Q3 Transaction volume increased by 38000% year-on-year. How did NFT become one of the fastest growing fields?
- NFTs are encrypted tokens based on cryptographic technology to ensure their uniqueness. They are usually associated with digital content (sometimes including physical assets) and provide relevant proof of ownership.
- NFTs have many use cases, including artworks, digital collectibles, music, and props in video games.
Cryptocurrency, utility tokens, security tokens, privacy tokens…Digital assets and their classification are growing and evolving along with encryption and blockchain technology.
NFTs (non-homogeneous tokens) are one of the fastest growing areas in the crypto industry. In this article, we will explore what NFTs are, how they are used and what makes them special.
What are NFTs?
NFTs are digital assets that can prove their uniqueness. They contain identification information recorded in smart contracts .
It is this identification information that makes each NFT unique. Therefore, any NFT cannot be directly exchanged with another NFT, and no two NFTs are the same. In contrast, if they have the same denomination, two banknotes can simply be swapped: for the holder, there is no difference between a dollar bill with a denomination of one dollar and another dollar bill of the same denomination.
Similarly, Bitcoin and Ethereum are homogenized tokens . You can send 1 BTC to others, and then the other party can send 1 BTC to you, so you still own 1 BTC (of course, the value of BTC may fluctuate during the transaction). You can also send or receive a smaller amount of BTC, measured in the unit “Satoshi” (Satoshi) , 1 Satoshi = 0.00000001 BTC, because homogenized tokens can be divided into smaller units .
Generally speaking, NFTs are indivisible , just like you can’t send part of a concert ticket to other people, because part of the ticket itself is worthless and cannot be used for redemption. However, in recent months, some investment groups have tried the concept of NFT fragmentation , although this is still in a legal gray area, because fragmented NFTs may be regarded as securities.
The CryptoKitties collection is the first batch of NFTs. Each Blockchain-based CryptoKitty is unique. If you send a CryptoKitty to someone and receive another CryptoKitty from that person, then the CryptoKitty you received and the one you sent are just completely different. The significance of the encrypted cat game is to allow players to collect different digital cats.
The unique information of NFTs like CryptoKitties is stored in smart contracts and is immutably recorded on the blockchain . CryptoKitties NFTs were originally launched on the Ethereum blockchain as ERC-721 tokens, but due to the congestion of the Ethereum network, these NFTs were later migrated to its own blockchain platform Flow to make it easier for novices access.
In the third quarter of 2021, the transaction volume of NFTs reached 10.67 billion U.S. dollars , an increase of 700% over the previous quarter.
Why are NFTs so special?
NFTs have unique attributes, and they are usually associated with a specific asset. NFTs can be used to prove the ownership of digital items (such as game skins, etc.) or physical assets .
And cryptocurrencies such as BTC and ETH are homogenized tokens, similar to coins or paper money. Homogeneous tokens are exactly the same, they have the same attributes and value when they are exchanged.
In March 2021, digital artist Beeple sold his digital art collection in the form of NFT for a high price of $6,900, making him the third-highest living artist at auction, second only to David Hockney and Jeff Koons.
How are NFTs used?
In addition to digital collectibles such as CryptoKitties, NBA Top Shot, and Sorare , NFTs can also be used for digital assets that need to be distinguished from each other to prove their value or scarcity. NFTs can be used to represent anything, from virtual land to artwork , to ownership licenses .
NFTs are usually bought and sold on the NFT market . Although NFT markets such as OpenSea and Rarible have so far dominated the field, some leading cryptocurrency exchanges (such as Coinbase ) have recently begun to set foot in the NFT market. In June 2021, the cryptocurrency exchange Binance launched its own NFT market; at the same time, its competitor Coinbase also announced its own NFT market launch plan in October 2021, attracting more than 1.4 million users to register within the first 48 hours Its waiting list.
How do NFTs work?
As mentioned earlier, tokens like BTC and Ethereum-based ERC-20 are homogenized tokens . In contrast, the NFT standard on the Ethereum network, the token standard used by platforms such as CryptoKitties and Decentraland (a virtual world based on Ethereum ) , is ERC-721 .
NFTs can also be created on other smart contract blockchain platforms other than Ethereum , which have NFT-related tools and support. Although Ethereum is the first widely used platform, the NFT ecosystem is expanding. Other public chain platforms such as Solana, NEO, Tezos, EOS, Flow, Secret Network and TRON also support NFTs .
NFTs and their smart contracts allow creators to add some detailed attributes to them , such as owner identity information, rich metadata, or secure document links. In an increasingly digital world, NFTs have the property of non-tamperable proof of digital ownership , which is an important development. Through NFTs, we have seen that the trustless security of the blockchain is applied to the ownership and exchange of almost all assets.
Just like the challenges the blockchain has faced so far, NFTs and their protocols and smart contract technologies are still under development. The dApps (decentralized applications) and platforms for managing and creating NFTs are still relatively complex. In addition, there are challenges in creating standards for NFTs. The development of blockchain is fragmented, and many developers are working on their own projects. The success of NFTs may also require unified protocols and interoperability .
How to buy NFTs?
NFTs can NFT market by many to make a purchase, including OpenSea, Rarible and SuperRare such as NFT market .
Below we mainly explain how to buy NFTs on the Rarible platform:
Step 1 : Go to the Rarible website ( https://rarible.com/ ) and click the ” Connet ” button at the top right of the page , select the wallet you want to connect to this platform (as shown in the figure below) and log in. Before logging in, you will need to accept the terms of service of the platform. In our example, we will use the Metamask wallet to connect, which is a popular web and mobile wallet.
Step 2 : After you log in, search for the NFT you want to buy on the Rarible platform. In our example, we will show how to purchase “Hand of Fate” NFT works created by artist Jango (as shown in the picture below). No matter which NFT you want to buy (assuming the NFT can be purchased directly), the buying process is similar. Once you have selected the NFT would like to purchase, click ” Buy now ” (Buy Now) button to purchase.
Step 3 : After clicking Buy, a confirmation window will pop up, asking you to check the details of the order again. If your confirmation, you can click ” Proceed to payment ” (to continue making payments) button (shown below), the final step.
Step 4 : Your wallet will pop up a window asking you to confirm the transaction. Similarly, if you are willing to continue the transaction, just click to confirm the transaction (purchase price and transaction fee are required), and the transaction will be processed. Once the transaction is confirmed, the NFT you purchased will be directly deposited into your Ethereum address and owned by you.
Note : You may need to avoid buying NFTs during peak periods, otherwise you may have to pay a very high transaction fee, just like our example in the figure below.
Which NFT projects caused a sensation?
CryptoPunks is one of the earliest NFTs series
CryptoPunks dates back to 2017 and is one of the earliest existing NFT projects. CryptoPunks is produced by Larva Labs development studio. It is a set of NFT series composed of 24×24 pixel art images. There are only 10,000 CryptoPunk avatars in total. These avatars are based on “punk” images, and each avatar has different characteristics in terms of gender, headwear, and glasses.
Initially, CryptoPunks were distributed for free, but now these CryptoPunks avatars are expensive. At the time of writing, the cheapest CryptoPunk avatars are also sold for six-figure dollars, while the rarest CryptoPunks (including aliens, apes and zombies) can be sold for millions of dollars. Even payment giant Visa joined the feast and snapped up a CryptoPunk avatar numbered #7610 as part of its “historical commercial artifacts” collection.
So, what can you do with CryptoPunks? These NFT avatars are mainly used to “show off”, and owners use CryptoPunks as their avatars on social media sites. In fact, this craze has prompted Twitter to launch a program to verify NFT avatars to verify whether the CryptoPunk avatars used by users are actually owned by them. In addition, we will soon see these CryptoPunks on the screen. Larva Labs has signed a contract with United Talent Agency to explore the introduction of some NFT series including CryptoPunks into film, TV, video games and other fields.
Bored Ape Yacht Club
Bored Ape Yacht Club (BAYC) is a limited number of NFT series based on Ethereum
Just like CryptoPunks, Bored Ape Yacht Club ( BAYC for short , Boring Ape Club) is also a series of NFT avatars, and there are only 10,000 in total. Each BAYC avatar has randomly generated attributes. Currently, a thriving community around BAYC has emerged.
Perhaps most importantly, having a BAYC NFT allows you to qualify for other additional NFTs for free , such as Mutant Apes Yacht Club (MAYC, Mutant Ape Yacht Club) and Bored Ape Kennel Club (BAKC, Boring Ape Kennel Club ) . We can think of BYAC as a ticket to join an exclusive club. This ticket can provide the owner with additional privileges and benefits.
In September 2021, 101 BYAC NFTs were sold at Sotheby’s auction for more than $24 million.
Axie Infinity allows players to collect cute Axies (NFT pets) for battle
NFT collections like CryptoPunks and Bored Apes (boring apes) are just one aspect of NFT use cases. NFT has other wide-ranging applications, one of which is used as game props in video games . The current largest NFT video game is Axie Infinity, which became the NFT series with the largest transaction volume in the third quarter of 2021, with a transaction volume of 2.5 billion U.S. dollars.
Axie Infinity is a game similar to Pokémon. Players collect cute pets called Axies and use them to fight each other, or to breed new Axies pets. Each Axie is an NFT. Because the game ” to play while you earn ‘(Play-to-Earn) of mechanisms to attract players to the Philippines and other countries through breeding and trading Axies to make a living. However, the game itself has a steep learning curve, and because the players playing Axie Infinity game for the first time, you need to go buy at least three Axies pet (composed of a team) to start playing this game on Axie market, and because each The transaction price of Axie alone is as high as hundreds of dollars, so the cost of forming an Axies team is not cheap.
NFTs and DeFi
In addition, NFTs have also made waves in the most interesting and innovative DeFi field of cryptocurrencies .
An example of the use of NFTs in DeFi (decentralized finance) is Aavegotchi , an experimental start-up project funded by the DeFi money market protocol Aave. The Aavegotchi universe uses a kind of NFT pixel ghost called Aavegotchis (as shown in the figure below). Behind each Aavegotchi NFT, a certain number of aTokens in the Aaxe protocol (such as aDAI, etc.) are pledged as collateral , which means Each Aavegotchi can generate income for its holders (because aTokens can generate fee income from the Aave loan pool). If the holder of an Aavegotchi NFT liquidates its pledge, then the Aavegotchi will disappear.
Above: Aavegotchis NFT pixel ghost
Another platform that aims to connect the DeFi and NFT communities is Rarible , which is a decentralized application (dApp) that allows users to sell digital art on the Rarible market . In July 2020, Rarible launched its governance token RARI to reward creators and collectors of the platform. Only by actively participating in the platform can you earn RARI rewards. This participation process is called ” market liquidity mining ” ( market liquidity mining) by the Rarible platform .
According to data from DappRadar , the NFT field has achieved explosive growth in 2021. The transaction volume in the third quarter of this year reached 10.67 billion U.S. dollars, an increase of more than 38,000% year-on-year . In August of this year, OpenSea, the largest NFT market, had a single-day trading volume of more than 75 million U.S. dollars, exceeding its total trading volume in 2020.
Above: NFT monthly transaction volume as of September 2021 (unit: billion U.S. dollars), source: DappRadar
At the same time, the changing hands prices of NFTs have repeatedly hit record highs. In March 2021, the digital artist Beeple sold his NFT art collection for $69.3 million at auction , making him one of the best-selling living artists overnight. Some rare CryptoPunks, Bored Apes and Art Blocks are also sold for millions of dollars . Established auction houses such as Christie’s and Sotheby’s have sensed the opportunities in the new NFT market and have accepted NFTs and held auctions , as well as launching their own NFT trading platforms. In addition, some art galleries are also struggling with the thorny issue of how to display digital art.
As the enthusiasm of artists and celebrities for NFTs soared, a lot of money also poured in. Rapper Snoop Dogg claims to be an NFT collector and launched NFT tickets for a virtual party in the encrypted game The Sandbox ; American movie stars Ashton Kutcher and Mila Kunis launched their Stoner Cats NFT cartoon short ; American National Football League (NFL) star Tom Brady also launched his own NFT platform Autograph.
The future of NFTs
At present, people’s attention to NFTs is mainly focused on artworks, games and encrypted collectibles . In addition, more and more well-known brands license their content as NFTs; fantasy football game Sorare has signed more than 100 football clubs on its platform, and ” Smurfs” and ” Minecraft” Games such as Doctor Who and BBC’s Doctor Who have been made into NFTs. Twitter launched its own series of NFTs (see the picture below) in June 2021, and announced plans to launch the NFT avatar verification function a month later.
In the game field, NFTs can be used as props in the game (such as skin) to use , so that they can be transplanted into a new game or trade with other players.
However, the potential of NFTs is much broader, and its possible applications include copyright and intellectual property rights, ticketing, and sales and transactions of electronic games, music and movies, and so on .
For example, in September 2021, the thriller “Zero Contact” became the first feature-length film to be released in NFT format ; a few weeks later, the epidemic-themed thriller “ Lockdown ” was also released in NFT format. In October, Tom Brady’s NFT platform Autograph added musician The Weeknd and FTX CEO Sam Bankman-Fried to its board of directors, planning to launch music NFTs .
NFTs also bring the potential to create security tokens and tokenize digital and real assets . Real estate and other physical assets can realize partial ownership or shared ownership through tokenization. If these security tokens are in the form of NFT, then the ownership of these assets will be completely traceable and clear, even if some of their tokens are sold.
Other applications of NFTs include certificates, software licenses, warranties, and even birth and death certificates . NFT’s smart contract can prove the identity of its owner in an immutable way, and can be stored in a digital wallet for easy access. In the future, our digital wallet may contain all the certificates, licenses and assets we hold.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/q3-transaction-volume-increased-by-38000-year-on-year-how-did-nft-become-one-of-the-fastest-growing-fields/
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.