Every day is a new chapter in the history of NFT. In 2020, the NFT ecology begin to take shape, and in 2021, the enthusiasm for NFT has soared. Twitter CEO Jack Dorsey sold his first Twitter on the website "Valuables by Cent”. The 5 worded tweet was bid as high as US$2.9 million;”CryptoPunk #7523" was sold for US$11.754 million, setting a single CryptoPunk NFT historical transaction record ; New York Times column NFT sold for 350 ETH; Grammy Award winner Ryan Tedder will issue NFT on Origin; GUCCI and other luxury goods companies begin to sell NFT; Crypto celebrities, KOLs, musicians, artists, and stars begin to pay attention to NFT and have successfully raised attention for NFT.
Jack's first Twitter-Image Source: Internet
But popularity does not mean breadth. In the second week of March 2021, although the number of weekly users of the NFT platform reached 398,800, a record high at the time, it is foreseeable that NFT still has a lot of room for user growth. However, there are difficulties hidden behind the boom in transaction volume. The latest data shows that NFT transactions have fallen by nearly 80% from the peak period. Looking beyond the viral trend of NFT, the artistry of NFT art itself has also been questioned, resulting in the shrinking of the NFT market transaction scale.
From a technical perspective, on the one hand, the decentralization of the NFT carrier platform restricts the circulation of NFTs; on the other hand, the high transaction fees, network congestion, and poor user experience of Ethereum also hinder the growth of the NFT market. It can be seen that, if NFT wants to achieve large-scale development, it not only needs to overcome technical barriers, but also has to break the high threshold, in order to welcome all users who love and are willing to explore.
Transaction volume fell by nearly 80%. The artistry of NFT itself is questioned
According to DuneAnalytics data, on May 4, the world's top NFT trading platform OpenSea's trading volume reached its peak, with a 24-hour trading volume of up to 23.13 million US dollars; by June 15, the trading volume was only 4.93 million US dollars, which fell from the peak of the market by 78.7%. Using 7-day transaction volume, the trading volume in the past 7 days has dropped by 61%, compare to that of the peak in May. SuperRare is also facing the similar situation: The trading volume is 936,000 ETH in May, which is 58.3% lower than the peak of 3.382 million ETH in March.
The reason may be related to the fact that its artistic value has not been widely recognized. Take the BAYC as an example, the recently popular NFT, despite the two-way increase in transaction volume and price, many investors did not agree with its value other than appreciation. Sleepy, a crypto art investor and BAYC holder, said: Many people who buy these monkeys NFTs are not for collection, and some people only buy monkeys at the floor price only for a publicity stunt.
In addition, in response to the rapidly expanding NFT trading market, Chinese artist Xiu Li, a member of the Chinese Artists Association, once commented in an interview to a crypto water ink painting: “These things don’t value composition or color, let alone brushwork and use of ink. Things like these should not called paintings at all.” This interview eflects the attitude of some traditional artists towards the NFT market.
BAYC-Image Source:Opensea
High fees, network congestion, and poor liquidity hinder the growth of the NFT market
Up to now, among the top ten NFT sales projects, CryptoPunks, Hashmasks, CryptoKitties, Sorare, Axie Infinity, Art Blocks, MyCryptoHeros and Gods Unchained are all established on the Ethereum network. The average transaction fee of Ethereum has risen sharply after 2021. In February, the average transaction fee was US$20, and the average transaction fee in March was US$18. Although the gas fee decreased in April, it is still unfriendly to high-frequency trading. Most Ethereum-based NFT trading platforms need to pay gas fees during the buying and selling (except for Nifty Gateway, which allows users to pay with credit cards). Even the the removal of works requires users to pay for gas, and the transfer speed of the trading platform is also slow. A transfer often takes 3-5 minutes to confirm.
Hashmasks-Image Source:Internet
Based on the NFTs issued by different public chains, the liquidity of the NFT market is extremely limited due to the different standards of public chains. For example, NFTs on the Ethereum chain cannot be traded on the Flow chain. Even NFT projects that are built on the same public chain may also be incapable of circulation due to different standards implemented, such as ERC-721 and ERC-1155 of Ethereum.
High transaction fees, network congestion, and poor user experience are the main problems of the existing Ethereum network. Coupled with poor liquidity, this makes it more difficult for NFTs with high thresholds to become popular. Therefore, seeking solutions that can carry high-frequency trading and large-scale markets is an important development direction of the current NFT industry.
Exploring the way of NFT scale development in detail
According to the division of technical architecture, the NFT industry ecological infrastructure is mostly concentrated in the following three directions: the major underlying public chains at the data settlement layer, various technical standards at the protocol layer, and various auxiliary service applications at the application layer. The development dilemma of NFT may be able to find a breakthrough along the improvement of its ecological construction.
On the underlying public chain of the data settlement layer, Ethereum still maintains a large lead in the market share, while the remaining public chains have asymmetric competitive advantages in terms of development speed and some indicators. With the advancement of ETH2.0, Layer 2 is closely connected with the Ethereum main chain, or can make full use of Ethereum's perfect financial infrastructure to reduce GAS fees.
For various technical standards at the protocol layer, some of the underlying public chains of NFT have begun to develop unified on-chain protocol standards to meet the future development needs of NFTs. Based on the unified on-chain protocol standards, it can effectively reduce the threshold and difficulty of NFT asset issuance. For users , NFT assets using such a unified chain protocol standard can quickly realize the confirmation of digital assets, solving digital asset security issues and improving the cross-ecological circulation of digital assets.
At the application layer, most of today's NFT exchanges, artworks, games, etc. are built on a specific underlying foundation and are applications created based on the ERC-721 standard. The gradually emerging centralized NFT trading platform has many characteristics such as low threshold, low transaction fees, and convenient operation. It is extremely friendly to ordinary users, and may truly break the high threshold of NFT.
Gate.io NFT Magic Box is one of the typical representatives. As the world's first centralized NFT trading platform, the NFT Magic Box platform provides low-cost NFT users, artists and NFT institutions around the world through the independently innovative GateChain public chain and cross-chain protocol. Supported by high-performance blockchain technology, users only need to focus on creation of works, and they can enjoy an all-round transaction experience including platform empowerment, low-cost minting, works display & sales, and truly create a hands-on creation and auction platform.
Conclusion: Challenges and opportunities coexist, the era of "NFT" of is coming
NFT is a digital asset on the blockchain with the characteristics of uniqueness, indivisibility, and difference. It can realize the value transfer of data content and provide a feasible way for the virtualization of real assets. It has important advantages in the current period of digital acceleration. According to data from NonFungible.com, from 2017 to 2020, the total market value of NFTs has rapidly increased from US$31 million to US$320 million, with a growth rate of over 9 times and an average growth rate of 300%, which is a stunning growth rate. Although the transaction volume in May and June of this year has fallen, the NFT trend cannot be stopped. As of June 21, Cryptoart.io data shows that 680,040 works of art have been sold, with a total transaction price of over US$600 million.
Image Source: Cryptoart.io
From games to collectible cards, from Cryptokitties to NBA Top Shot, to the emergence of art and collectibles in 2021 and the combination of NFT and Metaverse, the NFT ecosystem is gradually improving, stimulating the continuous improvement of the technical layer and the protocol layer. Meanwhile, NFT is also promoting its platform to create more new model scenarios. Of course, the frenzied market needs more stable layout, advancement and breakthrough. The future NFT, without doubt, will coexist both challenges and opportunities, and the era of NFT is coming.
Read More：
Gate.io NFT Magic Box (NFT Creation and Auction Platform) Magnificent Launch [https://www.gate.io/en/article/20541]
Gate.io NFT Magic Box Official Launch (NFT Creation and Auction Platform for Everyone)
[https://www.gate.io/en/article/21304]
References:
"NFT talks about the value of encryption art after cooling down: a speculative bubble or a new Duchamp? “
"Overview of NFT Infrastructure Development Status: Public Chain, Side Chain and Layer 2"
"Overview of NFT Development in the First Quarter: Technical Solutions, Infrastructure and Application Track"
Author: Gate.io researcher Hannah.H
*This article only represents the views of researcher and does not constitute as any investment advice.
*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all other cases, legal action will be taken due to copyright infringement.
