Share of NFT transactions on Ethereum
The NFT industry seems to have become a major player in the blockchain universe, more specifically, the core of the Ethereum blockchain.
How does this show up? Is NFT an important part of Ethereum activities? Will Ethereum become the most used blockchain for NFT projects?
(1) NFT transaction volume vs. global chain transaction volume
2020 NFT transaction volume vs. Ethereum blockchain total transaction volume
(Black is the NFT transaction volume, and yellow is the total transaction volume of the Ethereum blockchain)
First of all, it should be noted that there are two independent variables in the above figure: NFT transaction volume and total Ethereum blockchain transaction volume. There seems to be no obvious connection between the two.
In addition, it can also be noticed that compared with the total transaction volume on the Ethereum blockchain, the average weekly NFT transaction volume is extremely low; the weekly transaction volume on the Ethereum blockchain exceeds 5 million, while the NFT transaction volume is 12 Million.
(From top to bottom, the total amount of NFT transactions; the total amount of transactions on the Ethereum blockchain; the ratio between the upper and lower ones)
Compared with previous years, during 2020, the NFT transaction volume has decreased significantly. The reason for this relative decline is the rise of side chains. The side chain allows project and encrypted game publishers to provide players with a large number of off-chain interactions without high costs and reduce delays. At the same time, project and encrypted game publishers only need to interact with the main chain for key transactions, such as user wallet assets transaction.
(2) NFT market size vs. encryption market size
From a transaction point of view, it can be seen that compared with the total amount of activities on the chain, the scale of the NFT industry is still small.
Since NFT is considered by many people to store value, how does the market value of NFT compare with the market value of major cryptocurrencies? Does the NFT market grow every year?
Note: The market value of NFT is calculated according to the formula, that is, the total supply of each NFT Ticker X the average value within a year, and taking into account the relative liquidity rate of each NFT Ticker. The annual cryptocurrency market value is calculated based on the average daily cryptocurrency market value over the past year.
It can be seen that in 2019, NFT achieved solid growth during the crypto winter: NFT accounted for more than 1% of the entire Ethereum market value, and it also had a certain benefit to the market value of Bitcoin.
The comparison between the stable value of NFT and these two cryptocurrencies should be interpreted. During 2020, the value of BTC (Bitcoin) and ETH (Ethereum) has increased significantly, which proves the stability of the NFT industry, even though the developing ecosystem of NFT is much smaller than the other two.
The impact of ETH price on the NFT market
Almost like other cryptocurrencies, the value of ETH has fluctuated sharply during 2020, rising from $107 in March to more than $650 at the end of the year.
Will the fluctuations in the value of Ethereum’s core cryptocurrency have an impact on the NFT industry and the market? If so, is this effect positive or negative?
Compared with basic cryptocurrencies in history, the independence of the NFT industry proves that this young ecosystem will continue to emancipate, evolve, mature, and become self-sufficient.
(3) Number of active buyers & sellers vs ETH price
Number of weekly active buyers & sellers in 2020 vs ETH price
(Red is the number of NFT buyers, blue is the number of NFT sellers, and green is the ETH price)
In the last quarter of 2020, with the recovery of the value of Ether and the simultaneous decline of network costs, the number of NFT buyers/sellers increased significantly. It is difficult to attribute this surge to one of these two factors alone.
(4) Transaction volume vs ETH price
Weekly NFT transaction volume vs ETH price in 2020
(Yellow is NFT transaction volume, green is ETH price)
On the contrary, there is no direct correlation between ETH price and transaction volume. On the contrary, as the price of ETH continues to increase, the transaction volume in the past six months has fallen sharply.
The report believes that this phenomenon is related to two factors: the pre-sale of NFT projects that began in the first half of the year.
In addition, when the price of a certain cryptocurrency is relatively low, buyers and collectors will take the opportunity to fill their portfolios with new assets. If the market is based on ETH, the dollar sales will not be too high anyway, so the dollar price of the asset will automatically increase.
In short, the crypto winter seems to be a good opportunity for collectors and NFT buyers to expand their investment portfolios. They may store the value obtained and use it when the price increases.
(5) ETH transaction volume vs ETH price
Weekly ETH transaction volume in 2020 vs ETH price
(Blue is ETH transaction volume, green is ETH price)
In September, the transaction volume of ETH soared sharply, which has a greater relationship with the decline in Gas fees rather than the increase in ETH prices.
The peak in September was probably due to Ethereum’s liberation from unprecedented network congestion, which put the market on standby. This surge period coincided with a drop in Gas fees and prices, allowing ordinary users to return to the market.
In this specific context, most users who want to buy and sell NFTs have to wait for the price of network fees to drop before they can take action.
When it comes to NFT, it is inevitable to mention Ethereum, and when it comes to Ethereum, it is impossible to bypass Gas fees. What is the gas fee? What impact will it have on the performance of NFT?
What is the gas fee?
Gas is a unit used to measure the amount of computational work required to perform specific operations on the Ethereum blockchain. As can be seen from the name, the principle of Gas is similar to gasoline. The latter is used as the energy of a car to ensure that the car can run normally, while Gas on the Ethereum network “fuels” for blockchain transactions and allows users to perform different operating.
Gas (GWEI) fee is to support Ethereum Virtual Machine (EVM) transactions. Whenever a transaction occurs on the Ethereum blockchain, the wallet that initiates the transaction must pay a network fee, called Gas or GWEI, which is used to pay the miners.
As a Turing-complete machine, the Ethereum virtual machine can execute arbitrary code, which is one of the main reasons that makes Ethereum so powerful. But at the same time, this also makes it more susceptible to the halting problem (referring to the code and input of an arbitrary computer program to determine whether the program will end or continue to run forever).
In order to prevent various situations from happening, Ethereum introduced the Gas mechanism. After the introduction of Gas, users cannot execute a program that never stops. The cause of this problem may be a code problem, or it may be caused by someone. Gas fees can prevent the program from running forever and prevent the entire network from stagnating.
The price unit of Gas is gwei, and the unit of gwei is smaller than Ether. 1 gwei is equal to 0.000000001 ETH.
What impact will gas fees have on NFT?
In most cases, Gas’s transaction fees are very low and have no direct impact on the market. But in 2020, with the emergence of decentralized finance (DeFi), the volume of transactions that the Ethereum network needs to manage has increased sharply. Due to the variety of financial instruments used in these transactions, the transactions are particularly complicated.
The direct consequence of this for users is that the gas fee of all transactions has risen sharply, and the price of NFT has risen rapidly. In some cases, transaction costs are even more expensive than the assets themselves.
The sudden increase in Gas fees will have a visible impact on the NFT ecosystem. There is a dependency between the technical situation of the Ethereum network and the non-homogeneous token market it supports.
Below, this article will use the latest data report, that is, the data report as of 2020, to detail the negative impact of rising gas fees on NFT sales, average sales, and the number of buyers.
(6) NFT sales VS Gas cost
Comparison of NFT sales and gas prices in 2020
(Black is NFT sales, red is Gas price)
The above figure can clearly show that the dramatic increase in Gas (GWEI) fees has prevented many users from conducting NFT transactions.
Throughout July and August 2020, the price of GWEI rose sharply, reducing the weekly NFT trading volume. Starting in mid-September, when the gas cost starts to fall to a price that users can afford, the sales volume will automatically increase.
The conclusion of this first analysis is that there is a foreseeable and obvious correlation between the cost of Gas and the activity of mid- and low-end users.
(7) Average NFT sales VS Ethereum Gas fee
Comparison of the average value of NFT sales in 2020 and the gas cost of Ethereum
(green is the average value of NFT sales, red is the gas price)
Gas costs not only affect sales, but also affect average sales. During the peak period of Gas fees, only large holders, namely NFT collectors, so-called “whales” can continue NFT transactions.
The above figure can show that the average price of NFT transactions has risen sharply with the surge in Gas fees, and the average price of NFT has risen.
This does not mean that the value of the NFT itself has increased, but that during this period, only particularly expensive NFT transactions can still be carried out, and these fees account for only a small part of all transactions.
(8) Number of NFT buyers VS Gas fee
Comparison of the number of NFT buyers and the price of Gas in 2020
(Yellow is the number of NFT buyers, red is the gas fee)
In addition to the two points mentioned above, Gas fees also affect the number of NFT buyers, that is, the impact of high Gas fees on the number of corresponding NFT users or wallets during this period.
The above figure shows that this effect is also visible, although not as obvious as the previous two comparisons. It is not difficult to observe that when the gas fee increases, the number of NFT users will gradually decrease.
Why pay attention to NFT?
Undoubtedly, the NFT ecosystem is full of vitality and great potential, and the exploration of existing projects is just the surface of the industry. NFT is still a young and early development field, and many new ideas and new projects are in the pipeline.
Even so, the impact of this ecosystem on other mature industries is profound, and this profound impact will continue.
The NFT field quickly attracted a lot of attention and ushered in many audiences, including major brands and IPs such as Animoca, Ubisoft, Warner Bros., NBA, Formula 1, BBC, Atari.
In addition, the NFT ecosystem has not yet empowered individual creators, artists, musicians, and filmmakers to bring them independence, provable authenticity, security, and unlimited possibilities. NFT has opened up a whole new The global environment allows them to display and sell their works.
There is no doubt that the NFT world has been eager to try and will become the mainstream. For both new and old industries, NFT will bring revolutionary subversion.
Note: The article is translated from nonfungible.com.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/eight-must-see-transaction-data-for-investing-in-nft/
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