Will the Booming NFTs Achieve Large-scale Growth Soon？

Every day, a new chapter is written in NFT history. T Jack Dorsey, CEO of Twitter sold his first tweet on the website Valuables by Cent, with only 5 words bidding for $2.9 million; CryptoPunk #7523 was sold for $11.754 million, setting a single CryptoPunk NFT historical record; New York Times column NFT was sold at 350 ETH; Grammy winner Ryan Tedder issued NFTs on Origin; luxury companies such as GUCCI began to sell NFTs; celebrities, KOLs, musicians, artists, and stars in the crypto space entered the NFT field and helped make NFTs mainstream.

Technically, on the one hand, the decentralization of the NFT carrier platform restricted the circulation of NFTs; on the other hand, Ethereum’s high fees, network congestion, and poor user experience also hindered the growth of the NFT market. It could be seen that it was and still is necessary for NFTs to overcome technical barriers and break high thresholds to achieve large-scale development and win support from ordinary users who love and are willing to explore NFTs.

Are NFTs truly art?

According to DuneAnalytics data, the world's top NFT trading platform OpenSea reached its peak trading volume on May 4, 2021, with a 24-hour turnover of $23.13 million; by June 15, the turnover was only $4.93 million, down 78.7% compared to the peak volume of the market. And the transaction in 7 days dropped by 61% from the peak on May 4th. The data on SuperRare was almost the same, with a turnover of 936,000 ETH in May, down 58.3% from the March high of 3.382 million ETH.

The reason may be the fact that the artistic value of NFTs is not widely acknowledged. Take BAYC, which was recently in the limelight in the NFT market, as an example, although its transaction volume and price had risen in both directions, many investors who participated in it did not recognize its appreciation. Sleepy, an investor in crypto art and holder of BAYC, indicated that many people were not buying BAYC for collection, and some people who only purchased BAYC at floor prices were just hyping NFTs.

In addition, Chinese artist Li Xiu, a member of the Chinese Artists Association, once responded to the rapidly expanding NFT trading market and commented on a pair of ink-style encrypted paintings in an interview: "I can’t see the artistic structure and color composition in these paintings, let alone methods of using brush and ink, etc. They can’t be called paintings at all.” This also reflects the attitude of some traditional artists towards the NFT market.

High handling fees, network congestion, and poor liquidity hindered the growth of the NFT market

As of now, of the top ten NFT projects in sales, CryptoPunks, Hashmasks, CryptoKitties, Sorare, Axie Infinity, Art Blocks, MyCryptoHeros, and Gods Unchained were all built on the Ethereum network. The average trading fee on Ethereum had risen sharply after 2021, with an average of $20 per transaction in February and $18 per transaction in March. Although the gas fee in April decreased slightly, it was still high for high-frequency traders. Most Ethereum-based NFT trading platforms need users to pay gas fees during the transaction (only Nifty Gateway allows users to pay by credit card). Even traders who want to remove the works from the platform had to pay a Gas fee. Moreover, the transfer speed was slow, with a transfer generally taking 3-5 minutes to confirm.

NFTs released on different public blockchains, had different use standards. This has seriously restricted the liquidity of the NFT market. For example, NFTs on the Ethereum chain can not be traded on the FLOW chain. Even NFT projects built on the same blockchain may not be able to be exchanged with each other due to different standards implemented, such as ERC-721 and ERC-1155 of Ethereum.

High handling fees, network congestion, and poor user experience were the main problems of the existing Ethereum network. And the poor liquidity made it more difficult for NFTs with high thresholds to become popular. Hence, it was significant for the NFT industry to seek solutions that could carry high-frequency transactions and scale the market.

Exploring the path towards large-scale development

According to the technical structure, the ecological infrastructure of the NFT industry was mostly concentrated in the various underlying blockchains at the data settlement layer, the multiple technical standards at the protocol layer, and the auxiliary service applications at the application layer. The NFT industry may be able to find a breakthrough while improving its ecological construction to get rid of the dilemma that it faced in its development.

On the underlying blockchain of the data settlement layer, Ethereum is still the leader in market share to a large extent, and the rest have asymmetrical competitive advantages in terms of development speed and some indicators. With the advancement of ETH2.0, Layer 2 was closely connected with the main chain of Ethereum, or it could make full use of the complete financial infrastructure of Ethereum to cut down GAS fees.

As for the various technical standards at the protocol layer, some NFT underlying blockchains had begun to develop unified on-chain protocol standards that met the future development needs of NFTs. The unified on-chain protocol standards could effectively lower the threshold of and dumb down the NFT asset issuance. As for users, NFT assets using such a unified on-chain protocol standard could quickly help them achieve the right of digital assets, make their digital assets securer, and enable the cross-ecological circulation of digital assets.

On the application layer, most of today's NFT exchanges, artworks, and games were built on a specific underlying foundation and based on the ERC-721 standard. The centralized NFT trading platforms have many characteristics such as low threshold, low handling fee, and convenient operation. They are very friendly to ordinary users and may be able to break down the high barrier to the entrance of NFT.

Gate.io NFT Magic Box is one of the typical NFT platforms. As the world's first centralized NFT trading platform, the NFT Magic Box innovated the GateChain and cross-chain protocols independently. It provides NFT users, artists, and NFT institutions throughout the world with low-cost and high-performance blockchain technology. Users on the platform who only need to focus on creating works can enjoy an all-around transaction experience including platform empowerment, low-cost coin minting, displaying works, and sales. It is indeed a platform that allows everyone to create NFTs and conduct NFT auctions.


Conclusion: In the era where challenges and opportunities coexist, NFTs will finally come to stay.
NFT is a digital asset deployed on the blockchain. It is unique, inseparable, and different from other products. It can transfer the value of data and is a feasible way to virtualize real assets. Hence, it is of great significance to the world which is growing rapidly towards digitalization.
From 2017 to 2020, the total market value of NFTs, according to data from NonFungible.com, had grown rapidly from $31 million to $320 million, a growth rate of over 9 times, and an average growth rate of 300%, registering an amazing growth rate. Although the transaction volume in May and June had fallen, the general growth and hype of NFTs were inevitable. As of June 21, a total of 680,040 pieces of art were sold, with a transaction price of over $600 million, according to the data on Cryptoart.io.

The NFT ecosystem is gradually improving, which can be seen from games to collectible cards, from Cryptokitties to NBA Top Shot, to the emerging art and collectibles in 2021, and to the combination of NFT and the Metaverse. This stimulates the technology layer and the protocol layer to be upgraded constantly, as well as promoting the platform itself to create more scenarios. Of course, the hyperactive market needs a stable layout to advance and make breakthroughs. The future will surely be filled with challenges and opportunities together, and the era of the NFTs will eventually come.



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Author: Hannah. H, Gate.io Researcher; Translator: Cedar. W
This article represents only the researcher's views and does not constitute any investment suggestions.
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