A quarterly overview of NFT development: technology solutions, infrastructure and application tracks

2021 NFT gradually with traditional art finance, entertainment media and other markets gradually integrated, the diversity of asset forms and good application scenarios make its ecosystem continues to expand, spillover effect is obvious.

A quarterly overview of NFT development: technology solutions, infrastructure and application tracks

Editor’s Note: This article was written and published by Cabin VC in collaboration with Flow and The Sandbox

NFT and FT are essentially blockchain-based technical protocol standards in the digitization process of assets, and in the common context, NFT is also used to refer to asset classes with the above characteristics or the market itself composed of such assets.

In 2020, the NFT ecology was first formed, and then the outbreak of DeFi ushered in its first round of boom. 2021, NFT gradually integrated with traditional art finance, entertainment media and other markets, and the diversity of asset forms and good application scenarios made its ecosystem continue to expand, with obvious spillover effects.

At present, most NFT applications are still developed with Ether as the underlying layer, and the market share of other underlying public chains supporting NFT asset issuance and circulation, such as BSC, is relatively small. The problems of high GAS fees and network congestion on the Ethernet chain have become important issues affecting the stable development of NFT ecology, and NFT ecology has started to seek layer 2 or side chain solutions, such as Polygon and other solutions to implement off-chain computing technology development with Layer 2, and the NFT platform project Sky Mavis is gradually NFT platform project Sky Mavis is gradually integrating Axie Infinity into its sidechain product Ronin, and Dapper Labs’ CryptoKittie will be migrated to Flow.

Excluding NBA Top Shot sales, non-homogenized token (NFT) sales surpassed $2 billion in Q1 2021, up more than 20x from Q4 2020, with an impressive growth rate compared to the cryptocurrency market despite its small market cap. Compared to 2020, the structure of asset classes in this market has changed significantly, and real assets such as ticket coupons, artworks, funds and stocks can be digitized by using NFT technology to embed equity and verifiability, etc. The current diversity of asset classes is not enough to boost the overall liquidity of this market, and limited liquidity is still one of the specific dilemmas of the current NFT ecosystem.

I. History of NFT market development
1993 – Crypto Trading Cards

NFT traces its roots back to 1993, when Hal Finney shared an interesting concept with the Cypherpunks group at CompuServe – Crypto Trading Cards.

A quarterly overview of NFT development: technology solutions, infrastructure and application tracks

2012 – Colored Coin

The first NFT-like token, Colored Coin, was created in 2012, consisting of small denominations of bitcoins, with the smallest unit being a satoshi (the smallest unit of bitcoin). Colored Coin demonstrates the potential for the malleability and growth of real assets on the 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 and distributed open source internet protocol on top of the Bitcoin blockchain. counterparty supports asset creation with a decentralized Counterparty supports asset creation and has decentralized exchanges, XCP contract coins and many projects and assets, including card games and Meme trading.

2015 – Spells of Genesis

Spells of Genesis game developers distribute game assets on-chain through the Counterparty platform, funding game development by issuing BitCrystals tokens, which can also be used as game currency.

2016 – Force of Will

In August 2016, Counterparty partnered with Force of Will, the fourth largest selling card game in North America, to distribute cards on the Counterparty platform. This partnership demonstrates the interest of mainstream gaming companies in digitizing game assets, and is a symbolic exploration and experiment.

2016 – Counterparty Rare Pepes

In October 2016, Rare Pepes, a type of meme featuring frogs, were released as assets on the Counterparty platform. These memes have a large fan base and a meme exchange called the Rare Pepe Meme Directory.

2017 – Ether Rare Pepes

In March 2017, Peperium, a decentralized meme marketplace and trading card game (TCG) project, made it possible for anyone to create memes that are permanently stored on IPFS and ethereum. Peperium-associated token RARE can be used to create mods and pay for the listing of works.

2017 – CryptoPunks

In CryptoPunks, the NFT project of John Watkinson and Matt Hall, creative technologists, avatars are born on Ether, capped at 10,000, and available for free to anyone with an Ether wallet. CryptoPunks does not follow the ERC721 standard because it was not established at the time, and as a result, its avatars are not exactly ERC 721. Therefore, the technical standard for CryptoPunks to build avatars can be described as a hybrid of ERC721 and ERC20.

2017 – CryptoKitties

CryptoKitties, a blockchain virtual game launched by Vancouver-based Axiom Zen that allows players to adopt, feed, and trade virtual cats, is pushing NFT from niche to mainstream. The rise of CryptoKitties coincided with a bull market in 2017, driven by a frenzy of CryptoKitties enthusiasts that saw the price of some virtual cats rise wildly to $100,000, drawing attention to the potential and power of non-homogenized tokens.

Axiom Zen then spun off Dapper Labs, which raised approximately $15 million from top investors including A16z and Google Ventures.

2018 to 2020 – NFT’s early ecosystem takes shape

From 2018 to 2020, the NFT market size grew by 825%, the number of active addresses grew by 201%, buyers grew by 144% and sellers grew by 113%. Although the NFT market has a small trading volume compared to other cryptocurrency markets, it is growing significantly.

In 2020, Dapper Labs enhanced the integrity of the NFT ecosystem by releasing Flow, a Layer 1 public chain built for gaming and other digital assets as a target market. In January 2021, VIV3, a Flow-based NFT trading platform, went live, allowing artists, game studios and others to use VIV3 to mint NFT tokens using Flow technology. In January 2021, VIV3, an NFT trading platform based on Flow, went live, allowing artists and game studios to use VIV3 to mint NFT tokens using Flow technology and offer assets to fans, collectors, gamers, and digital asset investors, broadening the distribution and trading channels of NFT works on leading trading platforms such as OpenSea and SuperRare.

II. Overview of NFT market ecology
The NFT market is growing exponentially year by year, with total USD transactions rising from $62.86 million to $250 million from 2019 to 2020, an increase of nearly three times. 2021 NFT benefits from the prosperous development of the DeFi ecosystem, according to NoFungible data (excluding NBA Top Shots) According to NoFungible data (not including data from programs such as NBA Top Shots, Nifty Gateway, etc.), the NFT market in the first quarter alone has surpassed the full year 2020 by eight times, at approximately $2 billion.

The number of active wallets, the number of buyers, and the number of sellers can also be used as indicators to evaluate the activity of the NFT market. Theoretically, the higher the number of active wallets, the more active users there are, and usually more than one active wallet is held by a single person, so the repetition rate of wallet usage must be taken into account when including the relevant metrics. The number of buyers and sellers is also proportional to the number of active users, and the more the number of buyers and sellers, the larger the user base.

In 2020, there are 222,000 wallets interacting with NFT-related smart contracts, which accounts for 30% of the number of active addresses in Ether, and the number of NFT active wallets in Q1 reached 1/2 of the total number in 2020, and the number of buyers and sellers is nearly the sum of the whole year in 2020. NFT is expected to become one of the core ecologies on the Ethernet chain.

  1. NFT asset classes market trading situation

From the NFT different categories 2021 Q1 trading market, collectibles and artwork categories almost each occupy half of the NFT market, while games, sports, music and other NFT categories are also slowly emerging. NBA Top Shot has sold over $550 million in the past six months, CryptoPunk has traded for $1.5 million in the first quarter, Beeple’s latest auction price at Christie’s was $6 million, and 3LAU’s album achieved a new record of $11.6 million in the first-ever NFT music album sales, all of which heralded the beginning of the NFT era.

As of April 19, 2021, NFT’s six crypto art platforms, SuperRare, MakersPlace, KnownOrigin, Async Art, Foundation and Nifty Gateway, have sold 190,665 pieces of art with a total market value of $550.039 million, 039,020.92 USD.

A total of 5 million NFT artworks were sold in 2020, with total sales of nearly $150 million. In contrast, the traditional art market has a significant headline concentration effect, with approximately 64% of the $63.7 billion in annual sales contributed by the top 1% of artists.

Although the NFT market is relatively small in terms of volume and unit price, the number of active artists, artworks and collectors greatly exceeds that of the traditional art market.

Traditional art flows are inefficient, with a single piece of artwork moving around for decades or only a few times. On September 1, 2020, the daily trading volume of the NFT market was approximately $24,110, with only 63 traders on the network, while on November 13, 2020, the NFT market recorded a daily trading volume of $618,500 and the number of traders exceeded 1,800. The number of traders exceeded 1,800.

1.2 Collectibles

NBA Top Shots, the leading NFT project on the Flow platform, is the first blockchain-based NBA digital collectibles game, launched by the NBA in partnership with Dapper Labs, the founding team of CryptoKitties, and backed by the investment of many stars.

Sorare is a digital sports collectible NFT with KylianMbappé priced at 116.15 ETH (about $64,000), making it one of the largest collectibles in terms of sales in 2020.

Founded in 2017, CryptoPunks is a platform for creating unique and limited NFT artworks. As a representative project of the collectible NFT category, CryptoPunks currently distributes works with individual prices ranging from 21 to 185 ETH and generated two large transactions in 2020, with two avatars selling for over $63,000 and $71,000 respectively.

1.3 Virtual Worlds

As of April 12, The Sandbox had $4.4 million in total sales in both the primary and secondary markets and had its most successful LAND sale ever that month, with sales totaling over 10 million SAND (approximately $6.5 million).

In February 2021 alone, the NFT art market expanded to $80 million, while the Metaverse (metaverse) and virtual LAND also continued to grow, with Axie Infinity sales reaching 888 ETH ($1.5 million worth of LANDS) and The Sandbox Game Virtual Worlds selling $3 million in LANDS NFTs, more than the 2019 and 2020 years combined.

1.4 Ecological layout of each category from NFT public chain

According to DappRadar’s April 2021 analysis report, Flow Blockchain is one of the fastest growing communities in the current cryptocurrency ecosystem, with on-chain active user (wallet address) metrics already surpassing those of ethereum.

In the same vein as the NBA Top Shot underlying architecture, the number of upper-layer ecosystem projects created on the basis of Flow, the first NFT public chain, is also growing.

MotoGP™ Ignition, the officially licensed MotoGP™ race management and collection game that will offer limited edition non-homogenized tokens (NFT) in two forms around the MotoGP™ brand experience: collection and race management, which sold out immediately after their release on Flow.

The VIV3 NFT marketplace, which sold out of all NFTs within 48 hours of going live on the main site, jumped onto the global stage in only its second month of launch by generating $2 million in revenue for solo artist Ben Mauro.

Chainmonsters is a massively multiplayer beast-taming game that had nearly 4,000 players in its alpha testing phase.

Dark Country, an NFT card trading game where players can acquire and own their own lands, recently released their first land pre-sale on Flow with over $500,000 in sales in just two days.

Epix is a showcase for premium NFT collectibles, and in Epix you can see exclusive collections from the original creators. These pieces come from notable brands in entertainment, acting, comics and outstanding digital artwork, with projects such as Mike Thompson’s Hip Hop Icons, Enemy Metal Star Wars, and fashion luxury platform Neuno released on Flow.

BloctoSwap is the first decentralized exchange on Flow, and according to DappRadar data, the company has seen over $18 million in transactions in the last 30 days.

Versus is a completely non-custodial, service-free NFT auction platform that introduces a novel dual-action model where collectors can bid either as a single bid or as a limited number of bids to get the best bang for their buck.

1.NFT Technology Layer

NFT technology layer includes the underlying infrastructure, the middle layer network protocol, and various NFT applications or DApps built on top of the protocol and the underlying layer. Today most NFT exchanges, artwork, games, etc. are mostly built on a specific underlying foundation (Ether, WAX, Cocos -BCX, etc.) and based on the ERC-721 standard to create applications.

Currently, these applications are limited by the transaction costs, performance and interoperability of the underlying technology facilities, and have limited room for sustainable development. Game finance, crypto art exhibition and auction still use the set of common protocols of Ether (ERC-721 and other NFT standards, liquidity mining protocols, etc.), and the technology portfolio in the direction of NFT is still weak.

NFT technology layers can be roughly divided into three categories: settlement layer, protocol layer, and application layer.

1) Settlement layer: mainly responsible for the recording and settlement of value

NFT settlement layer is responsible for handling similar business with FT, including providing a fixed anchor for the entire ecology, in order to achieve the entire ecological security and consistency, the current NFT applications build the most settlement layer to the public chain.

As far as the underlying infrastructure is concerned, Ether still maintains a large lead in terms of market share, while the rest of public chains have asymmetric competitive advantages in terms of development speed and some indicators. For example, Flow-based NBA Top Shots has been the No. 1 DApp in NFT ecosystem sales with over $40 million in sales since its launch in August 2020, and continues to maintain its leading position, while WAX leads in wallet activity metrics with Alien Worlds game DApp. WAX is leading the wallet activity metric with the Alien Worlds game DApp.

Solana, one of NFT’s underlying infrastructure, and Arweave, a decentralized storage platform, are now bridged via SOLAR Bridge to use decentralized storage projects to store data information within NFT, and decentralized storage issues will become increasingly important in 2021 as application layer activity continues to grow. Coin Smartchain also develops an ecology around the NFT market, such as the infrastructure Arkane Network, so that game developers and other DApps can easily integrate Coin Smartchain and its token system into their applications.

2) Protocol layer: Setting special rules for NFT technology

The NFT protocol layer lies between the NFT compute layer and the application layer. The settlement layer is responsible for setting up the basic rules for token recording and storage, and the application layer refers to the applications that users can use directly. The protocol layer, as the key module between the settlement layer and the application layer, will contain special calculation rules and nest a new operation logic and rules on the settlement layer.

The existing technical standards of NFT are still based on the development of Ethernet, with ERC-721 and ERC-1155 as the main ones. As a smart contract platform, all standards on the chain are built for specific functions and can automatically create traceable and verifiable ownership of assets.

At this stage, the main NFT technical standards issued by Ether as the underlying layer are the following categories.

ERC – 721

The ERC-721 standard, born in Cryptokitties, is the first NFT asset construction protocol recognized by the Ethernet community, and is the most widely used technical standard today. The ERC-721 standard is applicable to collectible assets, such as CryptoKitties, where the ERC-721 standard gives NFT assets cryptocat ownership, issuance and access control.

The ERC 721 standard defines four key NFT metadata: ID (global id), NAME (name), SYMBOL (symbol), and URI (Uniform Resource Identifier). The ERC-721 standard does not set standards for digital asset metadata or add restrictions on complementary functionality, so developers’ needs for creativity and uniqueness can be met.

In addition, the ERC-721 standard accommodates interoperability of NFT assets across multiple ecosystems, such that participants can purchase and trade NFT assets in secondary marketplaces or within applications.

Under ERC-721, a contract can only issue one NFT asset, and there may be thousands of different types of props in a game scenario, making ERC-721 incompatible with complex game scenarios.


(Semi Fungible)

The ERC-1155 standard allows developers to create and identify different types of assets in the NFT ecosystem, and the ERC-1155 standard is mainly used in the blockchain gaming sector.

The limited edition NFT tokens issued for the anniversary of Cryptocurrency are based on the ERC-1155 standard, and its wallet product, Trust Wallet, is also compatible with this technical standard.

Unlike the ERC-721 standard, the ERC-1155 standard allows any kind of NFT assets to be issued within the same smart contract, and different kinds of assets can be traded in multiple packages, which will effectively reduce asset transaction fees and optimize participants’ transaction experience. In addition, ERC-1155 removes the NAME and SYMBOL fields from the metadata, leaving only the ID and URI. In the gaming scenario, the ERC-1155 standard sacrifices decentralization but improves convenience and scalability, allowing developers to reuse NFT props for different business scenarios.

Another technical advantage of the ERC-1155 standard is efficiency. For example, assuming that an ID represents a “sword” in the ERC-721 standard, if a user wants to transfer 1000 swords, he needs to modify the state of the smart contract (transferForm method) 1000 times to obtain 1000 unique tokens. However, with ERC-1155, the developer only needs to call transferFrom with a number of 1000 and perform the transfer operation once. This is a significant increase in efficiency, but at the same time results in a lack of information to track the history of a single sword.

Other protocol standards

The NFT technology protocol standard is still in its infancy, and with the development of the NFT market technical iterations will be inevitable. In 2020, the Interchain Foundation is working on building a new NFT technology standard based on Cosmos, which will enter the testing phase at the end of Q 1, 2021.

3) Application layer: creating applications for users to participate in NFT

The NFT application layer serves to develop user-ready NFT application solutions, such as NFT-like DApps, or Web applications that interact with smart contracts and NFT protocols.

In terms of usage categories, the main NFT project applications are as follows.

In comparison, the collection category, virtual worlds, and games occupy a larger proportion of the market share in 2020, at 39%, 21%, and 27%, respectively.

The art NFT applications are dominated by crypto art trading platforms, with the number one SuperRare having 3.25 times more transactions in 2020 than the number two MakerPlace.

The addition of NFT provides more room for imagination for decentralized games, allowing players to enjoy cross-game experience while having ultimate ownership of game props. In game-based NFT applications, in-game assets can be designed to be tied to external crypto assets, and players can gain ownership of game assets by holding external crypto assets. For example, if there are only ten swords in the game, only those who have the corresponding external crypto assets can use them.

1.NFT Infrastructure

According to the technical architecture, the NFT industry eco-infrastructure is mostly focused on the following three directions.

1) The major underlying public chains of the data settlement layer.

2) various technical standards on the protocol layer.

3) various auxiliary service applications on the application layer, such as wallets, auxiliary services, etc..

3.1 Underlying public chains

Ethereum is still the preferred public chain for NFT application building, and TRON is one of the main public chains for NFT application scenarios. The number of NFT projects is about 1206, about half of that of Ethereum, and some NFT projects are gradually trying to deploy on ETH layer 2.

Flow public chain has only a few NFT projects so far, NBA Topshot and Viv 3, but due to the NBA Topshot traffic effect, Flow tokens have risen nearly 61% compared with the beginning of March 2021, and the market value is over $700 million, so Flow ecology is expected to attract high growth.

Among the underlying public chains, Binance Smart Chain (BSC) is the underlying public chain developed by Cryptocurrency Exchange and will be launched in September 2020. Currently, BSC has the fourth largest number of NFT projects on the chain, and NFT is also included in the investment eco-segment of Cryptocurrency.

In addition, Matic offers a Layer 2 scaling solution for off-chain computing while securing assets using the Plasma framework and a decentralized proof-of-stake (PoS) verifier network, it aims to provide scalable and instant blockchain transactions, and joins the Binance Chain Alliance (BCA ) in 2019.

In addition to Matic, the BCA Alliance currently has 22 other members, and the mainstream exchanges are interested in building basic technical facilities as an important entry point to intervene in the ecological development of the NFT industry through investment and other means.

In addition to Ether, Flow and Tron have improved their performance, such as providing lower transaction fees and better developer experience, and have the following three advantages compared to Ether.

Lower gas fees for digital creators.

Providing developer tools for real-world use cases.

Support for cross-chain DeFi liquidity extension sets.

3.2 Protocol Layer

Harmonization of protocol standards on NFT chains

Some NFT underlying public chains have started to develop a unified on-chain protocol standard to meet the future development needs of NFT, based on the unified on-chain protocol standard, it can effectively reduce the threshold and difficulty of issuing NFT assets. 1. IOST new protocol standard

  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 pass corresponds to a unique identity ID and has only one owner. In addition, under the IRC 721 standard, NFTs can store identity IDs and metadata in the contract. Developers can improve storage efficiency by storing external URLs for metadata and links to metadata in the contract. It also has a flexible locking transfer mechanism and includes blacklist management features to meet the management needs of gaming and entertainment applications.

IOST also publishes the standard interface IRC 722 standard, which is now mainly supported by wallets such as TokenPocket.

Flow NFT token standard

Flow uses the Cadence programming language, a resource-oriented programming language that introduces new features to smart contract programming to help developers ensure their code is secure, reliable, clear and easy to use.

1) Each NFT is represented by a resource with an integer ID. Resources are the ideal type to represent NFTs because they have important ownership rules enforced by the type system. They can only have one owner cannot be copied and cannot be accidentally or maliciously lost or duplicated. These protections ensure that NFTs are secure and can represent assets with real value.

2) NFTs can usually be represented by some kind of metadata, such as a name or a picture. Flow uses this as an entry point so that all metadata associated with it can be stored on-chain.

3) When users on Flow want to transact with each other, they can do so peer-to-peer, without having to interact with a central NFT contract by invoking resource-defined methods in each user account.

NFT 20 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 an ERC20 token derivative representing that NFT item, which can be immediately traded on the Dex.

By creating a secondary market for ERC20 derivatives of NFT, NFT20 hopes to solve the liquidity problem in the NFT space. Solving this problem would provide arbitrage opportunities, allow investors to gain price exposure to NFT projects without having to identify and purchase individual NFTs, and allow for fairer price setting and easier trading of NFT assets for collectors and novices.


2020 NFT technology has developed tools that allow users to acquire partial ownership of NFTs by purchasing “NFT pieces. In this way, game participants with small amounts of money can still gain a percentage of ownership by purchasing NFT pieces, one of the pioneering projects being Niftex.

Lendroid is also currently developing a meta-pass system that allows users to share, collaborate, and borrow portions of NFTs in new ways, as well as allowing pass holders to recertify an attribute of a digital asset to create transferable NFT assets. Asset owners can also provide limited access to another user, such as changing layers in an artwork or temporarily accessing a virtual location, and for pass holders, recertification and smart contracts essentially guarantee the security of lending digital assets without fear of borrower default.

3.3 Application Layer

NFT ecology is still relatively niche, and the application layer can be broadly classified into two major directions, one is to provide ecological support services for the application layer, aimed at improving user experience, including infrastructure, trading platforms, etc.; the second is for the user interaction layer, providing application interfaces for NFT application scenarios, which can be divided into games, collectibles, artwork, etc.

From a quantitative point of view, the ecological support services around the NFT asset trading (issuance) platform are the most concentrated application scenarios. It is worth noting that the service categories provided by most NFT asset trading platforms are not limited to the level of NFT artwork trading only.

The overall structure of the existing NFT ecosystem is relatively simple, and Animoca Brands has heavy compound attributes in the current ecosystem and cannot be completely classified as a single category. The development path of Animoca Brands and its existing business form will be inspirational for the future of NFT, and more similar companies may emerge in the future.

NFT trading assets are mostly concentrated in the field of artwork, game props, cards, etc., so it also limits the trading platform to obtain user channels. NFT artwork trading platforms, such as Rarible, Mintable, Opeasea, etc. all provide one-click NFT artwork casting mode. Take Rarible platform as an example, digital works can be uploaded in the form of PNG, GIF, WEBP, MP4, MP3, etc. and minted into ERC 721 or Rari (Rarible governance coin), and then circulated on the Rarible platform after paying a certain GAS fee.

III. NFT track main application scenarios and bottlenecks

  1. Overview of application scenarios

1.1 Metaverse category

NFT will continue to be used in more and more scenarios, and more innovative examples will emerge on a regular basis, with the most popular being in-game assets, collectibles, virtual real estate (land), domain names, and artwork.

Typically, assets purchased within any app and virtual currency purchased within free-to-play games may face problems in being able to withdraw, reuse, resell, or otherwise use across games or platforms, but NFT assets purchased in-game are actually owned by the purchaser, and each asset is unique and identifiable and can be transferred between users without permission from the developer, outside the game, sold on the open market, or even used in other games.

With new and innovative usage scenarios being added, NFTs can represent virtually any class of digital asset and therefore have a very large market potential and growth.

One of the best applications in the NFT space is the metaverse, where games, user-generated content, art, finance, avatars, multiplayer, and social are concepts that have tangible value to players.

NFT provides value similar to any tangible tangible object of value, with uniqueness and scarcity, the holder has full ownership and can sell it to anyone, if the two properties are mapped, the possibilities of NFT are endless, currently NFT assets and applications that combine tangible tangible tangible objects and digital art are starting to receive a lot of attention from Sandbox, for example CryptoKaiju’s vinyl toys that can be used as game characters in The Sandbox and the recent FEWO and RTFKT co-branded sneakers, but also applications that use NFT technology for rare wine collections, such as Wiv.io or NFTSpirits.

1.2 Games

Game props are broadly defined as in-game player assets, one of the characteristics of which is that they must be acquired by the player through the act of playing, or purchased through money. Game assets have unique characteristics and usage data, and are only valuable in certain environments.

On the one hand, game props are suitable to be expressed in the form of NFT because the development and use of game props are all on-chain and their value is supported by the game scenario, which can avoid the centralized link of value on the chain; on the other hand, most game equipment and characters have unique and free circulation characteristics, which are consistent with the attributes of NFT. In addition, NFT game props can be confirmed and reused in cross-scene and cross-game, and game assets are expected to become NFT ecological passable assets.

At this stage, game NFTs are developed on top of Ether, and their subsequent development is limited by the cost of Ether Gas. Without the support of a perfect or highly available infrastructure, the development of NFT games will be restricted even if there are many potential users.

Case: Axie Infinity

Game NFTs combine uniqueness and availability. For example, in Axie Infinity, each fantasy creature, Axie, has different attributes. Players can use Axie to fight, collect and raise them. The Axie body consists of six parts: eyes, ears, horns, mouth, back, and tail, with the horns, mouth, back, and tail determining which cards each Axie can use in battle. Each Axie also has a different type, with different types having different strengths and weaknesses.

In addition to combat, Axies also have breeding characteristics, allowing them to produce offspring, which can also be used in combat, or continuously reproduce (maximum reproduction is 7). The breeding process consumes ETH or SLP tokens, which are homogeneous tokens (FT). There are two ways to acquire Axie: by trading on the open market or by participating in the game environment, where users earn money playing the game by selling SLP tokens on the open market, a model that will in turn increase the audience’s demand for such game-like NFT. As the scale of Axie Infintiy game participants grows, the scarcity of Axie value will increase and the demand for SLP tokens will be driven.

A blockchain-based game industry designed to reach the level of Fortnite or League of Legends cannot rely solely on NFT technology or design a special token model to achieve this. It usually takes a lot of time and resources to develop a best-selling game, and we believe that the evolution of NFT game form will only be partially seen in the next 3-5 years.

1.3 Collectibles

NFT technology can be used to characterize the ownership of collectibles, mainly art collectibles at this stage. Collectibles usually have two main characteristics, uniqueness and irreproducibility.

In a centralized network, it is difficult to completely digitize the collection with existing common digital media and technologies, and NFT technology is one of the solutions. Theoretically, NFT can to a certain extent solve the traditional art field anti-counterfeiting problems, but the technical level, the current stage of NFT underlying technology can not support the huge art market, therefore, NFT collectibles market is currently focused on digital art, such as the current weekly trading volume ranking Rarible, CryptoPunks and SuperTare are digital For example, Rarible, CryptoPunks and SuperTare are all digital art collectibles trading platforms.

At this stage, the collectibles market is still too niche, with a narrow target population and large development limitations, but the stage success of NBA Top Shot also reveals the considerable potential of the future market of NFT. This is further evidenced by the UFC, Warner Music Group and MotoGP, with many brands and teams seeking innovative solutions, such as the adoption of more capable underlying solutions like Flow, to create new experiences for their audiences to enable deeper interactions between companies and their audiences.

1.4 The Art Category

As crypto art trading activities become more and more frequent, the advantages of selling crypto artworks on the Ethernet network become more and more well-known, and mainstream digital artists are gradually entering the crypto field. Beeple sold a set of digital artworks at Nifty Gateway, one of which sold for $777,777.77.

The traditional art industry is gradually taking notice and experimenting with NFT technology to interact with art products across borders, such as Christie’s, the British luxury and art auction house, which held its first auction of NFT works in October 2020, with Portraits of a Mind: Block 21 selling for $131,250. On March 11, 2021, Christie’s New York sale of Everydays: The First 5000 Days sold for $69,346,250, making Beeple the third highest-priced work by a living artist. The artwork by Beeple thus became the third highest priced work by a living artist, behind David Hockney and Jeff Koons.

The establishment of the NFTX Token Index in 2020 is a new attempt to gain customers. Even non-professional investors who do not know much about crypto and traditional artworks can track their personal NFT token portfolios and increase the convenience of secondary market investment.

In terms of artwork as an asset form, NFT is only its technical implementation form, the core of artwork NFT value is still the art value of the work itself, which is also the fundamental factor determining the price of artwork NFT. Along with the emerging artists on the gradual acceptance of NFT technology, NFT may become the key carrier of future digital art creation, the future of the creation of digital art collection is very likely to NFT form of operation.

1.5 Finance

DeFi was one of the hot sectors in the cryptocurrency market in 2020, and its total market capitalization reached $16.042 billion on September 1, 2020, and fell rapidly to the level of early August 2020 under the influence of Sushiswap’s founder being exposed to cash out of several projects in succession. During this period, the NFT market, led by MEME, rose rapidly, with total daily trading volume climbing from September 17 to a yearly high of $0.54 million on September 27, when art platform SuperRare and NFT trading platform OpenSea each reached record monthly volumes of $777,000 and $2.75 million, respectively. SuperRare and OpenSea, the NFT trading platform, each recorded record monthly volumes of $777,000 and $2.75 million respectively.

The combination of DeFi and NFT is usually a combination of platforms transposing liquidity mining models into the NFT space, such as MEME and Aavegotchi, with MEME being the typical representative.

At present, the combination of NFT and DeFi applications can be divided into the following categories: applications that introduce the concept of NFT into the DeFi model, such as MEME, Avegotchi, WHALR, CARGO, and Rarible, which introduce liquidity mining directly on the NFT platform.

The overall market size of NFT is about 2% of the DeFi market size, and the weekly trading volume of its NFT token Pineapple is less than 5% of the daily trading volume of FT token MEME Coin, for example, and the trading volume is uneven due to the obvious market heat cycle effect.

NFTX is a platform for generating ERC20 tokens backed by the NFT collection. The tokens generated by the platform are called funds and are fungible and combinable. Using NFTX, users can create and trade funds of collectibles based on their preferences from DEXs such as Uniswap. The emergence of NFTX allows for a lower barrier to participation in the NFT market, and for those who do not want to spend time minting and trading NFT pieces, the ease of direct participation through the secondary market will be greatly enhanced.

Case in point: mortgage lending

NFTfi is a P2P NFT asset collateral lending platform, its operation process allows NFT asset holders to use NFT as collateral to obtain more liquid assets, currently supports wETH and DAI, NFT asset liquidity can be enhanced because of this, limited by the liquidity of NFT assets and market liquidation problems, the platform currently only uses the P2P model.

In the lending process, the borrower can use a standard casting NFT asset such as ERC-721 as collateral, other users can make an offer on the NFT asset, if the borrower accepts the offer to obtain the loan, the collateral NFT asset will be locked in NFTfi’s smart contract. During the lock-up period, the collateral NFT assets are neither vested in the borrower nor in the lender, and the platform generates the corresponding voucher of interest, which can be transferred by the lender.

The essence of the technology of NFT is the technical standard of asset digitization, through the real estate, art and other real assets on the chain, so as to solve the financing problems arising from the low efficiency of the flow of such assets. The digitized real assets or virtual assets will also further improve the underlying asset structure of the DeFi ecosystem, and combined with the DeFi liquidity mining model, it can solve part of the liquidity problem of the NFT asset trading market.

At present, the financing attribute of NFT asset issuance is becoming more and more obvious, the first NFT issuance in March 2021, INO (Initial NFT Offering) was proposed as a financing model in the market, INO aims to distribute NFT assets and achieve financing needs. The first issuer to use this method is Chinese artist Cao Jun, whose previous landscape painting was auctioned for $452,349,000 in 2018. At this stage, INO is not fundamentally different from traditional ICO issuance methods, but the sale of marketable objects can divest the compliance risks arising from direct financing. We believe that the scale of financing models such as INO and its variant ISNO (Initial Staking NFT Offering) will grow significantly in the next 1-3 years.

IV. NFT application space
NFT technology application space in addition to the development of the early meta-universe, games and then 2021, the concentrated emergence of art, collectibles, NFT ecosystem gradually improved, 2021 around the NFT product architecture will achieve a more multi-dimensional and personalized user experience, through end-to-end experience design, identity and reputation NFT can link more levels of personal relationships, strengthening the user attributes within the platform. Through the end-to-end experience design, identity and reputation NFT can link more levels of personal relationships, strengthen the attributes of users within the platform, and thus promote the platform itself to create more new mode scenarios.

At this stage, the NFT industry scenario model and product construction direction mainly revolves around the following four points.

Community circle expansion

2021 art and collectibles in the sale of high-priced items to expand the NFT market visibility, spillover effect is obvious, while the development of games, music, sports, ticketing and other application scenarios continue to penetrate the NFT into real life. From simple and direct NFT sales to interactive NFT dapps, these close to life application scenarios make NFT more retaining, gradually digitizing life and gradually introducing physical industry communities such as gaming circles, music models and popular fashion into the crypto world, further opening the door between crypto communities 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, who can use the digital identity to access and interact with each other across platforms and transfer NFT assets in the derived usage scenarios. NFT will not only be closed data in the pure sense, but also personal information, habits and preferences of users will be stored in the form of data on the chain and become part of the assets held, and the boundaries of the platform, users and assets will be integrated with each other.

Combinable products and derivatives

Saint Fame DAO, Zora and Foundation are early examples of this trend. Recipients can customize or hold an NFT asset and fuse it multiple times with another NFT to create a new NFT asset that can be redeemed in kind using the corresponding supply chain or sold in the open market. This type of NFT is less susceptible to speculative activity and can be accepted and accessed by a wider audience.

Asset Classes and Liquidity Creation

NFT technology can be used to digitize assets, real estate assets are also being digitized with NFT technology to alleviate the lack of liquidity and other problems, such as a property located at 5828 St. louise Wise Avenue in the United States, at a price of about 42.426 ETH online NFT trading platform Mintable.

NFT technology can basically solve the problem of proof of ownership of most tangible assets, including real estate, and after digitization, it is easy to split shares to reduce the threshold of asset investment. In fact, the application of NFT goes far beyond digital art, collectibles and games, it is a digital technology that can be used for tokenization and can exchange any kind of items with unique properties.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/a-quarterly-overview-of-nft-development-technology-solutions-infrastructure-and-application-tracks/
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.

Like (1)
Donate Buy me a coffee Buy me a coffee
Previous 2021-05-31 07:56
Next 2021-05-31 08:18

Related articles