In one point, non-fungible tokens (NFT) are just a primitive form of blockchain, just like replaceable ERC-20 tokens. However, the narrative of NFT as a category has begun to refer to broader trends, so, similar to DeFi, the term “NFT” now includes its own ecosystem.
However, NFT will utilize many of the same financial primitives as DeFi, so its stack of layers (7 layers in total) will look very similar in the end, but more consumer-centric.
Layer 1: Layer 1 project
So far, the NFT field has been dominated by Ethereum, Flow and the smaller Wax. Most NFT applications may need to transition from the Ethereum main network to Layer 2 solutions or side chains, while relying on Ethereum as the settlement layer. The exceptions to this rule may be those high-end digital art or blue-chip collectibles that require stronger censorship resistance.
Other base layers (Layer 1), such as Solana, are actively building their NFT infrastructure, such as Metaplex, which enables individuals to build their own NFT storefronts and publish NFT collections through customizable royalty distribution.
Layer 2: Layer 2 solutions and side chains
Most consumer-centric non-homogeneous token applications-games, sports, virtual worlds, utility assets, etc.-have experienced turbulence on Ethereum. After building CryptoKitties and CheeseWizards, Dapper Labs decided that Ethereum could never provide the powerful scalability required by game studios, and chose to build Flow. Similarly, even projects like Sorare, which correctly determined the direction of scalability, built on sidechains like Loom that eventually closed down, failed to try to extend their NFT. Axie Infinity does not want to rely on other third parties, so it embarked on the road of establishing its own side chain Ronin. So far, the side chain has been very effective in reducing gas costs and increasing user adoption.
As an Ethereum hybrid Layer 2, Polygon’s biggest advantage so far is its compatibility with Ethereum, which reduces the learning curve for users and developers. In addition, Polygon uses its tokens to incentivize bridging to its network very well. It is worth noting that Polygon is setting up a new $100 million fund for games and non-fungible token projects, doubling down on NFT.
The developers of Gods Unchained, Immutable Labs are about to launch their Ethereum Layer 2 scaling solution ImmutableX. This Layer 2 is built using ZK-rollups, and the Immutable team claims that it is more suitable for NFT-based applications.
Check out Messari’s article on Ethereum scaling solutions to understand the breakdown of ZK-rollup and sidechains and state channels.
So far, this story should sound familiar-[Insert Encryption Project] built a relatively successful NFT protocol, but was unable to achieve the necessary scalability on the Ethereum mainnet, and chose to build its own solution [insert new area Blockchain].
The last high-profile NFT layer 2 solution comes from Enjin, the first platform to provide token injection with a fixed sticky curve for each token. Recently, Enjin raised $18 million for its NFT scaling solution Efinity, a new blockchain built as a Polkadot parachain. As part of Efininity, Enjin, the company that pioneered the ERC 1155 token standard, is developing a new token standard called “paratokens”, which will be interoperable across the entire Polkadot ecosystem and used to issue Efinity tokens (EFI ).
Although the battle of smart contracts is the battle of blockchain’s DeFi applications, the upcoming battlefield between Layer 2 will compete for NFT hegemony.
Layer 3: Vertical/Application
Although NFT is created and transmitted at Layer 1 or Layer 2, the application layer is a potential interface for issuing these tokens. As individuals enter the world of conferences, art galleries, casinos, and upcoming use cases, virtual worlds like Decentraland and Cryptovoxels have slowly grown over time.
Other apps such as Fantasy Sports have gone through crazy speculation, but are still adding new users. So far, encryption-based sports applications have achieved incredible success. NFT sports applications have generated more than 800 million U.S. dollars in secondary sales, and if primary sales are taken into account, it may exceed 1 billion U.S. dollars.
Although blockchain-based games as a trend have not yet fully taken off-partly due to scalability issues-with the release of several upcoming games (including Illuvium, EmberSword, Aurory, etc.), the field is still continuing increase.
In addition, Uniswap V3 is the first financial application that effectively utilizes NFT. Uniswap’s V3 agreement needs to actively manage liquidity-LP selects a range within a custom price range in the asset market-in the process to create an individual price curve represented by NFT. Each NFT is shown as a unique on-chain generation art based on the attributes of your position.
In addition, DeFi protocols like Synthetix choose to use NFT as a member of the Spartan committee that manages the Synthetix protocol. Each committee NFT (SC-NFT) is unique to an individual and can be withdrawn from old members and awarded to newly elected members of the committee.
Although the issuance protocol that offers to create your own unique NFT (ie SuperRare token or Zora’s zNFT) may be suitable for the application layer, the main benefit of the market comes from its liquidity, which is why I put these protocols in the financial layer.
NFT issuance is a commoditizable layer that can be facilitated by multiple layers of the stack, including:
Layer 1 or Layer 2 blockchain and scaling solutions
White label distribution agreement (for example, Nameless is used for Veefriends)
Market agreement (eg Rarible)
Individual applications (ie Sandbox, Uniswap, etc.)
Front-end interface (such as Zapper)
Ultimately, these platforms will have to rely on the unique utility propositions they can provide to users. The virtual world can license content, and Top Shot cards will be used in the Hardcourt game of NBA Top Shot.
Layer 4: Auxiliary application
Composability ensures that other developers can build on existing applications and protocols.
Decentraland and other virtual worlds will undoubtedly have various applications in their ecosystem, such as online casino Decentral Games. In addition, Sorare has also established a partnership with Ubisoft, which is using existing Sorare cards to develop its own dream league One Shot League. The composability of this layer means that applications or protocols that facilitate the development of third-party applications will have the opportunity to gain more value.
Level 5: NFT financialization
Similar to assets in DeFi, NFT requires similar primitives such as lending, liquidity, and asset management. In addition, although the value proposition of NFT lies in its uniqueness, fungibility is important for increasing liquidity and the financialization of NFT. So far, projects focusing on the financialization of NFTs are trying to make irreplaceable tokens as fungible (and liquid) as possible.
Most agreements aimed at increasing the liquidity of NFTs are implemented by creating liquidity pools in which individuals can deposit similar NFTs, or subdivide individual NFTs to encourage greater speculation.
NFT Fragmentation Project
Fractional-Collectors create part of the NFT as fungible tokens, which can be combined to redeem the tokens, or the base NFT can be purchased at a price higher than the reserve price.
Niftex – NFT owners create NFT shards as fungible tokens. The basic NFT can be recovered by obtaining 100% of the shards or through special buyout clauses.
NFT liquidity pool project
NFTX-Collectors can deposit NFT into the NFTX vault and mint a fungible token (vToken), which represents the ownership of random assets in the vault, or redeem specific tokens from the same vault.
NFT20-a decentralized exchange where individuals can deposit NFT in the pool in exchange for a fungible token (such as 100 Punks tokens) that can replace an NFT (such as CryptoPunk) in the pool.
Unicly-subdivide the NFT collection into uTokens that can be traded. Specific collections (such as uPunks) are locked
Profitable NFT assets
Charged Particles-a protocol that allows users to deposit fungible or non-fungible tokens into NFT. Charged Particles NFT can be programmed using aToken with revenue.
Uniswap V3 LP positions-by providing liquidity, LP charges fees based on the three levels of each pool-0.05%, 0.30% and 1%-corresponding to different price ranges.
NFT issuance platforms and markets currently constitute one of the largest categories of NFT agreements, and are one of the more obvious market opportunities with business models in mind.
In this regard, the NFT issuance agreement and the market will compete based on the following characteristics:
Liquidity (depth and breadth of assets)
Unique features (ie unique token standards, royalties, collection fees, etc.)
Additional service products (such as partnerships)
Although unique features such as royalties and collector fees can one day be commoditized and incorporated into token standards, they are currently non-standard and therefore have become a key value proposition for many NFT creators and companies.
In the long run, the market may aim to be closer to social networks in order to fix users on their platforms. Ironically, this is the opposite of social networks such as Facebook and Instagram, which were originally social networks and later developed the market.
Layer 6: Aggregator
The aggregator can take many forms. Some agreements aggregate supply, while others focus on the demand (consumer) side. In the NFT field, there are actually only two main aggregators-OpenSea and Rarible. Both markets aggregate supply by integrating various smart contracts and the final blockchain. Since Rarible has only recently integrated the ability to buy and sell non-Rarible tokens on its platform, OpenSea has always been the de facto aggregator in this field.
Although many people view OpenSea simply as a market, it also aggregates a large amount of NFT data and metadata—data about data—that can be accessed through its API and may be used for other purposes. Both OpenSea and Rarible continue to create full-featured platforms for projects and individuals to issue irreplaceable assets. As aggregators compete for growth, they will continue to expand their asset offerings on multiple blockchains.
Layer 7: Front end and interface
There are many companies competing for eyeballs and building de facto front ends for NFTs. With collectibles and crypto art as the first breakthrough use cases, entrepreneurs choose to build galleries or interfaces for collectors to display their irreplaceable assets. Wallets such as Coinbase Wallet and Rainbow, as well as platforms such as Zapper and Zerion provide friendly interfaces to view NFT portfolios.
More powerful NFT analysis platforms (such as NFT Bank) provide returns in terms of investment analysis, taxation, and price estimation. There are multiple analysis platforms, but there is no interface to view NFT, including Nonfungible, Cryptoslam, and Nansen.
As NFT gains wider recognition, even agreements that do not publish NFTs may build interfaces for users to view, share, and interact with NFTs. Audius is a decentralized music streaming platform that launched Audius Collectibles, where artists with silver accounts-artists holding more than $100 in AUDIO tokens can display NFTs on their profile pages. This type of model incorporates native platform tokens and provides another way for artists to showcase their artwork, albums, or any assets they tokenize.
Similarly, applications such as Showtime and Nifty are building social networks for users to share and like NFT collections and interact with other collectors. Eventually, displaying NFTs on personal data or social networks may become universal across platforms. Finally, platforms like RabbitHole are issuing rewards (as tokens and potential NFTs) to users who use applications such as OpenSea and Uniswap.
In the past 12 months, the NFT landscape has evolved from a small ecosystem with sales of hundreds of millions to a multi-chain ecosystem, in which the sales of individual projects such as Axie Infinity have exceeded US$1 billion. OpenSea’s full-year sales in 2020 were 24 million U.S. dollars, and by August 2021, sales exceeded 1 billion U.S. dollars. Unlike the DeFi ecosystem, NFT is highly consumer-oriented and compelling. As DeFi continues to build the future financial track, NFT will periodically enter the cultural zeitgeist.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/a-picture-to-understand-the-nft-stack-what-projects-do-you-know-about-the-current-state-of-the-nft-ecosystem/
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.