The NFT market is beginning to move towards "ecologization." Who is quietly building the foundation of the pyramid?

This article is from Mars Finance, author: Liang Yushan.

If DeFi is a reflection of traditional financial markets, then the current NFT market is an imitation of DeFi.

NFT funds, trading platforms (including cross-chain aggregation), creation platforms, auction protocols, lending platforms, and DAOs, etc…. all of these are replicating the structure of the DeFi market. More importantly, new projects in categories such as auctions, lending, and DAOs have emerged almost simultaneously in the first quarter of this year. Various signs indicate that the NFT market is accelerating its move towards "ecologization."

(Note: Auction protocols and IDO platforms are both for asset pricing)

In this process, we find that the players in the NFT space are not just imitating DeFi, but are attempting to build their own "pyramid base" (NFT public chain) to avoid the problems currently faced by DeFi, fundamentally establishing a more complete and independent NFT market.

Why build a "pyramid base" specifically? Who is involved? Will this "base" become a "sufficient and necessary" condition for the rise of the NFT market? Starting from these three questions, this article will explore the NFT public chain track.

1. Pyramid Base: Public Chain

As an infrastructure layer, the value of public chains has been fully realized with the explosion of DeFi. This is vividly demonstrated by Ethereum.

In the past year, a large number of emerging DeFi projects have been built on Ethereum, rapidly pushing Ethereum from a "token issuance machine" to the role of a "public chain." As more and more projects enter the Ethereum network, DeFi has become Ethereum's moat, providing greater imaginative space for ETH value capture.

If we draw an analogy with the structure of the DeFi market, then the public chain is equivalent to the pyramid base. The stability and area of the base to some extent determine the scale of the entire pyramid. Any module (protocol) built on the base needs to pay the cost of using the base (Gas fees).

Thus, the premise for DeFi to explode is that Ethereum, as the pyramid base, is mature enough, and the performance of ETH value achieving over 1300% growth in the past year is inseparable from those DeFi projects rooted in the base, which have prospered the Ethereum ecosystem.

2. The Ultimate Goal of Building an NFT Public Chain: Value Reinvestment

Since Ethereum is already mature enough, why do NFT players still want to build a public chain? From Ethereum's perspective, this is a "success or failure" issue.

On one hand, DeFi projects indeed empower the Ethereum ecosystem and its value; on the other hand, with multiple DeFi projects gaining popularity, the Ethereum network's capacity struggles to cope with the surge in on-chain activities, leading to issues such as network congestion and high Gas fees, which greatly diminish the user experience of entering the DeFi and NFT worlds.

What about other public chains? Although other public chains have lower usage costs and smoother networks compared to Ethereum, for developers who prefer decentralization and focus on the development environment, this does not seem to be the optimal choice.

Since Ethereum cannot solve the congestion problem in the short term, and other public chains have centralization issues, why not build a public chain ourselves? From the external market environment, this is the original intention of the CryptoKitties team to build the FLOW public chain.

"We started the technical development work for Flow early on. CryptoKitties launched in December 2017. We realized a few weeks later that the limitations of Ethereum prevented us from building a stable business model through CryptoKitties. We also knew that failing on other chains would pose an existential risk for us," said the Dapper Labs team in a March interview with DappReview.

If we consider the perspective of "latecomers," NFT projects that recently announced the construction of public chains, we may better understand "why build an NFT public chain": value reinvestment.

The success of Ethereum has proven that the value captured at the infrastructure layer during the early stages of market development is the greatest and most enduring. Currently, compared to DeFi, the NFT market is in an earlier stage, and laying out the public chain track early is undoubtedly a choice that benefits both the individual and the industry before Ethereum resolves its scalability issues.

After all, as more new projects emerge, those public chains that can provide a better user experience and accommodate more projects are likely to become the "Ethereum of the NFT market," thereby establishing their own ecosystem and gaining value reinvestment.

3. Dapper Labs Leads, Efinity, NFTMart Start

● Dapper Labs---FLOW

Dapper Labs is both the development team behind CryptoKitties and the designer of the FLOW public chain.

As mentioned above, the Dapper Labs team began conceptualizing and designing the FLOW public chain in 2017, due to network congestion on Ethereum affecting user experience. By September 2019, the team completed a $11.2 million financing round, backed by top venture capital firms like a16z, Union Square Ventures, and DCG, with the funds used for developing FLOW.

By January of this year, influenced by the surge in trading volume of NBA Top Shot (created based on FLOW), the FLOW public chain and its native token entered the public eye. According to market data, the FLOW token has risen nearly 100 times in the secondary market compared to its public offering price, currently hovering around $36.

(NBA Top Shot weekly trading volume)

According to the official definition, FLOW is a fast, decentralized, developer-friendly blockchain that uniquely integrates usability improvements into the protocol layer. Currently, some top developers and world-class brands have begun building on FLOW, with ecosystem partners including Warner Music, Ubisoft, NBA, and UFC.

In terms of specific applications, the NFT trading platform VIV3 based on FLOW has already launched, and cross-platform application publisher Animoca Brands plans to build the collectible game MotoGP on FLOW, while the world's largest NFT comprehensive trading market Opensea has announced its intention to integrate the FLOW chain.

● Enjin-Efinity

Enjin is a blockchain gaming platform, and its Chief Technology Officer Witek Radomski created the ERC-1155 protocol, which is recognized as an official Ethereum token standard.

ENJ is the native token of Enjin, which saw a significant surge in the first quarter of this year, influenced by the popularity of NBA Top Shot and the overall rise of the NFT sector, with a rise of over 300% in March.

On March 31, Enjin announced the completion of a $18.9 million private funding round and plans to establish the NFT public chain Efinity based on Polkadot. Thus, Enjin officially entered the public chain track.

According to the Efinity white paper, the Enjin team is currently collaborating with the Web3 Foundation to build Efinity on Polkadot. This blockchain is a parachain of Polkadot, using relay chain validators to achieve consensus, allowing Efinity to have an independent economic framework, data, and state. "The Ethereum-based Enjin will continue to develop, and a cross-chain bridge will connect the two networks to be fully compatible with the entire Ethereum ecosystem."

In terms of token economics, Enjin plans to launch the Efinity public chain token EFI, which can be used to pay network fees.

● NFTMart-nftmart.network

NFTMart is an NFT trading platform within the Polkadot ecosystem, which has not yet launched its mainnet.

According to the official introduction, NFTMart is not merely an NFT trading platform but a trading platform aimed at establishing "its own vertical public chain."

Specifically, the NFTMart platform is divided into two parts: one is nftmart.network, which serves as a decentralized NFT public chain primarily used for publishing NFT assets and processing on-chain transaction data; the other is the nftmart.io platform entrance, which provides NFT product trading scenarios.

● Immutable-ImmutableX

Immutable is the development team behind the well-known blockchain card game Gods Unchained. This game is second only to CryptoKitties in popularity within the NFT world and is known as the blockchain version of "Hearthstone."

ImmutableX, designed in collaboration with StarkWare (a zero-knowledge proof technology development company), is not purely an NFT public chain; its essence is a Layer 2 scaling solution for Ethereum. Given that the team is also attempting to solve network congestion and promote the development of the NFT market, we find it necessary to introduce "the NFT chain on Ethereum," ImmutableX.

ImmutableX was created to address the scalability and Gas fee issues of NFT projects on Ethereum. On April 8, ImmutableX released its Alpha version, announcing initial support for Gods Unchained players to trade "Trial of the Gods" cards, with plans to support more projects in the future.

By April 11, Immutable tweeted that within 24 hours of the Immutable X mainnet launch, it had saved the Gods Unchained community over $410,000 in Gas fees.

4. Will NFT Public Chains Become a "Sufficient and Necessary" Condition for Market Rise?

Before answering "Will NFT public chains become a 'sufficient and necessary' condition for market rise?", we need to understand what is required for the rise of the NFT market.

The answer is undoubtedly: hotspots, capital, users, and applications.

The NFT market already possesses hotspots and capital. The news of Beeple's artwork selling for $69.34 million has become a key event driving NFTs into the mainstream; the market data showing that VCs invested nearly $400 million in NFT projects in the first quarter proves that capital is flowing into the NFT market.

What remains before us are the two elements: users and applications, and their relationship is complementary. In the past, the NFT market was mainly focused on games and collectibles, and most projects did not move beyond a "transitory" development state, often appearing as "flash in the pan." The changes in user numbers have mirrored this situation.

Currently, however, NFT projects related to social, lending, and verification are beginning to emerge, which helps reshape the original, singular market structure to some extent. Imagining this, the future development of the NFT market will be more sustainable and dynamic, thus raising the requirements for public chain performance.

Therefore, our question also finds its answer: The rise of the NFT market will inevitably require a public chain that can run quickly and provide a good user experience.

But the current problem is that NFT public chains are basically at the same development stage as other NFT projects, which is entirely different from the significance of Ethereum to DeFi, as the latter undertakes the "heavy responsibility" of carrying a large number of DeFi projects under sufficiently mature conditions.

However, this does not mean that NFT public chains have no opportunity. After all, regardless of how large a public chain's market share is, the coexistence of multiple chains is difficult to break, and the era of cross-chain will eventually arrive. Those NFT projects that layout the public chain track early and prepare for cross-chain are likely to welcome their own opportunities in the future.

5. Conclusion

The launch of public chains by NFT projects is influenced by external environments and the need for their own ecosystem construction.

From the external environment perspective, the issues of network congestion and high Gas fees on Ethereum make NFT gaming projects that emphasize user experience more urgently in need of an efficient, low-cost public chain; from the perspective of NFT projects themselves, having the opportunity to build a public chain and establish an ecosystem in the early market is undoubtedly a good choice.

In the future, once NFT public chains rise, the entire market will inevitably further break into the mainstream, as low-cost, high-efficiency public chains will attract more participants from the traditional market.