Investigation Reveals NFT Community Is Changing

Why Does the NFT Market Makes One’s Hearts Beat

Andrea Baronchelli, PhD in mathematics at the Alan Turing Institute and City University London, paid her attention to the NFTs phenomenon after the record-breaking sale of Beeple’s “Everydays”: The First 5000 Days was sold for 69,34 million dollars. Such prices were common for the people working with Bitcoin and, sometimes, Ethereum. However, this sale of a digital painting turned into a real hype.

Total Numbers

A new research of NonFungible reveals that the capitalization of the NFT market has grown by 300% over three years in 2020 (from $123,999,573 to $372,203,300) and by 4,540% in 2021 (to $16,898,362,987). The growth rate reached 13,628%. And that is in just three years. One can say that this is an absolute record for the DeFi market. The growth continues — according to the website coingecko.com the NFT market capitalization as of April 29, 2022, is $35,1 billion.

NFT Market Segmentation

The researchers from the City University London analyzed the same segments in parallel with NonFungible:

  1. Art
  2. Collectibles
  3. Metaverses
  4. Services
  5. Gaming
  6. Others (NonFungible included sports in this particular case)
  1. CryptoPunks and Bored Ape Yacht Club in Collectibles ($1,862,605,426 and $1,744,863,506 respectively).
  2. Axie Infinity in gaming ($3,485,878,200).
  3. The Sandbox and Decentraland in the Metaverses ($317,607,356 and $110,760,195 respectively).
  4. VeeFriends in Services ($158,186,652).
  5. ArtBlocks in Arts ($1 329 717 503).

Changing Focus Based on Segmentation

At the end of 2017, the real trend of the newly created NFT market was presented by the CryptoKitties collection. Cute cats instantly won the hearts of users, and the first NFT community formed itself around them. The ability to select genetics, cross cats, and breed new breeds has made the idea useful. It is not interesting just to have a cat. The selection is really engaging.

  • 18% for the art,
  • 33% for the Gaming,
  • 39% for the Metaverses.

The Segmentation of the Average Sale Price of NFTs

Let us consider a pivot table by segments.

Losses and Profits

The percentage of losses from the total trading volume is the highest in the category of Utilities — 5.98%. The art NFTs and Collectibles are close to this number. However, the Gaming and Metaverse categories promise you the highest profits.

The Size of the NFT Community

If we take a look at the number of NFT communities, we will see the dominance of the Gaming segment.

The Market Share Based on Blockchain

As expected, the Ethereum blockchain is in the lead — 76% of all created tokens have the ERC protocol.

The Structure of NFT Traders

The scientists of the Alan Turing Institute came to an interesting conclusion, investigating the nature of the sale on the NFT market based on the trade networks, the nodes of which are the traders themselves.

Visual Features of the Art NFTs Collections

After processing 1.25 million graphic images from different collections through a trained AlexNet convolution neural network, the scientists evaluated the visual similarity of different objects. The most homogeneous (that is, similar) among themselves turned out to be the NFTs of the Sorare and Cryptopunks sets.

Segment Outlook in Numbers

NonFungible considered the capabilities of most segments in their report.

NFTs Can Cause Problems. Which Ones?

The year 2021 was a hype source for the NFT. It was new, trendy, and unusual. However, some skeptics say that 2022 has put everything in its place and the “bubble” is close to bursting. Most of these comments are based on the failure in respect of the sale of the first post on Jack Dorsey’s Twitter. In March 2021, it was sold for $2.9 billion. In April 2022, the maximum auction price for this lot was $6,849.30.

Services Usability

The very interaction with marketplaces and minting sites is quite difficult for inexperienced users. In addition, many users mentioned the difficulty when transferring tokens to buyers or as a gift. Also, in terms of ease of use, the marketplaces are far from online stores and platforms for the sale of real products. Imperfect filters and search complexity significantly complicate your work with NFTs.

Legal Bases and Taxes

At this point, the decentralized finance market itself is far from perfect, and you don’t understand the importance of NFTs in this case. The regulatory bodies offer different options, but the crypto legislation is completely separate from the NFT legislation — this is a completely different asset. The token segments themselves are so heterogeneous that it is not yet possible to bring them to a common denominator.

Anti-fraud Activities

While the NFT market is technologically weak, some marketplaces like OpenSea are eliminating plagiarism and fraud on their own. You do not know how to deal with the situation when many tokens can be issued for one object. Also, a new type of fraud has appeared — sleepminting. It turned out that it was possible to issue a token for an artist and then, without his consent, transfer the rights to ownership to yourself. At the same time, the transaction in the Blockchain is considered completely legitimate.

Ecology

This problem affects all projects based on the Proof-of-Work algorithm. The energy consumption and the associated increase in carbon dioxide emissions into the atmosphere are of concern to all crypto and NFT communities. However, this problem is solved by switching to the Proof-of-Staking algorithm.

Inflation and Speculation

While the crypto markets are just getting their stability, this problem remains. In 2021 we saw the record highs for speculative selling. The inflation also appeared with an increase in the number of projects, imitators, and celebrities on the marketplaces.

Lack of Knowledge

While the tokens are more related to the hype, any middle person buys them only because of the trend. This is especially true for the Art category, where most of the traded objects do not have any value. You can find some real benefits among the club options (for example, Bored Ape Yacht Club), service, and financial tokens. If we take a look at the entertainment, NFTs are also a big part of an idea.

Missing Some Digital Assets Display

This problem mostly applies to all the digital copies of real things. For example, if you bought a crown with some diamonds from Dolce and Gabbana or a pair of super-quality sneakers from Gucci, your suit will shock even the star of glamour, Paris Hilton. A great idea. But where do you show all these treasures? In reality, you can visit some fashionable hangouts, shows, and events, but they are not online yet.

Summary

It’s too early to talk about any crisis in the NFT market. This phenomenon will stay with us. However, it will become a full-fledged part of the digital economy. Based on smart contracts, token minting is an excellent solution for impartial proof of your ownership in the virtual world. It took just four years for the NFT market to make its name. Yes, so far, there is more hype than any kind of regulation. And please do not forget the scams. But is there any example in the history of mankind when a new economic phenomenon became ideal from the moment it appeared?

Real Estate

A middle person of any deal, leaving his/her function to the smart contracts. The models of

The Film Industry and Events

In addition to copyright and ownership, tokens can act as tickets — with or without unique characteristics (row, place, bonuses). Some film companies already include the opportunity to act in films or take part in the drawing in tokens.

Status Confirmation

Are you a part of a closed community, or do you have a unique avatar on a social network? It’s about your rights, and we’re back to the power of NFTs. Only instead of a card that wears out over time, which can be lost, or a typical image, you can confirm your involvement and uniqueness with the help of your original image. And a token in the Blockchain will indicate your ownership.

Protecting Data and Defining Access Rights

While this problem in IT is solved in different ways, and huge resources are spent on ensuring reliability and confidentiality. However, the release and circulation of NFTs are simple and cheap. And the protection from any malicious intent provided by the very environment of their circulation is Blockchain technology.

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