application.

The transaction volume in 2021 is$16 billion

Active users in 2021 are1.26 million

Methodology: Total transaction volume and unique active users of OpenSea Ethereum and OpenSea Polygon in 2021.

4.2 SuperRare

SuperRareandJohn Crain、Charles CrainandJonathan PerkinsLaunched in early 2018. Since then, SuperRare has curated a talented cohort of artists and built a passionate community of collectors.

This year, SuperRare launched the first phase of its long-term decentralization plan, distributing$RAREToken. $RARE is used to manage new curated spaces on the platform.

According to the sales of the top 1,000, the current average sales price of SuperRare works is 10.6ETH. This is the highest price in any market in the industry.

The transaction volume in 2021 is$207.5 million

Active users in 2021 are4400

Methodology: Total transaction volume and unique active users on SuperRare in 2021.

4.3 Foundation

Foundationis a marketplace that spans many cultural asset classes, from digital art to music to memes. The platform launched in February 2021 and has already hosted multiple and diverse auctions, from the original Nyan Cat memo to Edward Snoeden’s NFT, which captured the landmark court decision ruling NSA mass surveillance illegal .

The transaction volume in 2021 is$135 million

Active users in 2021 are26,000

Methodology: Total transaction volume and unique active users of Foundation in 2021.

4.4 Rarible

Since its launch in late 2019, theRaribleThe market has always been an active center for the trade in collectibles and art. This year, Rarible launched plans to expand from a single NFT marketplace to an ecosystem of projects based on Rarible smart contracts and leveraging Rarible indexers. The Rarible protocol is governed by the RaribleDAO and its $RARI token.

The total volume of transactions in 2021 is$249 million

Active users in 2021 are79,000

Methodology: Total transaction volume and unique active users on Rarible in 2021.

4.5 Fractional

FractionalIt is a protocol that enables the ownership of one or a group of NFTs to be easily differentiated and shared. Users can lock one or a group of NFTs in a vault, split the ownership of the NFTs in the vault into a fixed supply of ERC20 tokens, and then list these tokens on the decentralized exchange.

Since its launch in July 2021, Fractional has seen strong early adoption. Popular fractional tokens such as$DOGIt is the fragmented token of NFT of the original Doge meme, and the transaction volume on DEXs has exceeded hundreds of millions of dollars.

The trading volume of fragmented tokens in 2021 is$1.78 billion

Fragmented token traders in 2021 are37,000

Methodology: Total transaction volume and unique active users of fragmented tokens in 2021.

4.6 Catalog

Available in March 2021,CatalogIt has become a leading planning market for music NFT. Each Catalog record is a unique collection issued by a musician.

andHaleek Maul、Daniel Allan、Matthew ChaimandXcelencia。

The transaction volume in 2021 is$1.65 million

Active users in 2021 are181

first level title

5.The Highlight

5.1 Pak

Pakis an anonymous creator known for pushing the boundaries of NFTs by exploring new mechanisms not possible in traditional art mediums. They currently occupy the number one position in the field of crypto art,Over $291 million worth of art sold to date. they still keepWork by living artist fetches most expensive price at auctionsales records. Their drops are multi-dimensional, incorporating puzzles, game theory, mystery, and clean geometric visuals. In 2021, Pak's creations are all tied together in the $ASH token, which is earned by burning Pak NFTs and unlocks early access to new projects. More on Pak:Who is Pak?

In "Merge"sold in drop$91.8 millionpublic units

sold$292 millionartwork

$85.8 millionASH Market Cap

5.2 CryptoPunks

CryptoPunksIt is the first programmatically generated NFT PFP project on Ethereum, and has NFTs"rookie card "status. When it launched in 2017, NFTs could be claimed for free by anyone with an ethereum address. 2021 cements the program's status as a blue-chip PFP. CryptoPunk's highest turnover record is held by 'Covid Alien' Punk #7523,It sold for $11.75 million at Sotheby's in June。

$11.75 millionhighest single transaction

$2.4 billionvolume of transactions

5.3 BAYC

Bored Ape Yacht Clubis a collection of 10,000 unique ape (ape) PFP NFTs launching in April 2021. BAYC collectors are granted full commercial rights to the apes they purchase. The core team has provided a roadmap of interesting perks, like editorial access to shared art boards, airdropping companion NFTs, and IRL events. This strategy stands in stark contrast to previous PFP projects such as CryptoPunks and Hashmasks, which saw hardly any further input from creators once they were live.

$2.8 millionhighest single transaction

$979 millionvolume of transactions

5.4 ArtBlocks

Art Blocksis a major market for generative art, and it has seen phenomenal growth this year. Each item is a collection of works of art, randomly generated at minting time using an algorithm designed by the artist. The blue-chip art block series that came out this year is likeRingersandDmitri CherniakandFidenzatoTyler Hobbs.

$6.9 millionhighest single transaction

$1.39 billionof secondary sales

5.5 Everydays：the First 5000 Days”

BeepleFor the past 13+ years, he has been creating a work of art every day, and in 2021, all his hard work has paid off. Beeple'sEverydays: The First 5000 DaysWork is a collage of 5,000 images created for his Everydays series. this work isThe first NFT work to be auctioned by a large traditional auction house, and holds the seventh-most expensive sale price for a work of art by a living artist.

This sale of Beeple is followed by another massive auction at Christie's in 2021:$29M for Human ONE

$69.3 millionfirst Christie's auction

$174.5 millionBeeple's total NFT sales to date

5.6 XCopy

XCopyis a London-based NFT artist who explores death, dystopia and apathy through distorted visual loops. He is the top artist with the highest total sales and single sales on SuperRare. XCopy is one of the earliest pioneers of NFTs as an artistic medium, starting his journey as a crypto art creator and evangelist in 2017.

$7 millionhighest sales of

4,$0.6 millionSuperRare sales volume

5.7 Axie Infinity

Axie Infinity2021,

2021,$3.7 billionof NFT trading volume

$25.4 billionFully diluted market capitalization of AXS

$103 millionSLP Market Cap

6.Emerging Trends

We are excited about several trends for 2022:

6.1 Music

The music industry has collapsed. We all know this. Today, there are more than 8 million musicians on Spotify.Only 7,500 of them, or 0.09 percent of the group, earned more than $100,000 a year.

Music on the internet is largely controlled by streaming platforms, who charge consumers to listen. We believe that NFTs can quickly make music freely available to all, but owning a scarce, authentic version will be expensive (like traditional art).Catalogis a leader in this area, andArpeggi Labsis another platform worth keeping an eye on. In 2021, collectors will place less emphasis on audio NFTs than visual NFTs, but this may start to change in 2022.

Using NFTs, artists can sell directly to fans, and fans can directly support musicians and, in return, share in the proceeds from the music they love. A strong case study for this use case is the Inner EP, the author of which isHaleek Maul. Haleek for $235,000 in 2021sold four songs from his new EP. He would need about 59 million Spotify streams to earn the same amount. Haleek now has a new way of developing his music without a traditional record label. His fans are his record label, and that's a strong incentive.

6.2 Photography

andIsaac “Drifters” WrightandJustin Aversanoand(Where My Vans GoandTwin Flames). Previously photographers had limited ways to make money online, but now NFTs offer photographers a new way to build direct relationships with fans and fund their art.

#FreeHawaii projectis an interesting case study of how the National Trust can empower photographers.Cath Simardis a famous photographer in Canada who is tired of going after people who infringed the copyright of her most famous photo, which has been shared millions of times without crediting her. Before, she couldn't collect a dollar for her efforts, but

When she decided to sell the photo as an NFT and then release the rights to use the photo to the world, herThe NFT sold for $300,000 at auction.

6.3 NFT-enabled DAOs

A Decentralized Autonomous Organization (DAO) is an organization formed by a group of people with economic incentives and common beliefs to jointly provide products or services without a centralized entity or corporate governance structure. Bitcoin was the original DAO, but in the years since, DAOs offering a variety of products and services have proliferated.

NounsDAOandPunk 4156andGremplinfirst level title

7.Closing

2021 will be a breakout year for NFTs, but the asset class remains small relative to the broader spectrum of cryptocurrencies. The total market capitalization of NFTs is about $31.4 billion, which is only about 1.36% of the total cryptocurrency market capitalization ($2.3 trillion).

We believe that by the end of this decade, NFTs will eventually surpass cryptocurrencies in size, and steps will be taken towards this goal in 2022.

• Existing large cryptocurrency exchanges (Coinbase、FTX、Krakenetc.) will recognize the importance of access to NFTs for their business growth. Fiat uplink will be improved, making it easier for people outside the cryptocurrency ecosystem to buy their first NFT.

• There will be more consumer brands and celebrities launching NFT projects, gaining more mainstream attention for the category and further making NFTs a part of mainstream culture.

• Belief in the value of many types of NFTs beyond pure visual art — such as music, photography, and virtual real estate — will grow, with several of these categories becoming multibillion-dollar asset classes in their own right.

• NFTs will appear on Ethereum L2s on a large scale, bringing cheap and fast NFT experience to more people. This will make the total user pie of NFTs bigger and bigger, and will exceed 10 million by the end of the year.

The NFT field is crazy in 2021, and an even crazier situation is forming in 2022. Thanks for reading.

Sincerely,

1confirmation team