NFT Ecosystem Overview (21')
What are NFTs: NFTs are digital assets that are unique and scarce in nature. Each NFT comes with a unique identifier that gives an asset inherent protection from duplication & division without a creator's consent. This protection allows creatorship and ownership to be assigned to each asset, giving viewers, collectors, and buyers a transparent look into the life cycle of an asset. Even failed bids or changes in list prices are documented in the system and will forever follow the asset.
At this point it’s safe to say that the NFT industry has gone mainstream with celebrities, artists, musicians, athletes, and the general public all taking notice. First adopters like Elon Musk, Chamath Palihapitiya, Gary Vaynerchuk, and Mark Cuban started putting a spotlight on the industry in February of this year which gave the growing industry its launch pad. The excitement in NFTs ratcheted up another level Beeple’s 1 of 1 piece called “The First 5000 Days' was auctioned (by Christie’s) and sold for $70MM. Celebrities and musicians from around the world started pouring in at the beginning of March (21’) dropping new projects featuring exclusive songs and art. For example, the musician known as The Weekend launched his first NFT collection on Nifty Gateway netting him $2.29MM in sales. An exclusive song he created just for an NFT buyer sold for $490,000. The Weekend is not alone, Snoop Dog dropped his own collection called “Journey with the Dogg” which netted him over $300,000 in sales.
In the midst of these record-breaking sales, it’s important to truly understand the technology, use cases, and risks behind the technology.
Common Use Cases: NFTs have various use cases including collectibles (trading cards, digital assets), art, music, gaming currency & accessories, digital land, and much more.
Advanced Use Cases: Some companies have taken NFT use cases to another level. A company like Tinlake is using NFTs as collateral to underwrite loans. Unstoppable domains have brought domains on-chain and given domain owners true ownership. Another interesting usage that has started gaining steam is using NFTs to verify physical goods. Wiv.io has tagged physical wines, and liquors with NFTs that live on the blockchain. The history of each piece lives on the chain and can be digitally bought, sold, traded, and exchanged.
Value Proposition: Each NFT comes with a differentiated value and identifier, making it a perfect asset to prove ownership. The inherent uniqueness of each asset creates value & scarcity.
Sources: In the midst of the NFT craze an entire ecosystem has continued to build and mature around the hype. At this point marketplaces, metaverses, exchanges, wallets, and art platforms have all been established and are supporting the industry.
How to Buy: 1) Download a Crypto Wallet - these wallets allow you to hold cryptocurrency and assets. 2) Connect a digital wallet - common options can be found listed below but I use Metamask. 3) Connect to a primary crypto exchange - In most situations you'll have to connect a primary crypto exchange like Coinbase to actually purchase a currency like Ethereum. 4) You’re all set! - You can start participating in any marketplace or virtual world you like. What you can buy is based on how much is in your wallet.
Currency: Typically the majority of NFTs can be purchased by converting to/from Ethereum. Making Ethereum the current standard for current crypto transactions on a consistent basis.
Risks: There are a couple of risks when investing in space. The first risk that jumps out immediately is oversaturation - how many NFTs can hold significant value at the same time? It's currently unclear how long collectibles hold value and if they will continue to appreciate even after the hype dies down. Another major risk is counterfeiting work. This risk specifically threatens artists and their pieces. Many artists have complained that their art files have been copied and converted into NFTs without their permission. Currently, there is no real solution to this risk, other than artists alerting their followers of the fraud. They can also notify platforms of this piracy and hope the platforms remove the fraudulent work.
Below I broke down eight integral pieces of the NFT ecosystem and featured a couple of my favorite companies/projects in each category. Obviously there a dozens even hundreds of other companies I could have added but the ones listed below have personally stood out to me for a variety of reasons.
General Trading Marketplace: A marketplace that allows you to buy, sell, trade, showcase & bid on various types of NFT assets.
Collectibles: Since the launch of CryptoKitties in 2017 by Dapper Labs, digital collectibles have exploded in popularity. These collectibles are now cultural mainstays and have brought mainstream interest to the industry. Collectible brands increase in value by attracting & maintaining a large following through community and marketing. Most of the collectibles listed below either have their own dedicated marketplaces, community channels, and full-fledged brands.
NFT Art Marketplaces - Art marketplaces have become integral to the industry. They can serve as galleries, auction houses, and forums. They also serve as marketing machines. Many platforms such as Nifty Gateway and Makersplace partner with celebrities and well-known artists to drop unique and limited collections on a weekly basis. These collections in particular introduce a wide audience to the world of NFTs.
Metaverse: Immersive platforms where users/players create, buy, sell & create with-in-game assets, all while interacting with the virtual world.
Crypto Exchanges: A crypto exchange is simply a platform that allows users to buy, sell, or trade different types of cryptocurrencies.
Crypto Wallets - Software that allows you to store your crypto funds & assets. It also enables smooth transactions & dapp exploration.
NFT Finance - Imagine using your NFTs as collateral against a loan, these companies are making that dream a reality.
Crypto Domains - Crypto domains allow owners to build domains on the blockchain. They also act as a wallet to send/accept payments. A huge benefit of these domains is that they protect against web censorship since they are not governed by the Internet Corporation for Assigned Names and Numbers.
Building a 10-year overnight success
3 年This was my first look under the hood of what an #NFT even means. While I understood some, I still don't get how it works. Do you know of a good resource (ideally video) that explains the process?
Global Web4 (AI/ML & Web3) Lead at Axiom Space
3 年As a note, many of these companies are well known at this point but one of the projects that may still be unknown to some people is Zed Run. Actually came across the project by following Drew Austin, another force in the NFT space. Zed is a digital horse racing game built on Ethereum. The project brings together all the best elements of NFTs and a digital metaverse. Allowing people to buy, breed, and race digital horses. Comes with a full marketplace and live auctions. Super bullish on this project and others like it.