Non-Fungible Tokens (NFTs) empower creators with a new business model and give consumers around the world 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 at the time. BTC shows us what happens when an open, permissionless ledger can prove the authenticity and true ownership of digital information without a third-party intermediary. In the more than ten years since BTC was released to the world this time, it has not stopped with BTC, and NFTs have also proved that the blockchain can be used for many other purposes than cryptocurrencies.
The craze of NFTs this year covers a wide range, such as visual art (visual art), gaming (gaming), photography (photography), music (music), fashion (fashion) and consumer brands (comsumer brands). In 2017, a quirky idea on Ethereum (an on-chain game of trading and mating virtual cats) has grown into a multi-billion dollar global asset class that has helped thousands of creations and millions of consumers. But we are still in the early stages of this movement.
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, NFTs kick in as anyone in the world can participate without permission, and no one controls the database where the digital goods reside explosive growth.
NFTs give users real ownership. Tokens are owned on-chain by controlling locally stored private keys (no need for a centralized server). When you own an NFT, you can verify it to anyone in the world by signing a transaction with a private key you control, and no third party can take it away from you.
The public ERC 721 protocol created on the Ethereum blockchain in 2017 was the main catalyst for the growth of NFTs. ERC 721 is a standard that allows anyone to mint and transfer NFTs. Before Ethereum and ERC 721, NFTs have been tried on the blockchain in various forms. But the user experience, interoperability, and ease of use that both Ethereum and ERC 721 offer developers are game-changing. There has been an enthusiastic community of builders experimenting with the protocol since 2017, and in 2021, all of these experiments are paying off with massive growth in the category.
NFTs now represent the bleeding edge of the cryptocurrency industry, bringing users to the space by spreading faster than any other category within cryptocurrency. Today, it’s not just ERC 721 on Ethereum that is thriving, but ERC-1155 and many other NFT protocols on other blockchains like Ronin, Polygon, Tezos, Flow, and Solana.
There are many use cases for NFTs – any creative activity on the internet can be tokenized as an NFT and sold to backers.
To date, there are four main categories of NFTs that represent most of the activity: visual art, profile-pic-projects, cultural collectibles, and gaming . Each of these four categories has grown into a multi-billion dollar global asset class, and all are worth taking a closer look at.
Generating sustainable income as a digital artist has historically been difficult. Visual artists use centralized social networks like Facebook, Instagram, and Twitter to reach consumers, but that doesn’t give everyone much freedom, and it’s very easy to make real money through the web2 business model (advertising) difficult. Top artists can build their name in web2 and generate freelance work, commissions and brand deals, but these are generally constraints on creativity (and not so 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 directly to consumers.
Traditional art has a global market of over $50 billion. Before NFTs, digital artists could not participate in this market because they did not have an easy way to authenticate the scarcity and originality of their work. Traditional works of art are difficult to copy and also difficult to authenticate, on the contrary, the emergence of NFTs makes the reproduction and authentication of digital works of art very simple.
Easy verification of original work has led digital artists to sell more than $2.BT worth of art on Ethereum this year (source: Cryptoart.io). These big names include Pak, Beeple, Xcopy, and Dmitri Cherniak, who all grab the headlines, but thousands of visual artists are thriving right now. Art from over 1,200 artists has sold for more than $100,000 to date.
Profile Picture Projects (PFPs)
A specific type of visual NFT that has exploded this year are Profile Picture Items (PFPs). These are collections of a fixed number (most commonly 10,000) of digital characters, all of which share a similar art style, but differ in their characteristics. Larva Labs created Cryptopunks in 2017, the real PFP project that started it all. Since then, thousands of PFPs have emerged. Bored Ape Yacht Club and Nouns are a few of the more well-known projects, but the various others on this list are endless. CrypToadz, World of Women, Long Neckie Ladies, Lost Poets and Queens + Kings are other recent notable PFPs.
PFPs represent a new way of building brands from the bottom up instead of the top down. For over 100 years, consumer brands have been built top-down by businesses. We believe that over the next 100+ years, brands will be built from the bottom up by PFP projects 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.
PFPs are foundational, user-owned brands that people around the world can engage with right from the start. By owning a PFP and representing it as a digital identity, anyone can belong to a community and spread that community around the world. The combination of unified incentives and shared beliefs makes it an incredibly powerful force when you compare it to the old top-down approach of building brands as entities controlled by corporations. The benefits are obvious.
Every aspect of internet culture can be tokenized and sold as NFTs, in this report we define sports, music, photography, video and other NFT collectibles as “cultural collectibles” . Music, photography, video and sports are just a few of the subcategories within the bucket of cultural collectibles that could develop into their own large-scale independent categories in the coming years. If you are a builder or collector in this field, these are areas that are worth exploring further and will continue to grow in the future.
Online games and NFTs are a natural fit, as NFTs give players real 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, allowing game developers to leverage 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-world real money in-game, while developers can also grow their gaming ecosystem from what was originally created.
Axie Infinity is leading the play-to-earn gaming movement to date. 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 think that Axie Infinity is just the epitome of the first generation of earn-as-you-play games, and expect to see an explosion of compelling games and experiences in this space over the next few years.
Developers are attracted to NFTs because their open and interoperable nature allows new gaming experiences to be built on top of the original game. This has never really happened in previous games – historically, all popular games were owned by big companies with closed ecosystems (For example, Fortnite is owned is owned by Epic of). When compelling experiences are built on top of existing games and in-game assets, online gaming leaps from one-hit wonders to long-term engagement communities.
NFTs have been used to represent land titles in virtual worlds, but also financial assets, such as custom liquidity terms on AMMs, grant access to experiences, and serve as tickets to redeemable physical goods, and more. These early use cases are not yet widely adopted, but they have obvious potential. We suspect this will lead to other use cases that may not currently exist. The future of creativity in NFTs is very bright.
Each NFT collection 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, every NFT contract was fragmented. This makes it difficult to build applications that can interact with all NFTs (for example, marketplaces like OpenSea) because custom code must be written to interact with each contract.
The ERC721 standard is the most ubiquitous and the main catalyst for the global liquidity we are now seeing in markets like Opensea. But some projects use the ERC1155 standard, which differs in that it can create both homogenous and non-fungible tokens. In ERC1155, IDs represent not just a single asset, but an asset class. ERC1155 contracts save gas when 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 “Layer 2s” built on top of Ethereum and still rely on Ethereum for consensus, such as Polygon and Ronin. There are also separate, competing “Layer 1s” such as Flow and Solana. There is a lot of competing noise around L1 now, but Ethereum and its L2 still account for over 90% of the NFT volume (see below). With more L2 innovations to come in 2022 and beyond, we expect the Ethereum ecosystem to continue its dominance. But adoption to other chains is likely to grow as well.
Here is a quick timeline of NFT history
2012-2013: Colored Coins
Colored coins are Ethereum’s first attempt to introduce both homogeneous and non-fungible tokens on Bitcoin. Yoni Assia published a specification for Colored Coins in 2012 and had an implementation in 2013. While Bitcoin’s scripting language was limited, this approach never gained much traction, but it planted the seeds for future development.
Counterparty builds on the Colored Coin idea of adding metadata to transactions to represent new coins. Historic projects such as Rare Pepe and Spells of Genesis were launched on Counterparty during this period. The limited scripting language also hindered the development of Counterparty, and the project never outgrew a small group of cryptocurrency natives, but it was also a major advance.
2017-2018: Punks, Kitties and OpenSea
In June 2017, John Watkinson and Matt Hall created CryptoPunks, 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, CryptoKitties was the first notable project to launch using the standard. CryptoKitties quickly gained traction and media attention as some players made six-figure profits on their trades.
While the CryptoKitties marketplace charges 5%, the main benefit of NFTs is that users have real ownership of them and can do whatever they want with them. Shortly after Kitties gained some traction, a non-custodial marketplace for people to buy and sell ERC721 tokens emerged: OpenSea.
2019-2021: The Awakening
Beginning in 2019, the NFT experiment ushered in a climax. Until the end of 2020, NFT trading volume was small compared to cryptocurrency trading volume, and experiments were largely outside the mainstream. But a small but passionate community of truly loving believers is working to grow the ecosystem.
At the end of 2020, blue-chip artists like Pak and Beeple have put up high-profile work on SuperRare and NiftyGateway. In 2021, PFP exploded (Bored Apes, Nouns, Toadz), with traditional auction houses such as Sotheby’s and Christie’s and mainstream consumer brands such as Adidas and Nike heavily participating.
OpenSea is the largest NFT marketplace by trading volume. In 2017, co-founders Devin Finzer and Alex Atallah saw 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 and the most widely used non-custodial cryptocurrency application.
In 2021, the platform has a trading volume of $16 billion and 1.26 million active users.
SuperRare is the leading market for high-end visual art. The platform was launched in early 2018 by co-founders John Crain, Charles Crain and Jonathan Perkins. Since then, SuperRare has curated a cohort of talented artists and built a community of passionate collectors.
This year, SuperRare launched the first phase of its long-term decentralization plan, distributing RARE tokens to the community, investors and core teams. RARE is used to manage new curated spaces on the platform.
According to the sales of the top 1000, the current average selling price of SuperRare works is 10.6ETH. This is the highest price in any market in the industry.
In 2021, the platform has a trading volume of $207.5 million and 4,400 active users.
Foundation is a marketplace spanning many cultural asset classes, from digital art to music to memes. The platform launched in February 2021 and has already hosted a number of auctions as varied as the original Nyan Cat memo to Edward Snoeden’s NFT, which captures the court’s landmark decision to rule NSA mass surveillance illegal .
In 2021, the platform has a trading volume of $135 million and 26,000 active users.
Since its launch in late 2019, the Rarible marketplace has been an active center for collectibles and art trading. 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.
In 2021, the platform will have a total transaction volume of $249 million and 79,000 active users.
Fractional is a protocol that enables the ownership of one or a group of NFTs to be easily divided and shared. Users can lock one or a group of NFTs in a vault, split NFT ownership in the vault into a fixed supply of ERC20 tokens, and then list those tokens on a decentralized exchange.
Fractional has seen strong early adoption since its launch in July 2021. Popular fractional tokens, such as $DOG, the original Doge meme’s NFT’s fragmented token, have been traded on DEXs in excess of hundreds of millions of dollars.
In 2021, the trading volume of fragmented tokens on the platform will be $1.78 billion, with 37,000 trading users.
Launched in March 2021, Catalog has become the leading curated marketplace for music NFTs. Each Catalog record is a one-of-a-kind collectible released by the artist.
Catalog has already embraced musicians from a range of genres from dancehall to techno, and we expect to see blue chip artists on the Catalog platform in 2022. Some early candidates include Haleek Maul, Daniel Allan, Matthew Chaim and Xcelencia.
In 2021, the platform has a trading volume of $1.65 million and 181 active users.
4. Key projects
Pak is an anonymous creator known for pushing the boundaries of NFTs by exploring new mechanisms impossible in traditional art mediums. They currently hold the No. 1 spot in the crypto art space with over $291 million worth of art sold to date. They also hold the record for the most expensive sale of a work by a living artist at auction. Their drops are multi-dimensional, incorporating puzzles, game theory, mystery, and clean geometric visuals. In 2021, Pak creations are all tied to the $ASH token, which is earned by burning Pak NFTs and unlocks early access to new projects.
CryptoPunks is the first programmatically generated NFT PFP project on Ethereum and holds the status of NFTs “rookie card”. When it launched in 2017, NFTs could be claimed for free by anyone with an Ethereum address. 2021 cements the project’s status as a blue-chip PFP. The record for CryptoPunk was held by ‘Covid Alien’ Punk #7523, which sold for $11.75 million at Sotheby’s auction in June.
Bored Ape Yacht Club is 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 provides an interesting roadmap of benefits, such as editing access to shared art boards, NFT and IRL activities for airdrop companions. This strategy is in stark contrast to previous PFP projects such as CryptoPunks and Hashmasks, where once they were delivered, creators had little to no further input.
Art Blocks is a major marketplace for generative art and has seen incredible growth this year. Each item is a collection of works of art, randomly generated at the time of minting using an algorithm designed by the artist. This year’s blue-chip art block series is like Ringers to Dmitri Cherniak and Fidenza to Tyler Hobbs.
4.5 Everydays: the First 5000 Days”
Beeple has been creating a piece of art every day for the past 13+ years, and in 2021, all his hard work has paid off. Beeple’s Everydays: The First 5000 Days piece is a collage of 5000 images created for his Everydays series. This work is the first NFT work to be auctioned by a major traditional auction house, and holds the seventh most expensive sale price for a work of art by a living artist.
Beeple follows this sale with another massive sale at Christie’s in 2021: $29M for Human ONE
XCopy is a London-based NFT artist who explores death, dystopia and apathy through distorted visual loops. He is the top artist with the highest total and single sales on SuperRare. XCopy, one of the earliest pioneers of NFTs as an artistic medium, started his journey as a creator and evangelist of crypto art in 2017.
4.7 Axie Infinity
Axie Infinity is an NFT-based game where players battle, raise and trade fantasy creatures called Axies. Every Axie is an NFT. Axie Infinity is the largest NFT game based on transaction volume and active player base, and has been leading the game-to-play movement to date.
We’re excited about several trends for 2022:
The music industry has collapsed. We all know this. Today, there are more than 8 million musicians on Spotify. Only 7,500 of them, 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 turn music into something that everyone can listen to for free, but having a scarce, authentic version is expensive (like traditional art). Catalog is a leader in this regard, and Arpeggi Labs is another platform to watch. In 2021, collectors will place less emphasis on audio NFTs than visual NFTs, but that 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 Inner EP by Haleek Maul. Haleek has sold four songs from his new EP for $235,000 in 2021. He would need about 59 million Spotify streams to earn the same amount. Haleek now has a new way to develop his music without a traditional label. His fans are his record company, and there is a strong motivating effect.
5.2 Photographic pictures
Photography is another creative category poised to gain momentum in 2022. It’s picking up steam in 2021, with photographers like Isaac “Drifters” Wright and Justin Aversano casting and selling popular collectibles (Where My Vans Go and Twin Flames). There were previously limited ways for photographers to make money online, but now NFTs offer photographers a new way to build direct relationships with fans and fund their art.
The #FreeHawaii project is an interesting case study of how the National Trust can empower photographers. Cath Simard is a famous Canadian photographer tired of going after people who infringed the copyright on her most famous photo, which was shared millions of times without her name being given. Previously, she was unable to charge a dollar for her efforts, but when she decided to sell her photos as NFTs and then release the rights to use them to the world, her NFTs sold for $300,000 at auction.
5.3 NFT-like 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 various products and services have proliferated.
NounsDAO is a good case study of DAOs in the context of NFTs. Created by a group of Nounders, including Punk 4156 and Gremplin, Nouns is a PFP project that auctions one Noun per day. Proceeds from the sale of Nouns go to a treasury managed by Nouns holders. Each noun represents not just a piece of art, but a vote that determines how the treasury spends its funds. We expect many novel NFTs+DAO experiments to emerge in 2022 and beyond.
2021 has been a breakout year for NFTs, but the asset class is still small relative to the broad range of cryptocurrencies. The total market capitalization of NFTs is about $31.4 billion, which is only about 1.36% of the total market capitalization of cryptocurrencies ($2.3 trillion).
We believe that by the end of the decade, NFTs will eventually surpass cryptocurrencies in size, and in 2022 steps will be taken towards this goal.
- Existing large cryptocurrency exchanges (Coinbase, FTX, Kraken, etc.) will recognize the importance of entering NFTs for their business growth. Upward channels for fiat currencies will be improved, making it easier for those outside the cryptocurrency ecosystem to buy their first NFTs.
- There will be more consumer brands and celebrities launching NFT projects, gaining more mainstream attention for the category and further making NFTs part of mainstream culture.
- Belief in the value of many types of NFTs beyond pure visual arts — such as music, photography, and virtual real estate — will grow, with several of these categories becoming multi-billion dollar asset classes in their own right.
- NFTs will appear in a large area on Ethereum L2s, bringing cheap and fast NFT experience to more people. This will make the total number of users of NFTs bigger and bigger, and will exceed 10 million by the end of the year.
The NFT space is crazy in 2021, and 2022 is shaping up to be even crazier. Thanks for reading.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/1confirmation-nft-industry-review-and-summary-in-2021/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.