Home Ethereum What are NFTs? Map the NFT ecosystem

What are NFTs? Map the NFT ecosystem

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What are NFTs?  Map the NFT ecosystem

Map the NFT ecosystem

NFTs have been the hottest topic and frothiest market of 2021, with sales volumes increasing 100x while also becoming a topic of discussion on evening talk shows.

It took nearly a decade for crypto to really break into the mainstream, but NFTs only needed a few years to capture people’s attention. While brands like Budweiser, Visa, and Adidas have purchased NFTs and entered the space, it’s clear that NFTs are more than just a new trend.

This infographic sponsored by Next Decentrum defines NFTs and explores the thriving ecosystem that has rapidly grown around them. Find out what non-fungible means, where NFTs are minted and traded, and what the future holds for this asset class.

What are NFTs and what is fungibility?

NFTs are non-fungible tokens whose ownership history and current ownership are cryptographically secured on a blockchain. These tokens can represent anything, whether it’s a digital work of art in the form of a jpeg or a song as an mp3 file.

By storing the transactions of these tokens on a block chainwe can have digital proof of ownership and markets for these digital assets without fear double spend or falsification of past transactions and ownership.

Understanding fungibility

This all sounds a lot like cryptocurrencies, so what makes NFTs so special? Their non-fungibility. Unlike cryptocurrencies like bitcoin or ethereum, non-fungible tokens represent goods or assets with unique properties and attributes, allowing them to have unique values ​​even though they are part of the same collection.

Fungible: A good with interchangeable units whose value is indistinguishable. Examples: US dollars, bitcoins, arcade tokens

Not fungible: A good with unique properties, giving it a unique value compared to similar goods. Examples: real estate, paintings, NFT

The most popular NFT collection, Cryptopunks, is a collection of 10,000 pixel art “punks”, with various attributes like different hats, glasses, hairstyles, etc. Random attribute combinations with different rarities give each punk a unique value.

Rarity and subjective aesthetic preferences determine the valuations of cryptopunks and other NFTs, with other factors like their historical significance, and even the blockchain they are hosted on affecting their value.

Comparison of NFT-enabled blockchains

There are many different blockchains capable of creating and hosting NFTs, with Ethereum currently being the largest and most widely used in terms of market capitalization and transaction volume.

Ethereum uses the power-intensive proof-of-work consensus method, but the network plans to move to proof-of-stake next year, which should reduce power consumption by around 99%.

blockchain Market capitalization Consensus method
Ethereum $526 billion proof of work
Solana $63.93 billion Proof of Stake
avalanche $26.22 billion Proof of Stake
Polygon $12.41 billion Proof of Stake
Tezos $4.57 billion Proof of Stake
To flow $4.07 billion Proof of Stake

Source: Messari.io
As of November 29, 2021

In addition to concerns about its energy intensity, minting and transacting on the Ethereum blockchain incurs significantly higher fees compared to other blockchains.

Average Ethereum transaction fees vary between $30-80 (depending on the specific transaction) and the current NFT minting fees is around $130, all other blockchains in the table above have transaction and mint fees that remain under $1.

Although these high Ethereum fees have caused many users to explore other blockchains to mint NFTs, many secondary markets help cover some or all of the gas fees when minting Ethereum.

Secondary NFT marketplaces

Alongside the main blockchain networks where NFTs are created and hosted, there are a variety of secondary markets for NFTs where the majority of NFT trading takes place.

These marketplaces make it easier for users to create, buy, and sell NFTs, with OpenSea having become the primary secondary NFT marketplace. It is estimated that OpenSea had $1.9 billion in trading volume as of November 2021, representing over 95% of NFT trading volumes.

Market Trading Volume (November) Supported blockchains
OpenSea $1.9 billion Ethereum, polygon
Clever Gateway $31.79 billion Ethereum
super rare $18.77 million Ethereum
Foundation $15.33M Ethereum
Hic and Nunc $4.48 million Tezos
MakersPlace $1.09M Ethereum
Asynchronous art $131,000 Ethereum

Source: The block

While some marketplaces (like OpenSea) make it easy for anyone to mint and offer an NFT for sale, other platforms like SuperRare limit the art and artists offered, resulting in a more organized marketplace . Similarly, some marketplaces like OpenSea host NFTs from multiple blockchains like Ethereum and Polygon, while other marketplaces like Hic and Nunc are loyal to a single blockchain (Tezos).

While OpenSea currently dominates the secondary market, cryptocurrency exchanges should soon offer new competition. Coinbase is currently building its own NFT marketplace, and FTX market with Ethereum and Solana NFT is up and running.

Digital art, games, the metaverse and the future of NFTs

NFTs caused a stir in 2021, providing creators with digital and decentralized networks where they could host and exchange their work.

Currently, digital-centric use cases are at the forefront of NFT development, with ownership of in-game assets or property in the metaverse being two of the primary use cases being explored. However, NFTs can be used to tokenize physical assets such as real estate, physical works of art, and more, opening up nearly endless possibilities for their application.

From removing the friction of paperwork and bureaucracy in today’s real estate exchanges to enabling easy fractionalization of asset ownership, the tangible use cases of NFTs in the real world are just beginning to be explored.

To learn more about NFTs, visit Next Decentrum.

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