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Digital art is just the beginning. From crypto cats to mortgage loans to digital land in the meta universe, the NFT ecosystem can provide a lot of things.
Original title: “Deep into the 11 components of the NFT market and explore the future of asset ownership in Web 3.0”
Written by: Bai Ze Research Institute
In the first half of this year, the NFT track in the cryptocurrency field reached an unprecedented peak, which was attributed to the “physique” of the NFT itself. Almost every news organization is trying to explain questions such as “Why would anyone spend money to buy a jpeg image that anyone can take a screenshot?”.
According to DappRadar’s data, we can understand that NFT sales in the first half of 2021 reached 2.5 billion U.S. dollars, and since March, weekly NFT sales have remained at 10,000 to 20,000 units. In June, the monthly sales of OpenSea in the NFT market hit a record high, approaching US$150 million. And recently, with the rise of the concept of meta-universe-virtual land, meta-universe+NFT has brought NFT back to the mainstream view again.
On March 11, this day officially opened a new era of digital art and NFT prosperity. Mike Winkelmann, also known as digital artist Beeple, sold his NFT artwork “Everyday” for $69 million. This price not only set a new record for digital art, but also made Beeple’s work the third most expensive artwork sold at an artist auction.
And Twitter CEO Jack Dorsey (Jack Dorsey) even boosted the prosperity of NFT. He sold an NFT copy of his first tweet in 2006 for nearly $3 million.
Next, developments such as these have aroused people’s keen interest in the field of NFT. Although sales in the NFT market have declined in recent months, we can see more and more founders, artists, celebrities and investors pouring into this market.
And digital art is just the beginning. From Punk, Cryptocat and NBA cards to mortgages, virtual sneakers and digital land in the meta universe: the NFT ecosystem can provide many things. Let us dive into it next.
NFT market panorama
Encryption enthusiast Ole Heine on LinkedIn drew us a panoramic picture of the NFT market in 2021, which consists of trading markets, digital collectibles, games, infrastructure, financial protocols, domain name systems, data tracking platforms, autonomous organizations Dao, digital fashion, virtual exhibition hall and meta-universe composition. Below we will analyze them one by one.
NFT trading market
The digital trading market is an indispensable part of the NFT ecosystem. Although the rise of digital encryption art has promoted the supply side (artists and creators sell their works as NFTs), more and more collectors and investors are entering this field.
OpenSea is one of the oldest and well-established markets. It is a one-stop shop for users to create and trade NFTs. In March of this year, OpenSea raised $23 million in funding, led by Andreessen Horowitz, with angel investors including Naval Ravikant and Mark Cuban participating.
Another market is Rarible. The Digital Art Market recently announced a US$14.2 million Series A financing from Venrock Capital, CoinFund and 01 Advisors. The core of the platform is the platform’s Ethereum-based token RARI. By owning RARI tokens, collectors can vote on proposals that affect the platform, review creators, and curate featured artworks.
However, when evaluating these trading markets, one major difference is the difference in planning. Although platforms such as OpenSea and Rarible do not require a license, other markets including SuperRare, Nifty Gateway, Foundation, Known Origin, and Makersplace require special application procedures.
On Foundation, artists need to be invited by another creator to list their digital works. Other platforms such as SuperRare and Nifty Gateway require artists to upload videos to explain their experiences and motivations.
In addition, the issue of resale royalties of works is also worthy of our investigation. Resale royalties are the percentage that creators get from the secondary sale of their artworks. It is worth noting that different markets handle royalties in different ways. On SuperRare and MakersPlace, artists receive 10% of royalties, while artists on Rarible, Foundation and NiftyGateway can specify their own royalties.
Other notable markets include AsyncArt, Mintable, Zora, NFT Showroom, Blockparty, Cargo, Mitable and ArtBlocks.
Digital collectibles are the second pillar of the NFT ecosystem. Although there are few functions and categories, they include many high-value items determined by emotion and consensus (such as basketball or football player collection cards).
The first Ethereum-based NFT collection is CryptoPunks, which consists of 10,000 unique collectible punks, each with a unique set of characteristics. The most expensive auction was CryptoPunk #7523, which was sold at an auction held by Sotheby’s Auction House for $11.8 million.
CryptoPunk #7523 (Source: Larva Labs)
However, it was CryptoKitties that brought NFT into the mainstream. CryptoKitties was created at the ETH Waterloo Hackathon in Canada in 2017, and its feature is a game that allows users to collect, breed, and trade virtual cats. “Generation 0” cats are sold in auctions, and new cats can also be resold on secondary markets such as OpenSea. The most expensive sale is the CryptoKitty called Dragon, which was sold for 600 ETH or $172,000 in 2018.
Another well-known project in this field is NBA Top Shot, a basketball moment trading card platform created by DapperLabs in cooperation with the National Basketball Association. In April, LeBron James imitated the famous Kobe Bryant dunk’s best NBA shooting moment and sold it for $387,600.
Other collections include Sandbox, CryptoStamp, Avegotchi, MLB Champions, Meebits, TokenTrove, Hashmasks and Avastars.
Game platforms are an important pillar of the NFT ecosystem because they attract non-crypto users to the NFT ecosystem.
The best example is Sorare, a gaming platform based in Paris that is used to create and trade football players’ NFTs. In the game, players can form a five-card squad against other Sorare fans, and measure their performance based on the actual performance of football players in the football game. The winner of the contest can get rewards that can be exchanged for other cards or ETH. Sorare raised 40 million euros in Series A financing, led by Benchmark, in addition to Accel and angel investments including football players Antoine Griezmann and Rio Ferdinand.
One of the most famous crypto games is Axie Infinity launched by Vietnamese developer Sky Masis in 2018, and it has caught fire again recently. The game follows the game earning model, where players can fight, raise and trade digital creatures called Axies to build a virtual kingdom. In May of this year, the parent company Mavis Sky raised $8.75 million in funding from BlackTower Capital and Mark Cuban.
According to an article by Coindesk, as the new crown epidemic hits the Philippines, some Filipinos who have lost their jobs are able to make a living playing games and trading NFTs in Axies.
“With the money earned by playing Axie, Philipiness, the player in the game, has bought everything from baby diapers and milk to shoes and shirts for job interviews.”
Other famous NFT games include Gods Unchained, F1 Delta Time, Guild of Guardians, Splinterlands, CSC, Kingdom League, Lost Relics, ChainZ Arena, Crazy Kings, Evolution Land and MyCryptoHeroes.
Ethereum is dominant in the NFT ecosystem, but there is still room for improvement. As of July 2021, 8 of the top 10 NFT projects ranked by sales are built on Ethereum. However, high gas fees (the cost of transactions on Etherium), network congestion and unsatisfactory user experience are still a problem. This provides a market opportunity for new players. Significant improvements must be made between layer 1 and layer 2 solutions.
The first layer “base layer” refers to the underlying main blockchain architecture, and the second layer is the overlay network that exists on the underlying blockchain.
- Layer 1-Basic Layer: Etherium, Flow
- Layer 2 / Sidechain: WAX, Polygon, Enjin, Charged Particles, Tari
Financial agreement in NFT
Many interesting projects are working on the integration of decentralized finance (DeFi) and NFT:
- NFTfi: One of the first platforms for NFT mortgage loans. Users can earn income by lending ETH to users who use their irreplaceable tokens as collateral.
- NIFTEX: A platform with partial ownership of NFT. It was launched in May 2020, long before the NFT went out of the circle.
Other participants include Armor.fi (DeFi asset coverage company) and NFT20 (NFT index fund provider).
Blockchain Domain Name System
Although the traditional domain name is just the URL of the website, the blockchain domain name is associated with the wallet address, making it easier to send and receive payments. The domain name NFT, replace the complex cryptocurrency wallet address with a simple, human-readable name.
The main players in this field are Unstoppable Domains, Etherium Name Service (ENS) and Handshake.
Data tracking platform
Data tracking and analysis platforms play an important role because they bring transparency to the NFT ecosystem.
The leading database and analysis platforms are Nonfungible.com, DappRadar, NFTbank and Upshot.
Audio NFT platforms support the creation of musicians, just as the digital art market supports artists: they open up new ways for creatives to turn their work into assets.
Audio NFT eliminates the traditional mode of preserving music on records, and will help bring greater freedom to artists and greater openness and usability for users.
Well-known decentralized music streaming services are Audius, Rocki and Opus.
Decentralized Autonomous Organization Dao
DAOs “decentralized autonomous organizations” are communities owned by members that exist on a set of smart contracts. In the context of NFT, DAO can be used as an investment tool for NFT projects. Investors in the DAO can vote on proposals according to the rules established in the smart contract, and everyone’s vote is weighted by the number of tokens they own. If the proposed investment gets enough votes in favor, the smart contract will automatically trigger the transaction.
- Flamingo: A NFT-focused DAO that enables its members to develop and deploy NFT-focused investment strategies.
- ArkGallery: Buy the DAO of cryptopunk.
- WHALE: The WHALE token is a social token created by WhaleShark, one of the largest individual buyers of NFT. The owner of the token obtains a portion of the shares of Whale Shark’s NFT collection.
- FWB: FWB is a social token representing the community of NFT artists and creators.
NFT is about collectibles, and so is the fashion industry. One of the most famous start-ups in this field is the virtual fashion brand RTFKT, which recently announced a $8 million seed round of funding from Andreessen Horowitz and C Ventures.
A virtual hoodie launched by NFT fashion brand Overprice was sold for $26,000. The owner can virtually “wear” clothes by scanning the VR code on the smartphone.
Other NFT fashion brands include DressX, Digitalax and MetaFactory.
NFT’s virtual exhibition hall
You may now be wondering: “If you can’t show them to the public, what is the point of buying all these NFTs?” This has gradually created a whole new industry in the NFT field, and it is currently developing rapidly.
- Virtual galleries: Encrypted Art Museum, Flawnt and MOCDA are virtual galleries that allow collectors and artists to display their NFTs.
- Digital photo frames: Digital photo frames/displays from Blackdove, Qonos and Tokenframe allow NFT owners to display their purchased artwork in real life.
Other interesting projects in this area are Showtime (social networking) and Infinite Objects (NFT printing service).
Virtual world/meta universe
Have you played Minecraft, Fortnite or Sims? Then the virtual world may be for you.
The virtual world is a computer-simulated world in which users connect with each other, just like in the real world.
Decentraland is one of the most famous virtual worlds, and it provides a whole new experience: most things in Decentraland are NFTs. From virtual land to artworks on the walls of virtual galleries-players can buy, collect and sell assets that only exist in the virtual world. Decentraland is divided into different areas, from the gambling area Vegas City and the shopping area Metajuku to the education and business area, where users can meet and collaborate.
In June, a piece of virtual land in Decentraland was sold for more than US$900,000, making it the most profitable NFT land purchase ever. Other players, such as Somnium Space, Upland, and Cryptovexels (also known as “blockchain Minecraft” because players build with blocks) also perform the same tasks. They allow users to buy virtual land, build items, and tokenize them by trading on platforms such as OpenSea.
A virtual shopping area where users can buy virtual clothes (Source: Decentraland)
Look to the future
When we look back at the NFT sales history from May to today, the NFT bubble seems to have burst. According to Nonfungible data, overall sales plummeted from a seven-day peak of US$176 million on May 9 to approximately US$8 million in mid-July.
Many market analysts compare the Internet bubble of the late 1990s with the NFT bubble. As the growth of the technology industry stabilized after the bubble burst, Web2 companies such as Google, Facebook, and Amazon emerged and reshaped our daily lives.
In the expected Web3.0 in the future, which companies will lead the new trend? Maybe they are already on this map, we will wait and see.