NFT has迎来了 the Davis double-click moment

Source: IOBC Capital

In the past two years, the popularity of NFTs has continued to rise, even being selected as the top buzzword of 2021 by Collins Dictionary. Stimulated by the celebrity effect and profit-making potential, NFTs are sweeping the globe with unstoppable momentum. From Cryptopunks to purely textual Loot, the market has undergone astonishing changes at a rapid pace, evolving from community meme-type NFTs to application-type NFTs in the metaverse. People are witnessing not only the iterative updates in NFT gameplay but also the moment of the Davis double-click for NFTs.

So, what exactly is an NFT? Is it a new wealth-making opportunity, a future trend, or a fleeting bubble? The following content will take you from zero to understanding NFTs.

First, what is an NFT?

At a standard level, tokens can be divided into Fungible Tokens and Non-Fungible Tokens. Among them, Non-Fungible Tokens are unique tokens, which simply means that each NFT is different.

The essence of NFTs is digital asset tokens built on blockchain, and this asset can take the form of an image, audio, video, a string of code, a digital signature, or any other form of digital asset.
NFTs are generated through smart contracts such as ERC721 and ERC1155 standards, featuring uniqueness, indivisibility, programmability, and tradability.

1. Current Development Status of NFTs

1. The Industrial Value Chain of NFTs

To understand the current development status of NFTs, one must first grasp the industrial value chain of NFTs.

Jasmine Zhang and Fiona He, partners and investment managers at A&T Capital, have categorized the NFT industrial value chain from the bottom up based on NFT liquidity into three layers:

• Infrastructure Layer: Includes underlying public chains, Layer 2, storage, wallets, development tools, and other foundational infrastructure.

• Protocol Layer: Mainly consists of various NFT minting protocols and volatility protocols.

• Derivative Application Layer: Primarily includes NFT data protocols, curation applications, social applications, and general secondary markets.

In 2021, the Yixin Blockchain Research Institute also provided a similar layering of the NFT industrial value chain in "Understanding the Current Development Status of the Metaverse and NFTs." Overall, we believe this still reflects the current development status of the NFT industrial value chain.

2. Overall Data of the NFT Market

According to NFTGO statistics, the total market value of NFTs is currently $16.78 billion, with the number of addresses holding NFTs reaching 1.9 million, of which 1.18 million have made at least one transaction. Among them, there are 450,000 active addresses that have made at least one transaction in the past 30 days.

There are as many as 1,859 NFT projects, and the number of NFT projects has surpassed the number of digital currencies in the previous bull market. At the end of 2017, the total number of digital currencies worldwide was only 1,372, meaning that after nearly a year of rapid development, the number of NFT projects has now exceeded that of the previous bull market's digital currencies.

However, the NFT market size is still quite small. Currently, the total market value of digital currencies exceeds $1.5 trillion, with NFTs accounting for only about 1% of the total market value of digital currencies. In terms of trading volume, it still cannot be compared with the FT market; the current 24-hour trading volume of the NFT market is approximately $150-200 million, which is about 0.5% of the FT market's 24-hour trading volume of $117 billion.

3. Monthly Sales and Active Buyer Address Count of NFTs

According to Cryptoslam data, the monthly sales and active buyer address count of NFTs have shown significant growth over the past year.

As seen in the above chart, NFTs began to emerge at the end of 2017, went through a period of silence during a bear market, and exploded in 2021-2022.

4. Total Market Value Curve and Holder Count Curve of NFTs

Both the total market value of NFTs and the number of NFT holders have shown significant growth in the past year.

5. Currently, the vast majority of NFT transactions occur on the Ethereum chain

Currently, the vast majority of NFT transactions take place on the Ethereum chain, with NFT trading volume on blockchains like Solana, Ronin, Avalanche, and Flow being relatively small.

6. Gradually, other NFT trading platforms are competing with OpenSea

With the rapid development of the NFT market, more and more startup teams are eyeing the "NFT trading" pie. Although OpenSea remains the largest NFT trading platform, significant competitors have begun to emerge.

Recently, competition among NFT trading platforms has intensified, with the development strategies of LooksRare and X2Y2 frequently sparking discussions within the industry.

2. Ten Classic NFT Projects

For many people, speaking generally about NFTs may still leave them without a concrete concept or understanding of NFTs. We will analyze ten NFT projects with historically high total transaction volumes as examples.

CryptoKitties

CryptoKitties, the first NFT to gain popularity in the cryptocurrency circle. They can be bred, collected, are indestructible, and cannot be replicated.

Since CryptoKitties can be bred, the total number has now exceeded 2 million+, but the transaction volume has only reached 70,000 ETH, and there are now fewer people speculating on them.

CryptoPunks

CryptoPunks, born in June 2017, was originally intended to pay tribute to the punk art of early 1970s London. From a standard perspective, it is recognized as the first NFT project in the industry because it issued 10,000 Punks through a "modified ERC20" contract, marking the first exploration of "non-fungible" tokens and serving as one of the inspirations for the ERC721 standard.

CryptoPunks generated 10,000 24x24 pixel art image NFTs through algorithms, with each punk pixel avatar NFT having its own information, including its attributes and ownership and transfer information.

The founding members of CryptoPunks are only two: John Watkinson and Matt Hall. Initially, they kept 1,000 Punks for themselves and gave away the remaining 9,000 for free to anyone who wanted them, yet at that time, no one claimed them.

Bored Ape Yacht Club

Abbreviated as BAYC, the Bored Ape Yacht Club was launched in April 2021, consisting of 10,000 ape image NFTs. These monkeys are randomly generated through programming, with each ape's clothing, accessories, background, and expressions being unique, and the Bored Ape Yacht Club is built on the Ethereum blockchain.

The founding team of the Bored Ape Yacht Club consists of only four people, with Gordon being a cryptocurrency trader, Garga a media professional, and Tomato and Saas being software engineers. The four of them are friends in real life and are also very interested in the crypto world; they entered the scene in 2017 and witnessed the birth and development of CryptoPunks and CryptoKitties.

The background story of the Bored Ape Yacht Club is essentially a fantasy: the story takes place ten years later, where every ape that has ventured into the crypto field will achieve financial freedom, but by then, there are no more mines to dig. Thus, the apes become bored in the swamp, leading them to establish a private club for all apes to enjoy.

Each holder of a Bored Ape NFT can freely draw on the wall canvas of the Bored Ape Yacht Club Bathroom, with the ability to draw one pixel every 15 minutes.

BAYC currently has over 6,300 holders, with a floor price reaching 91 ETH. If CryptoPunks is a community of both the wealthy and the common people, BAYC is undoubtedly a pure wealthy club. Currently, notable celebrities holding BAYC include renowned collector Pranksy, NBA Rookie of the Year LaMelo Ball, Curry, celebrities like Yu Wenle, Lin Junjie, Xu Jinglei, and Wu Jianhao.

Mutant Ape Yacht Club

The Mutant Ape Yacht Club, abbreviated as MAYC, can be understood as a fork of BAYC.

It can only be created by exposing an existing Bored Ape to a Mutant Serum vial or minting a Mutant Ape during a public sale.

Decentraland

Decentraland is a virtual land metaverse project, where the virtual land is NFTs, and each coordinate of land is unique. Decentraland is also based on the Ethereum blockchain, and buying and selling land NFT assets requires MANA.

On August 17, 2017, Decentraland launched its ICO, raising 86,206 ETH. The total design of Decentraland is 90,601 plots of land, each measuring 16m x 16m. After purchasing land, users can build and decorate, although 3D modeling is required, making the content creation threshold slightly higher.

As of today, there are approximately 800,000 registered users, with over 20,000 monthly active users. Currently, the number of landowners in Decentraland exceeds 6,700, and the floor price of land currently for sale on OpenSea has surpassed 5 ETH.

The Sandbox (Land)

Also a digital real estate game, with a relatively low entry barrier, allowing novice users to create small metaverses using modules provided by the platform.

Sandbox land is limited to 166,464 plots, with 3x3 plots, as well as 6x6, 12x12, and 24x24 plots, with a floor price of 3.78 ETH, slightly lower than Decentraland's floor price.

Clone X

A virtual human project launched by RTFKT and Takashi Murakami. Clone X has 3D model files that can be integrated into multiple metaverse platforms.

RTFKT was co-founded in 2020 by veterans in the trend toy industry, including Benoit Pagotto, Chris Le, and Steven Vasilev. The spaceship-like shoes that Musk wore at a party were designed by RTFKT; Takashi Murakami is a master of Japanese ukiyo-e and a well-known artist in the anime industry, and he participated in the design of Clone X.

According to RTFKT's vision, the future virtual human Clone X can be implanted with AI chips to interact with its owner, enhancing the experience through VR devices. This achieves a trinity of NFT + AI + VR and can cross multiple metaverses, essentially representing NFT Avatars.

Azuki

A Japanese anime-themed NFT released in January 2022, featuring exquisite artwork, with an initial release of 10,000 pieces. Each NFT varies in dimensions such as hairstyle, eyes, mouth, neck, clothing accessories, and background type.

The goal of the Azuki founding team is to establish Azuki as the largest decentralized brand in the metaverse, with community ownership allowing players to explore the upcoming metaverse.

Loot

Loot is an NFT with eight lines of English words on a black background with white text. In fact, each Loot represents a set of adventure equipment with random scarcity, with the eight items corresponding to the adventurer's weapon, helmet, chest armor, belt, gauntlets, leg armor, necklace, and ring.

Loot is actually an SVG format image that, when created, ignited excitement in the cryptocurrency circle. The total design quantity is 8,000 pieces, with numbers 1-7777 available for anyone to claim and mint by calling the smart contract deployed on Ethereum. The remaining 222 pieces can only be claimed by the contract deployer, Dom, who has claimed 22 pieces, so the current circulating supply is 7,779 pieces. As of today, there are over 2,500 holders, with a floor price of 2.54 ETH.

There is still some consensus in the industry regarding Loot; if the community continues to develop, it may follow a path toward a metaverse game, turning these NFTs into parameters for hero equipment.

Sorare

Sorare is a fantasy football game where official digital collectibles can be traded. Sorare has gained support from European giants such as Atlético Madrid, Juventus, and Bayern Munich, as well as from Major League Soccer, the Korean League, and the Japanese League.

Sorare has received investment from SoftBank and also garnered investments from Piqué and Griezmann during its early seed round.

Sorare currently has nearly 330,000 player cards, including stars like Di María, Davies, and Suárez. Each card displays information such as the player's number, nationality, age, and position, and these cards can serve as collectibles or be used in games.

The ten NFT projects mentioned above mainly include community avatars, metaverse land or virtual humans, game hero cards, and other image-based NFTs. With the explosive growth of NFTs, an increasing variety of NFT types are emerging, primarily focusing on the development of NFTs in conjunction with metaverse games.

3. Mainstream NFT Trading Platforms

The beneficial effects of NFTs have ignited their issuance and trading, leading more and more teams to enter the NFT trading platform space. Currently, mainstream NFT trading platforms include: OpenSea, Rarible, Nifty Gateway, SuperRare, Binance NFT, LookRare, X2Y2, and others. Among them, besides the leading NFT trading platform OpenSea, LookRare and X2Y2 have attracted widespread attention from NFT trading enthusiasts with their unique incentive measures.

OpenSea: Early Layout, Long-term Deep Cultivation, and First-Mover Advantage

OpenSea is the most widely used NFT trading market, accepting over 150 cryptocurrencies, making it a universal NFT trading platform.
OpenSea can host and trade all types of NFTs, including Art, Music, Domain Names, Photography, Collectibles, Sports, Trading Cards, Virtual Worlds, and Utility.

It supports three blockchains: Ethereum, Polygon, and Klatyn. Recently, OpenSea has enabled minting transactions without fees through support for Polygon.

LooksRare: Anonymous Team + Trading Mining + Staking Dividends

In response to OpenSea's lack of a platform token, LooksRare initiated a vampire attack. The trading mining mechanism of LooksRare allowed it to quickly gain massive trading volume.

Since OpenSea's code is open source, the LooksRare team could identify active users who had traded at least 3 ETH within the last six months and airdropped LOOKS Tokens to them. However, to claim these tokens, users must list an NFT on the LookRare platform.

To lock in the liquidity of LOOKS Tokens, a LOOKS staking activity was also launched: users simply need to lock LOOKS in a smart contract to receive all transaction fee refunds. However, LooksRare has not locked in high-quality NFTs in the market, and when mining rewards become less attractive later on, the platform's growth may be relatively weak and lack stickiness.

X2Y2: Pre-sale Whitelist + Token Staking + Listing Mining

X2Y2's core strategy is listing mining, where users must list blue-chip NFTs at reasonable prices to earn listing mining rewards. This allows the X2Y2 platform to quickly acquire quality NFT trading products. Additionally, the product interface of X2Y2 resembles that of an exchange, indicating that its founding team likely understands the needs of NFT trading users very well.

X2Y2's platform token emphasizes fair distribution, with 1.5% of the token supply allocated for liquidity pre-sale to 1,000 users, 1.5% reserved in the LP pool, 10% for the team, 12% for airdrops, and 65% for staking mining.

However, X2Y2 has only stimulated NFT listings and lacks sufficient incentives for trading behavior. Currently, X2Y2's trading volume has not demonstrated strong competitiveness. Overall, no NFT trading platform has yet emerged that can truly shake OpenSea's leading position.

4. How Ordinary Investors Can Invest in NFTs

Ordinary investors can participate in NFT project investments in three main ways: obtaining whitelist Mint, public Mint at a specific time, and secondary market trading. Whitelist rounds involve granting whitelists to specific users, allowing them to Mint NFTs within a limited time frame. A whitelist can be understood as a priority entry ticket, and the main purpose of setting a whitelist includes: avoiding network congestion and incentivizing core community members.

Whitelist users can mint NFTs before the public sale time set by the project party, avoiding the phenomenon of network congestion and high gas fees caused by concentrated minting when the public sale opens. At the same time, it can also serve as an incentive for core community members, as each project party needs collaboration from specific roles (investment institutions, community influencers, community contributors). To encourage these specific users to continue empowering the community, they are generally given whitelist incentives.

Public Mint rounds open to mint NFTs at a designated time. If the project's community is very hot, technical means may be needed to grab during the public Mint round. If the project's community is not very active, there may be ample time to mint publicly.

Secondary market trading can occur normally after the public Mint time point.

Generally speaking, among numerous NFT projects, to avoid bad NFT projects, one should at least pay attention to the following points:
Stay away from NFT projects with anonymous teams; avoid projects filled with bots in Discord; differentiate between deep celebrity involvement and merely hiring celebrities for endorsements; and most importantly, be wary of projects with excessively high Mint prices.

NFTs are not only an important part of the digital economic ecosystem in the crypto industry but also a crucial component of the metaverse ecosystem, representing a new model of brand economy in the Web3 world. We have reason to believe that the digital world with NFTs will be even more exciting.