What are the advantages and disadvantages of Coinbase and FTX’s NFT market compared to decentralized platforms?

It is possible for Coinbase and FTX to establish NFT exchanges with unique value propositions.

As Coinbase and FTX announce their own NFT platforms and trading services, the NFT market structure is heating up. Generally speaking, when a centralized exchange (CEX) seeks to become a major NFT trading venue, it has both some key advantages and some disadvantages.

NFT competitive advantage of centralized exchange (CEX)

Given its size and resources, a centralized exchange (CEX) has some key advantages. Some of these advantages will be the key to determining whether these existing behemoths succeed in the NFT market.

pull pipe service

Asset custody is the main advantage of the Centralized Exchange (CEX). Coinbase ensures that retail traders will not misplace their assets or be locked out of their accounts due to forgotten passwords. Essentially, CEX helps prevent mistakes when transferring cryptocurrencies.

More importantly, Coinbase and other exchanges will be able to find synergies with high-end NFT custody (such as Punks, BAYC) and their NFT platforms. Most high-net-worth individuals will choose to host their high-value NFTs on Coinbase instead of self-hosting. Coinbase will be able to list and allow individuals to bid on NFTs stored in Coinbase Custody. This will help bring NFT liquidity to Coinbase, as they will naturally provide some higher-end NFTs on their platform.

Centralized exchanges (CEX) can use their vertically integrated services (node ​​infrastructure, mortgage services, etc.) to add more value to their platforms. This has other potential benefits, but custody seems to be the biggest direct advantage.

Branding and distribution

Large exchanges have large brands, spendable funds, and a strong existing audience. For example, Robinhood will become a strong competitor to Coinbase because of their larger existing user base. Similarly, Coinbase will compete with OpenSea and other NFT platforms. The potential of Coinbase or FTX to convert a small portion of its existing customer base into NFT traders would mean hundreds of thousands of customers. For reference, OpenSea, the largest NFT market, has supported NFT transactions with more than 500,000 unique addresses (not necessarily different traders).

In addition to distribution, Coinbase and FTX have big brands that allow them to find the best NFT artists and projects, and let them publish (launch) on their respective platforms. This is another way that centralized exchanges can guide liquidity.

Partnership and intellectual property

Combined with Coinbase’s existing user base, this well-known American exchange will also have a stronger ability to collaborate with big brands and influencers. FTX has obtained the naming rights authorized by all your favorite brands, and there are rumors that they will capture your high school football field next. Coinbase recently announced its partnership with WNBA and NBA, which will provide basketball fans with unique content, innovation and experience.

Large organizations like Disney are more likely to work with established companies such as OpenSea or Coinbase, which can provide legal contracts rather than license-free agreements. In addition, the centralized exchange will have the competitive advantage of cooperating with existing intellectual property rights and ensuring the transfer of royalties on its platform.

Potential disadvantages

The unlicensed NFT market (i.e. Rarible, NFTX, Genie) will still have an advantage over its centralized competitors.

Supervision

In general, the main disadvantage of US exchanges like Coinbase is regulation. Many NFTs are similar to securities, or may oscillate between consumer goods and financial products. Does this NFT provide governance capabilities for DAO, and does it charge brand licensing fees from the transaction volume? The cool NFT that you bought directly earns royalties from songs, content, or videos? Owning NFTs can obtain other NFTs released by the project. These NFTs may have monetary value or need to be exchanged for funds to be purchased? Fragmented NFT? . Please note that this may apply to U.S. companies, while FTX or other non-U.S.-centric companies may not have the same restrictions.

Asset breadth

Liquidity is arguably the most important quality of any market. Binance initially gained market share because it provided access to trading assets not listed elsewhere, thereby attracting funds and users (Binance also has an excellent user experience and entry experience). Likewise, Uniswap has gained traction because it provides assets even faster than a fast-growing exchange like Binance . Similarly, permissionless agreements and even other exchanges may be able to list a wider variety of NFT assets at a faster rate. Coupled with potential regulatory concerns about specific NFTs and license-free NFT agreements, whether it comes from cash flow-generating NFTs or fragmented NFTs, you may find the unique advantage of accumulating liquidity.

integrated

Ethernet Square, one of the landmark features is the combination of intelligence and software contracts. Alchemix can seamlessly use Yearn vaults to generate revenue, and InstaDapp can facilitate a one-click process to transfer collateral from one lending agreement to another (such as Aave to Compound). These types of integration and secondary applications promote the liquidity of the platform. Compared with Coinbase, FTX or other centralized NFT markets, the unlicensed market will be easier to integrate with other protocols due to its openness.

Final thoughts

Eventually, Coinbase and FTX may establish a powerful NFT exchange with a unique value proposition. Similar to how Coinbase and Uniswap can remain successful, the same is true for Coinbase and OpenSea or the decentralized NFT market. Importantly, NFT exchanges such as Coinbase, OpenSea, Rarible, and NFTX are also competing for the liquidity of different blockchains and various assets. The upcoming growth of NFT in various industries means that there will be many opportunities.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/what-are-the-advantages-and-disadvantages-of-coinbase-and-ftxs-nft-market-compared-to-decentralized-platforms/
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.

Leave a Reply