If 2017 belongs to ICO, 2018 belongs to IEO, 2019 belongs to CBDC, 2020 belongs to DeFi, then 2021 – undoubtedly belongs to NFT.
01 NFT market is developing amidst controversy
NFT (Non-fungible token), the emerging asset type known as non-homogenized tokens can convert digital artwork and other collectibles into unique and verifiable assets and put them on the blockchain for trading. These days, if you know a little about the digital currency industry, it’s impossible not to have heard of NFT, which, as a new digital asset tied to the real world, has almost become the next big thing that gets the most industry attention.
However, there is also a lot of controversy in the development of the NFT market.
On the bright side, the total market cap of NFT tokens hit an all-time high of $30 billion in mid-April this year, and while the bitcoin price crash in May caused most digital currencies to suffer in the extreme market, NFT trading volume has continued to grow.
According to a recent report released by DappRadar, the recent market shakeout does not appear to have had much of an impact on the NFT industry, as shown in the chart below, with users buying, trading and selling an average of 85,787 NFTs since the early digital currency market crash, with an average daily transaction volume of approximately $5.8 million, an increase of 277% compared to January of this year (when the average daily NFT sales volume was 21,815), and in the first 11 days of June, the average daily trading volume reached $14.9 million.
If we stretch the clock a little longer, you’ll see that NFT has been growing exponentially for most of the last year. Collectors, traders, gamers and artists continue to trade, buy and sell NFT as if they were never affected by the digital currency market shakeout. In addition, with the resurgence of NFT fever, more and more traditional industry giants and celebrities have recently begun to “covet” this emerging industry, such as
Alipay and the Dunhuang Fine Arts Institute jointly launched NFT, a payment code skin based on two ant-chain issues.
Fox Group has created a $100 million NFT creators fund.
sports car and F1 car manufacturing giant McLaren to list displays showcasing McLaren’s racing history and heritage and famous drivers NFT.
Marvel beginning to target the NFT market to attract IP collectors.
Elon Musk’s mother Maye Musk also launched her personal #DiamondsAreForever NFT.
On the other hand, however, there are still limitations to NFT applications. To date, there are no widespread NFT use cases in the real economy, and NFT application scenarios are still limited to a few verticals such as digital art, collectibles, and games, which in turn leads to the vast majority of NFT transactions remaining a low-frequency, high-value transaction. Many NFT trading platforms have service fees and transaction costs that are beyond the reach of the average trader, and Coinbase co-founder Fred Ehrsam has even predicted that the NFT market volume will decline and eventually “90% of NFT will be worthless”.
In addition, as most NFT projects are still deployed on the ethereum blockchain, the high cost of Gas fees and network capacity problems have been exposed as the market heats up gradually. The discussion of “centralization” and “decentralization” of NFT also began to surface.
02 NFT’s dilemma and innovation
As a breakthrough product that ignited the blockchain field after DeFi, despite the rapid growth of NFT, it is undeniable that it is still in the early stage of industry development and there are inevitably some inevitable bottlenecks, such as the relatively low degree of ecological perfection of NFT at this stage, and the obvious distinction between market tracks, various projects in terms of investment logic, business logic, circulation There are major differences in investment logic, business logic, circulation logic, etc., and it is difficult to form a stable and sustainable business synergy.
In addition, the NFT project has many practical problems that need to be improved in its application scenario expansion, network blockage due to transaction bursts, NFT asset issuance, pass exchange, etc., because there are technical differentiation characteristics that may cause constraints on the business level. If these problems are not better handled, it is likely that the development of NFT will be trapped.
Traditional NFT transactions are carried out on the chain, basically by the concept of “decentralization” to be realized, but NFT and the real world have a lot to do. As the market matures, property rights, value, transaction experience, liquidity, etc. undoubtedly touch on the substantive issues of “decentralization” versus “centralization”.
Although blockchain technology originally represents the “decentralized” idea and can provide a completely independent value transmission system. However, for the NFT project, it is obvious that transaction experience and liquidity are also the first and unavoidable issues, especially as NFT is becoming more and more popular, the liquidity of NFT is still relatively insufficient compared to other cryptocurrency markets, which further limits the value of NFT. In this regard, the centralized exchange NFT market can actually bring a better solution and address the challenges associated with the traditional model.
In fact, some of the leading centralized exchanges (CEX) have already started to set up their presence in the NFT market.
It is no exaggeration to say that the entry of CEX into NFT will inject more momentum and innovation into the space. Take KuCoin for example, as the first mainstream cryptocurrency exchange to support NFT asset replenishment, KuCoin has long been committed to NFT market expansion and project empowerment, and its NFT zone includes several high-quality NFT projects, such as LYXe, DEGO and THETA. Its BurningDrop platform has also helped a number of early stage NFT projects to distribute their passes fairly, such as XCAD and TCP, giving more ordinary users the opportunity to participate in the early stage investment in quality NFT projects.
In fact, if we benchmark DeFi, we will find that the early DeFi market was very slow to develop, and it was the announcement of DeFi support by several CEXs in late 2020 to early 2021 that drove the boom. According to the latest data from Coingecko, the market value of NFT tokens accounts for about 1.2% of the total market value of cryptocurrencies, which is not a large volume and therefore has a good potential for improvement. A typical example of a new NFT play is Kanaria.
Kanaria is an NFT set, built from the NFT protocol RMRK.app, dedicated to establishing a standard cross-chain NFT infrastructure on PoC and Kusama. Kanaria’s NFT sets, also known as Kanaria chicks, are extremely rare, and these chicks can hatch in specific situations to create more useful and ornamental “Canary” NFTs, and holding “Canary” NFTs provides access to specific benefits, such as discounts, revenue sharing, and early access to the RMRK program.
It is worth noting that due to the limited number of Kanaria and the fact that unsold Kanaria chicks will be destroyed at the end of the offering. Therefore, both the chicks and the hatching canaries are extremely rare and collectible. Users can choose to sell their NFTs, such as chicks or hatchlings, on the Kanaria platform or collect them and wait for their value to increase.
We all know that traditional NFT transactions are done on the chain, which requires users to not only have their own wallets, but also need to have basic knowledge of on-chain operations, etc. These are extremely high thresholds for newcomers. In order to lower the threshold of the user base, KuCoin and Kanaria have opened up centralized NFT play. These NFTs can be purchased directly from KuCoin (limited to 700), which is convenient and provides a better user experience. Even “novice” users who are new to the digital currency industry can easily access Kanaria eggs, and the process of hatching them is much easier. From the above, CEX is indeed better than DEX and other NFT platforms in terms of NFT features and experience.
03 NFT+CEX Market Development Outlook
NFT is a non-homogenous token, while most cryptocurrencies including Bitcoin and Ether are homogenous tokens, and they are very different in nature.
Frankly speaking, the support of centralized exchanges for NFT does not make it abandon the concept of “decentralization”, but at the same time can provide a better value delivery system, CEX into the game so that more and more people find that NFT does not have to force “decentralization”. More importantly, as traditional industries integrate more and more with the digital currency industry, CEX can fully play a more important role in the development of the NFT market. On the one hand, when the entry threshold will be significantly lowered, the development of the blockchain industry will inject more fresh blood, especially in the case of trying NFT, users of the physical industry will also be converted to CEX users, which will be of great benefit to both CEX and NFT greatly benefit.
In terms of liquidity, the combination of NFT and CEX can also make the circulation of many illiquid assets, as well as less credible assets easier and more credible, especially on a global scale to facilitate the circulation of long-tail markets and the circulation of scattered distribution of niche groups.
With the support of CEX, the momentum and application scenarios of NFT are bound to further expand. In today’s sluggish digital currency market environment, some may question the crazy growth of NFT has come to an end, but in fact, everything is just beginning ……
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/the-dilemma-and-innovation-is-the-end-of-the-wildly-growing-nft-in-sight/
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