NFT industry development report for the first quarter of 2021
Editor's note:Editor's note:
This article was written and published by Cabin VC in conjunction with Flow and The Sandbox, and jointly published by Odaily
NFT is a non-fungible token (Non-Fungible Token), which has the characteristics of non-split replacement and non-standardization. The corresponding FT (Fungible Token) is interchangeable and nearly unlimited. Grading attributes, NFT and FT are essentially technical protocol standards with blockchain as the bottom layer in the process of asset digitization. In the common context, NFT is also used to refer to asset categories with the above characteristics or a market composed of such assets itself.
In 2020, the NFT ecology has just formed, and the subsequent DeFi outbreak ushered in its first round of upsurge. In 2021, NFT will gradually integrate with traditional art finance, entertainment media and other markets. The diversity of asset forms and good application scenarios will make the ecosystem continue to expand, with obvious spillover effects.
Excluding NBA Top Shot sales, non-homogeneous token (NFT) sales in the first quarter of 2021 exceeded $2 billion, an increase of more than 20 times compared with the fourth quarter of 2020. Compared with the cryptocurrency market, although its market value does not account for High, but the growth rate is astonishing. NFT assets and infrastructure applications are mostly concentrated in art collections, metaverses, games and other fields. Real assets such as NFT can be digitized by using NFT technology to embed rights, verifiability and other functions. At present, the diversity of asset types is not enough to boost the overall liquidity of the market. Limited liquidity is still one of the specific difficulties in the current NFT ecology.
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1. History of NFT market development
1993 — Crypto trading cards
The predecessor of NFT can be traced back to 1993, an interesting concept shared by Hal Finney with the Cypherpunks group on CompuServe — Crypto Trading Cards.
2012 — Colored Coins
In 2012, the first NFT-like token, Colored Coin, was born. Colored Coin is composed of small denomination bitcoins, and the smallest unit is one Satoshi (the smallest unit of bitcoin). It can represent a variety of assets and serve a variety of purposes, including property, coupons, issuing company shares, and more. Colored Coin demonstrates the plasticity and development potential of the real asset chain, laying the foundation for the development of NFT.
2014—Counterparty
In 2014, Robert Dermody, Adam Krellenstein and Evan Wagner founded Counterparty: a peer-to-peer financial platform with a distributed open source internet protocol built on top of the Bitcoin blockchain. Counterparty supports asset creation, has a decentralized exchange, XCP contract currency, and many projects and assets, including card games and Meme transactions.
2015 — Spells of Genesis
Spells of Genesis game developers use the Counterparty platform to issue game assets on the chain, and issue BitCrystals tokens to fund game development, which can also be used as game currency.
2016 — Force of Will
In August 2016, Counterparty cooperated with Force of Will, the fourth best-selling card game in North America, to issue cards on the Counterparty platform. Force of Will is a large mainstream company with no previous experience in blockchain and cryptocurrency. This cooperation shows that mainstream games The company's interest in the digitization of game assets is a symbolic exploration and attempt.
2016 — Counterparty Rare Pepes
In October 2016, Rare Pepes was issued in the form of assets on the Counterparty platform. Rare Pepes is a meme with characteristics of a frog. These memes have a huge fan base and a meme exchange called Rare Pepe Meme Directory.
2017 — Ethereum Rare Pepes
With the rise of Ethereum in early 2017, Meme transactions began to appear on Ethereum. In March 2017, the decentralized meme marketplace and trading card game ( TCG ) project Peperium enabled anyone to create memes permanently stored on IPFS and Ethereum. Peperium's associated token, RARE, can be used to create memes and pay for listings.
2017 — CryptoPunks
In the NFT project CryptoPunks of John Watkinson and Matt Hall, two creative technology experts, the characters are native to Ethereum, and the total amount is limited to 10,000. Anyone who has an Ethereum wallet can claim CryptoPunk virtual characters for free. Because the ERC 721 standard had not been established at that time, CryptoPunks did not follow the ERC721 standard. Due to this limitation, its virtual characters were not completely ERC 721. Therefore, CryptoPunks' technical standard for constructing virtual characters can be described as a mixture of ERC721 and ERC20.
2017 — CryptoKitties
CryptoKitties pushes NFTs from niche to mainstream. CryptoKitties is a blockchain virtual game launched by Vancouver-based Axiom Zen, which allows players to adopt, feed, and trade virtual cats. The rise of CryptoKitties coincided with the bull market in 2017. Driven by the enthusiasm of CryptoKitties enthusiasts, the price of some virtual cats rose wildly to $100,000, and the public noticed the potential and power of non-homogeneous tokens.
Axiom Zen then spun off Dapper Labs, which raised about $15 million in financing from top investors such as A16z and Google Ventures.
2018 to 2020 — The early ecology of NFT is gradually taking shape
In 2020, Dapper Labs released Flow, a Layer 1 public chain built with games and other digital assets as the target market, to improve the integrity of the NFT ecological infrastructure. In the same year, NBA TOP Shot, an NFT digital collection based on Flow, was launched for only half a year, and the transaction volume exceeded 42 million US dollars. In January 2021, VIV3, an NFT trading platform based on Flow, was officially launched. Artists, game studios, etc. can use VIV3 to use Flow technology to mint NFT tokens at the bottom layer, and sell assets to fans, collectors, gamers and digital asset investors. . The distribution and trading channels of NFT works on leading trading platforms such as OpenSea and SuperRare have been expanded in multiple directions.
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2. Overview of the NFT market ecology
The NFT market has grown exponentially year by year. From 2019 to 2020, the total USD transaction volume rose from US$62.86 million to US$250 million, an increase of nearly three times. In 2021, NFT will benefit from the prosperity and development of the DeFi ecosystem. According to NoFungible data (excluding NBA Top Shots, Nifty Gateway and other project data), the NFT market transaction volume in the first quarter alone has exceeded 8 times that of 2020, about 20 One hundred million U.S. dollars,.
The number of active wallets, the number of buyers, and the number of sellers can also be used as indicators for evaluating the activity of the NFT market. Theoretically, the higher the number of active wallets, the more active users. Usually, a single person holds more than one active wallet. The repetition rate of wallet use must be considered when including relevant indicators. The two indicators of the number of buyers and the number of sellers are also proportional to the number of active users. The more buyers and sellers, the larger the user base.
Most NFT projects are based on Ethereum technology. In 2020, a total of 222,000 wallets will interact with NFT-related smart contracts. This number accounts for 30% of the number of active addresses on Ethereum. The volume is 1/2, and the number of buyers and sellers is nearly the sum of the whole year of 2020. NFT is expected to become one of the core ecosystems on the Ethereum chain.
1. NFT asset market transactions of various categories
Judging from the 2021 Q1 trading market of different NFT categories, collectibles and artworks each occupy almost half of the NFT market, while NFT categories such as games, sports, and music are also slowly rising. The total market sales of NBA Top Shot in the past 6 months have exceeded 550 million US dollars, CryptoPunk's transaction volume in the first quarter was 1.5 million US dollars, Beeple's latest auction price at Christie's auction house was 6 million US dollars, and in the first ever NFT music album sale, 3LAU's album achieved a new record of $11.6 million, which heralds the beginning of the NFT era.
1.1 Art category
As of April 19, 2021, the six NFT encrypted art platforms SuperRare, MakersPlace, KnownOrigin, Async Art, Foundation and Nifty Gateway have sold a total of 190,665 works of art, with a total market value of 550,039,020.92 US dollars.
In 2020, a total of 5 million NFT artworks were sold, with a total sales volume of nearly 150 million US dollars. In contrast, the head concentration effect of the traditional art market is obvious. About 64% of the annual transaction volume of 63.7 billion US dollars is contributed by the sales of the top 1% of artists.
Although the transaction volume and unit price of the NFT market are relatively small, the active ratio of artists, artworks and collectors greatly exceeds that of the traditional art market.
Traditional art circulation is inefficient, and a single piece of art is circulated for decades or only a few times. Relying on the blockchain, the circulation of artworks on the chain is fast, and transactions can be carried out 24/7. On September 1, 2020, the daily trading volume of the NFT market was approximately US$24,110, and the number of traders on the entire network was only 63. On November 13, 2020, the daily trading volume of the NFT market was recorded at US$618,500, and the number of traders exceeded 1,800 .
NBA Top Shots,The leading NFT project on the Flow platform, the first blockchain-basedNBA digital collectiblesdigital collectiblesCryptoKittiesgame, by the NBA andDapper LabsIt was launched in cooperation and received investment support from many stars.
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Data source: DappRadar
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Data source: DappRadar
Data source: DappRadar
As of April 12, The Sandbox had totaled $4.4 million in primary and secondary market sales, and had its most successful LAND sale ever that month, totaling over 10 million SAND (approximately $6.5 million ).
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In February 2021 alone, the NFT art market expanded to $80 million, while Metaverse (metaverse) and virtual LAND continued to grow, Axie Infinity sales reached 888 ETH (LANDS worth $1.5 million), The Sandbox game Virtual Worlds sold $3 million of LANDS NFTs, more than 2019 and 2020 combined.
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Data source: The Sandbox
According to DappRadar's April 2021 analysis report, Flow Blockchain is one of the fastest-growing communities in the current cryptocurrency ecosystem, and the number of active users (wallet addresses) on the chain has surpassed that of Ethereum.
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Data source: DappRadar
MotoGP™ IgnitionThe same as the underlying structure of NBA Top Shot, the number of upper-level ecological projects created on the basis of the first NFT public chain Flow is also increasing.
, the official MotoGP™ licensed race management and collection game. MotoGP™ Ignition will offer two forms of limited-edition non-fungible tokens (NFTs) around the MotoGP™ brand experience: collection and race management, and they sold out as soon as they were released on Flow.
1. NFT technology layer
The NFT technology layer includes the underlying infrastructure, the middle-level network protocol, and various NFT applications or DApps built on top of the protocol and the underlying layer. Most of today's NFT exchanges, artworks, games, etc. are mostly applications built on specific underlying foundations (Ethereum, WAX, Cocos-BCX, etc.) and based on the ERC-721 standard.
At present, these applications are limited by the transaction costs, performance and interoperability of the underlying technical facilities, and the space for sustainable development is limited. Game finance, encrypted art exhibitions, and auctions still use a complete set of Ethereum general protocols (NFT standards such as ERC-721, liquidity mining protocols, etc.), and the technology combination in the NFT direction is still weak.
The NFT technology layer can be roughly divided into three categories: settlement layer, protocol layer, and application layer.
The NFT settlement layer is responsible for handling businesses similar to FT, including providing a fixed anchor for the entire ecology to achieve the security and consistency of the entire ecology. At present, the most settled settlement layer for NFT applications is based on the public chain.
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Image source: "Boundary" NFT Industry Report
As far as the underlying infrastructure is concerned, Ethereum still maintains a large lead in terms of market share, and the rest of the public chains have asymmetric competitive advantages in terms of development speed and some indicators. For example, since its launch in August 2020, Flow-based NBA Top Shots has ranked the No. 1 DApp in NFT ecosystem sales with sales of more than 40 million US dollars within half a year, and has continued to maintain its leading position. WAX uses the Alien Worlds game DApp in the wallet It is in the leading position in terms of activity indicators.
Solana, one of the underlying infrastructures of NFT, and Arweave, a decentralized storage platform, are now bridged through SOLAR Bridge to use decentralized storage projects to store data information including NFT. In 2021, as the activity of the application layer continues to increase, decentralized storage Questions become more important. Binance Smart Chain also develops an ecology around the NFT market, such as the infrastructure Arkane Network, which enables game developers and other DApps to easily integrate Binance Smart Chain and its token system into their own applications.
2) Protocol layer: Formulate special rules for NFT technology
The NFT protocol layer is between the NFT calculation layer and the application layer. The settlement layer is responsible for setting up basic rules such as token records and storage. The application layer refers to the applications that users can use directly. The protocol layer, as a key module between the settlement layer and the application layer, will contain special calculation rules and nest a new one on the settlement layer. Operating logic and rules.
The existing technical standards of NFT are still based on the development of Ethereum, mainly ERC-721 and ERC-1155. As a smart contract platform, Ethereum has all standards on its chain built for specific functions, and can automatically create traceable and verifiable ownership of assets.
ERC - 721
At this stage, the NFT technical standards issued based on Ethereum mainly include the following categories:
The ERC-721 standard was born in Cryptokitties. It is the earliest NFT asset construction protocol recognized by the Ethereum community and is currently the most widely used technical standard. It evolved from the ERC-20 standard. The ERC-721 standard is applicable to collectible assets. For example, in CryptoKitties, the ERC-721 standard grants ownership, distribution rights and access control rights to NFT assets.
The ERC 721 standard defines four NFT key metadata: ID (global id), NAME (name), SYMBOL (symbol), and URI (uniform resource identifier). The ERC-721 standard does not formulate digital asset metadata standards, or add limited supplementary functions, so developers' creativity and unique needs can be met.
In addition, the ERC-721 standard meets the interoperability of NFT assets in multiple ecosystems. For example, participants can purchase and trade NFT assets in the secondary market or within applications.
ERC - 1155
（Semi Fungible）
Under the ERC-721 standard, a contract can only issue one type of NFT asset, and there may be as many as thousands of types of game props in a game scene, so the ERC-721 standard is difficult to be compatible with complex game scenes.
The ERC-1155 technical standard was proposed by the Enjin team. The ERC-1155 standard allows developers to create and identify different types of assets in the NFT ecosystem. The ERC-1155 standard is mainly used in the field of blockchain games.
The limited edition NFT tokens issued by Binance Anniversary are based on the ERC-1155 standard, and its wallet product Trust Wallet is also compatible with this technical standard.
Another technical advantage of the ERC-1155 standard is efficiency. For example, suppose an ID in the ERC-721 standard represents"sword"sword
, if the user wants to transfer 1000 swords, the state of the smart contract (transferForm method) needs to be modified 1000 times to obtain 1000 unique tokens. But for ERC-1155, developers only need to call transferFrom with a quantity of 1000, and perform a transfer operation. Efficiency has been greatly increased, but at the same time it has led to a loss of information, making it impossible to track the history of individual swords.
Other protocol standards
The NFT technical protocol standard is still in its infancy, and with the development of the NFT market, technical iteration will be inevitable. In 2020, the Interchain Foundation is starting to build a new NFT technical standard based on Cosmos, which will enter the testing phase at the end of Q1 in 2021.
3) Application layer: Create applications that allow users to participate in NFT
The NFT application layer serves to develop NFT application solutions that users can directly use, such as NFT DApps, or web applications that interact with smart contracts and NFT protocols.
In contrast, in 2020, collectibles, virtual worlds, and games account for a large proportion of the market share, 39%, 21%, and 27%, respectively.
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Data source: NonFungible, OKEx Research
Art NFT applications are mainly encrypted art trading platforms. The trading volume of SuperRare, which ranks first, in 2020 is 3.25 times that of MakerPlace, which ranks second.
The addition of NFT provides more imagination space for decentralized games, allowing players to enjoy cross-game experience while owning the ultimate ownership of game props. In game NFT applications, in-game assets can be designed to be bound to external encrypted assets, and players can obtain ownership of game assets by holding external encrypted assets. For example, if there are only ten swords in the game, only those who own the corresponding external encrypted assets can use them.
1. NFT infrastructure
According to the division of technical architecture, the ecological infrastructure of the NFT industry is mostly concentrated in the following three directions:
1) The major underlying public chains of the data settlement layer;
2) Various technical standards at the protocol layer;
3) Various auxiliary service applications on the application layer, such as wallets, auxiliary services, etc.;
3.1 The underlying public chain
Ethereum (Ethereum) is still the preferred public chain for building NFT applications. TRON is one of the main public chains for NFT application scenarios. The number of NFT projects is about 1206, which is about half of Ethereum. Some NFT projects are gradually trying to build on ETH layer 2 deploy.
Although the Flow public chain has only a few NFT projects, such as NBA Topshot and Viv 3, due to the traffic effect of NBA Topshot, the Flow token has risen by nearly 61% compared with the beginning of March 2021, and the market value exceeds 700 million US dollars. The Flow ecology is expected to attract high growth .
Among the underlying public chains, Binance Smart Chain is the underlying public chain developed by Binance Exchange and will be launched in September 2020. BSC uses the same EVM as Ethereum, so Ethereum projects can migrate to Binance Smart Chain with one click. Currently, the number of NFT projects on the BSC chain ranks fourth, and NFT has also been included in the Binance investment ecosystem.
In addition, Matic provides a two-layer scaling solution for off-chain computing while ensuring asset security using the Plasma framework and a decentralized proof-of-stake (PoS) validator network. Joined Binance Chain Alliance (BCA) in 2019.
In addition to Matic, the BCA Alliance currently has 22 other members. The mainstream exchanges take the construction of basic technical facilities as an important entry point, and intervene in the ecological development of the NFT industry through investment and other means.
In addition to Ethereum, Flow and Tron have improved performance, such as providing lower transaction fees and better developer experience. Compared with Ethereum, they have the following three advantages:
Digital creators can get lower gas fees;
Provide developer tools for real-world use cases;
Support cross-chain DeFi liquidity expansion set;
3.2 Protocol layer
Unification of protocol standards on the NFT chain
Some NFT underlying public chains have begun to develop a unified on-chain protocol standard that meets the future development needs of NFT. Based on the unified on-chain protocol standard, it can effectively reduce the threshold and difficulty of NFT asset issuance. For users, using such a unified on-chain protocol standard The NFT assets of the protocol standard can quickly realize the confirmation of digital assets, solve the security problems of digital assets, and improve the cross-ecological circulation of digital assets.
1. IOST new protocol standard
In April 2020, IOST officially released the NFT standard IRC 721, which is similar to Enjin's ERC 721 standard.
Each IRC-721 token corresponds to a unique ID and has only one owner. In addition, under the IRC 721 standard, NFT can store identity ID and metadata in the contract. Developers can improve storage efficiency by storing external URLs for metadata and links to metadata in contracts. It also has a flexible lock transfer mechanism and includes a blacklist management function to meet the management needs of games and entertainment applications;
IOST also released the standard interface IRC 722 standard, which is mainly supported by wallets such as TokenPocket.
1.Flow NFT token standard
Flow adopts the Cadence programming language, which is a resource-oriented programming language that introduces new features for smart contract programming, helping developers ensure that their code is safe, reliable, clear and easy to use, NFT tokens on Flow through the Flow emulator , completed with Cadence, and has the following characteristics:
1) Each NFT is represented by a resource with an integer ID, and a resource is an ideal type to represent an NFT because resources have important ownership rules enforced by the type system. They can only have one owner and cannot be copied, nor lost or duplicated accidentally or maliciously. These safeguards ensure that NFTs are safe and can represent assets with real value.
2) NFT can usually be represented by some kind of metadata, such as a name or picture. Most of this metadata is stored off-chain, and on-chain tokens simply contain URLs or similar elements that point to off-chain metadata. Flow takes this as an entry point, so that all associated metadata can be stored on the chain.
3) When users on Flow want to trade with each other, they can do so peer-to-peer without having to interact with the central NFT contract by calling resource-defined methods in each user account.
NFT20 standard
In the NFT ecosystem, NFT20 is a decentralized exchange and protocol for marking NFT items as ERC20 tokens so that they can be traded on decentralized exchanges such as UniSwap or Sushiswap. Anyone can add their NFT to the appropriate pool and receive a derivative ERC20 token representing that NFT project, which is instantly tradable on the Dex.
By establishing a secondary market for NFT's ERC20 derivatives, NFT20 hopes to solve the liquidity problem in the NFT field. Solving this problem provides arbitrage opportunities, allows investors to gain price exposure to NFT projects without the need to identify and purchase individual NFTs, sets prices more fairly, and makes it easier for collectors and newcomers to trade NFT assets.
other
In 2020, NFT technology has developed tools that allow users to obtain partial ownership of NFTs by purchasing "NFT fragments". In this way, game participants with small funds can still obtain a certain percentage of ownership by purchasing NFT fragments. One of the pioneering projects is Niftex.
3.3 Application layer
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Image credit: fatcatfun.com
The NFT ecology is still relatively small, and the application layer can be roughly divided into two directions. One is to provide ecological support services for the application layer, aiming to improve user experience, including infrastructure, trading platforms, etc.; the other is the user-oriented interaction layer, which is the NFT Application scenarios provide application interfaces, which can be divided into games, collections, artworks, etc.
From the perspective of quantity, the ecological support service emerging around the NFT asset trading (issuing) platform is the most concentrated application scenario. It is worth noting that the types of services provided by most NFT asset trading platforms are not limited to the transaction level of NFT works.
NFT trading assets are mostly concentrated in fields such as artworks, game props, cards, etc., which also restricts the trading platform to obtain user channels. As far as the on-chain transaction of artworks is concerned, the first step is to realize the on-chain of artworks, that is, how encrypted art creators can cast NFT works. NFT art trading platforms, such as Rarible, Mintable, Opeasea, etc., all provide one-click NFT works casting mode. Taking the Rarible platform as an example, works in digital form can be uploaded in the form of PNG, GIF, WEBP, MP4, MP3, etc., minted into ERC 721 or Rari (Rarible governance currency), and can be circulated on the Rarible platform after paying a certain gas fee.
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3. Main application scenarios and bottlenecks of NFT track
1. Overview of classification of application scenarios
1.1 Metaverse classes
NFT will continue to be applied to more usage scenarios, and more innovative examples will appear regularly, the most popular of which are in-game assets, collectibles, virtual real estate (land), domain names, and artwork.
In general, any in-app purchased assets and free in-game purchased virtual currency may face issues that cannot be cashed out, reused, resold, or otherwise used across games or platforms, but NFTs purchased in games The assets are actually owned by the buyer, each asset is unique and identifiable, and can be transferred between users without the need for permission from the developer, or transferred outside the game and sold on the open market, Even used in other games.
With the ever-increasing number of innovative usage scenarios, NFT can actually represent any type of digital asset, so it has great market potential and room for growth.
One of the best applications in the NFT space is the metaverse, where games, user-generated content, art, finance, avatars, multiplayer games, and socializing are concepts that have tangible value for players.
The value provided by NFT is similar to any tangible valuables. It has uniqueness and scarcity. The holder has full ownership and can sell it to anyone. If the two attributes are mapped, the infinite possibilities of NFT can be tapped. At present, NFT assets and applications that combine tangible valuables and digital art have begun to receive high attention from Sandbox, such as the vinyl toys launched by CryptoKaiju that can play game roles in The Sandbox, and the recently released sneakers jointly issued by FEWO and RTFKT. It also includes applications that use NFT technology for rare wine collections, such as Wiv.io or NFTSpirits.
1.2 Games
Game props broadly include in-game player assets. One of the characteristics of such assets is that players must obtain them through game actions or purchase them with money. Game assets have unique characteristics and usage data, and are only useful in specific contexts.
Game props are suitable to be expressed in the form of NFT. On the one hand, because the development and use of game props are all on-chain, their value is supported by the game scene, which can avoid the centralized link of value on-chain. On the other hand, most game equipment and characters have Unique, freely circulatory characteristics, which are consistent with NFT attributes. In addition, NFT game props can be confirmed and reused across scenes and games, and game assets are expected to become NFT ecological assets.
At this stage, game NFTs are all developed on Ethereum, and their subsequent development is limited by Ethereum Gas fees and other issues. If there is no perfect or highly available infrastructure support, even if there are a large number of potential users, the development of NFT games will still be restricted .
1.3 Collectibles
NFT technology can be used to represent the ownership of collections, and at this stage it is mainly art collections. Collectibles usually have two characteristics, uniqueness and non-replicability.
In a centralized network, it is difficult to completely digitize collectibles with existing ordinary digital media and technologies, and NFT technology is one of the solutions. Theoretically, NFT can solve the problem of anti-counterfeiting in the traditional art field to a certain extent, but at the technical level, the underlying technology of NFT at this stage cannot support the huge art market. Therefore, the NFT collectibles market is currently mostly concentrated in digital art, such as the current weekly trading volume The top Rarible, CryptoPunks and SuperTare are digital art collection trading platforms.
At this stage, the collectibles market is still too niche, and the development of narrow target groups has great limitations. However, the phased success of NBA Top Shot also reveals the considerable potential of the NFT market in the future. The market size of NBA Top Shot exceeds 550 million US dollars, which is a large sports It is a good example that the alliance and Global Talk IP are willing to accept the blockchain as an asset distribution technology carrier. UFC, Warner Music Group and MotoGP have further proved this point. Many brands and teams are seeking innovative solutions, such as using Flow, etc. The underlying solution with better performance creates a new experience for the audience, so as to achieve a deeper interaction between the enterprise and the audience.
1.4 Art category
With the increasing frequency of encrypted art trading activities, the advantages of relying on the Ethereum network for encrypted art sales have become more known, and mainstream digital artists have gradually entered the encrypted field. The famous digital artist Mike Winklemann (Aka. A suite of digital artworks is on sale, with one auctioned for $777,777.77.
The traditional art industry has begun to gradually pay attention to and try to use NFT technology for cross-border interaction of art products. For example, Christie's, a British luxury goods and art auction house, held its first auction of NFT works in October 2020, and finally "Portraits of a Mind: Block 21" was sold for $131,250. On March 11, 2021, "Everydays: The First 5000 Days" at Christie's New York auction was finally sold at a price of US$69,346,250. Beeple, the author of the artwork, became the third highest selling price for a work by a living artist, second only to Da David Hockney and Jeff Koons.
In addition to the casting of NFT works of art, the current trading platforms still focus on the sale of works of art. Therefore, how to expand the exchange's customer acquisition channels and attract user trading groups has become a major problem in improving the liquidity of NFT works. The establishment of the NFTX Token Index in 2020 is a new attempt to acquire customers. Even non-professional investors who don't know much about encrypted art and traditional art can increase the convenience of investing in the secondary market by tracking their personal NFT token portfolio.
As far as the asset form of artwork is concerned, NFT is only its technical realization form. The core value of NFT of artwork is still the artistic value of the work itself, which is also the fundamental factor determining the price of NFT of artwork. With the gradual acceptance of NFT technology by emerging artists, NFT may become a key carrier for future digital art creation, and the creation and collection of digital art in the future is very likely to operate in the form of NFT.
1.5 Finance
The combination of DeFi and NFT is usually a platform that transplants the liquidity mining model to the NFT field, such as MEME, Aavegotchi, etc., and the typical representative is MEME.
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Source: www.PANewsLab.com
At present, the applications combining NFT and DeFi can be roughly divided into the following categories: one is the application that introduces the concept of NFT in the DeFi model, such as MEME and Avegotchi; the other is WHALR and CARGO that mortgage NFT for DeFi mining, and directly on the NFT platform Introducing Rarible for liquidity mining.
The combined application traffic of NFT and DeFi mostly benefits from the high income generated by liquidity mining. The overall market size of NFT is about 2% of the market size of DeFi. Taking MEME as an example, the weekly trading volume of its NFT token pineapple is not as high as that of FT tokens The daily trading volume of MEME Coin is 5%, and due to the obvious cycle effect of market heat, the trading volume is unbalanced.
NFTX is a platform for generating ERC20 tokens supported by NFT collections. The tokens generated by the platform are called funds, which are substitutable and composable. Using NFTX, users can create and trade collectible funds based on their own preferences from DEXs such as Uniswap. The emergence of NFTX has lowered the threshold for participating in the NFT market. Ease of participation will also be greatly improved.
Case: mortgage lending
At present, the financing attributes of NFT asset issuance are becoming more and more apparent. The first NFT issuance will be in March 2021. INO (Initial NFT Offering) has been proposed by the market as a financing model. The purpose of INO is to distribute NFT assets and meet financing needs. On March 10, Binance Smart Chain DEX application BakerySwap announced that it will introduce INO, and the first issuer to use this method is the Chinese artist Cao Jun, whose previous landscape painting was auctioned for $452,349 in 2018. Scott Lewis, the co-founder of DeFi Pulse, also mentioned the concept of INO in the NFTX V2 design concept. At this stage, INO is not fundamentally different from the traditional ICO issuance method, but the compliance risk caused by direct financing can be stripped by selling valuables , we believe that the scale of financing under financing models such as INO and its variant ISNO (Initial Staking NFT Offering) will increase significantly in the next 1-3 years.
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4. NFT application space
In the application space of NFT technology, in addition to the metaverse and games in the early stage of development, and the art and collectibles that will emerge intensively in 2021, the NFT ecosystem will gradually improve. The product architecture around NFT in 2021 will realize more multi-dimensional and personalized users. Experience, through end-to-end experience design, identity and reputation NFT can link more levels of personal relationships, strengthen user attributes within the platform, and then promote the platform itself to create more new model scenarios.
At this stage, the NFT industry scenario model and product construction direction mainly focus on the following four points:
Community Circle Expansion
The sale of high-priced items in art and collectibles in 2021 has expanded the popularity of the NFT market, with obvious spillover effects, while the development of application scenarios such as games, music, sports, and ticketing continues to infiltrate NFT into real life. From simple and direct NFT sales to interactive NFT dapps, these application scenarios close to life make NFT more durable, gradually digitize life, and gradually introduce physical industry communities such as game circles, music fans, and popular fashion into the encrypted world. Further open the door between the encrypted community and the real world.
Digital Identity and Reputation
Compared with the simple model of purchasing and trading NFT assets, the platform can create a new type of digital identity based on the NFT assets purchased and held by users. Users can use this digital identity to access and interact across platforms. NFT assets are transferred in usage scenarios, and NFT technology can also be used as a way for users to create new identities, reputations, and self-expressions. NFT will not only be closed data in a pure sense, but users' personal information, usage habits, preferences, etc. The data form is stored on the chain and becomes part of the assets held, and the boundaries of the platform, users and assets are integrated with each other.
Composable products and derivatives
NFT may give birth to a new business form, under which NFT develops into a composable product or derivative. Saint Fame DAO, Zora, and Foundation are early examples of this trend. The audience can customize or hold a certain NFT asset, and can fuse it with another NFT multiple times to create a new NFT asset. The new asset can be exchanged for physical objects using the corresponding supply chain or sold in the open market. This type of NFT is less prone to speculation and can be accepted and acquired by a wider audience.
Asset Classes and Liquidity Creation
NFT technology can be used to realize the digitization of assets. In addition to the standard assets and art collections of real asset categories, real estate assets are also undergoing digital transformation with the help of NFT technology to alleviate problems such as insufficient liquidity. A property was listed on the NFT trading platform Mintable at a price of about 42.426 ETH.
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Chiliz, "NFT technology can basically solve the problem of ownership certification of most tangible assets including real estate, and after digitization, it is easy to split shares and lower the threshold for asset investment. At this stage, NFT is trying to use real estate assets as the entry point to continue to strengthen its digitization of long-tail assets try. In fact, the scope of NFT applications goes far beyond the fields of digital art, collectibles, and games. This is a digital technology that can be used for tokenization and can be exchanged for any item with unique attributes.", Chiliz, 4 Mar. 2021, www.chiliz.com/zh/chiliz-chainlink-zh/.
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LeftOfCenter, "Chiliz will integrate Chainlink to realize real-time issuance of NFT", ChainNews, 23 Oct. 2020, www.chainnews.com/articles/767407855704.htm.
Panoramic interpretation of the next encryption investment boom NFT"encrypted art,", Jinse, 8 Aug. 2020, www.jinse.com/news/blockchain/800980.htm.
Lou Yue, "The five most anticipated trends in the NFT sector in 2020", ChainNews, 17 Jan. 2021, www.chainnews.com/articles/308959402011.htm.
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NFT20, NFTfi, Flow... When the NFT infrastructure matures"WebX Labs,", 2 Mar. 2021, www.8btc.com/article/6603879
