NFT market transaction volume surges 1000%. Can it take over the second half of DeFi in the short term?

According to data from NonFungible.com, as of October 14, the total transaction volume of the NFT market reached US$130 million, with more than 4.92 million NFTs sold at an average price of US$26.4 . All three data have increased significantly in the past month.

At the same time, on October 8, the 21st work (Block 21) in the blockchain artwork "Portraits of a Mind" series was sold at Christie's for over US$130,000, setting a record for the highest NFT auction price.

As market trading volume heats up, this historic auction - NFT's first appearance in a major auction house - also means that certain changes in the NFT market are quietly taking place.

Although it is small, it has all the necessary organs

As a non-fungible token with uniqueness and indivisibility, NFT is different from the homogeneous tokens that we are more exposed to, which are indistinguishable from each other. Each one is unique, indivisible and interchangeable, scarce, and has strong private property attributes, which is almost naturally in line with the needs of equipment personalization and prop assetization in the gaming field.

In the traditional game architecture, the characters or equipment assets that players have invested time and effort in cannot be circulated and are placed on centralized servers. Their existence and even ownership are not in their own hands (V God’s "angry" entry into the blockchain world was largely related to Blizzard's forced rule changes regardless of players' opinions).

Perhaps for this reason, the first step for NFT to be implemented is in the gaming field. Cryptokitties, which was born in 2017, is the first phenomenal crypto game application and was the first to bring NFT into the public eye. Each crypto cat corresponds to a unique NFT, which is the player’s private property completely based on the blockchain and can be freely transferred and traded.

The gaming industry has thus become the first large-scale practice scenario for NFT. Currently, many crypto games such as Decentraland, Axie Infinity, Cryptovoxel, etc. have emerged one after another. The token attributes of NFT itself also help them build internal economic incentive models, allowing players to earn actual monetary benefits from their games, greatly increasing the playability of crypto games.

At the same time, NFT, which originated from crypto games, now has applications far beyond games and has expanded to many areas such as artworks, collectibles, virtual assets, real assets , and identity . Among them, the fastest growing areas are artworks and collectibles.

In the field of art , each piece of art will have a unique "digital ID" under the mapping of NFT, and "asset tokenization" will be realized based on NFT, breaking the transaction time and location restrictions of traditional cultural exchanges, and realizing instant circulation and trading anytime and anywhere. This is almost a solution tailor-made for art.

In the field of collectibles , NFT can provide immutable proof of ownership by tokenizing real-world collectibles, such as stamps, which can be safely stored, easily transferred and cannot be copied. For this reason, according to the Ethereum NFT market report released by the data analysis platform DappRadar, 81% of the NFT market transaction volume in September was contributed by the NFT digital collection and trading platform Rarible.

The application of NFT in real life is far from stopping here. The 20,000 VIP tickets for the European Football Championship in the form of NFTs launched by UEFA and Nike's NFT attempt to use "CryptoKick ID" to verify the authenticity of sneakers are both representatives of NFT's continuous implementation in more new fields.

At present, the NFT market can be described as "small but complete" and has taken shape.

Is NFT ushering in a “Cambrian Explosion”?

According to data from NonFungible.com, the NFT (Non-Fungible Token) market transaction volume exceeded US$7 million in September, a surge of more than 1,000%. In the first week of October, NFT sales reached nearly US$2 million, nearly doubling from the previous month. The overall transaction volume in the NFT market has increased significantly in the past month.

However, the transaction volume of millions of dollars is naturally dwarfed by that of the top DeFi projects, and the same is true for the number of active users. According to duneanalytics data, as of October 9, OpenSea and Rarible, which ranked first and second in the number of users in the NFT ecosystem, had 25,707 and 7,331 active users, respectively, while the number of active users of the top DeFi projects Uniswap and Kyber during the same period was 382,589 and 104,008, which is still an order of magnitude difference.

However, on an optimistic note, OpenSea ranks sixth, only behind Uniswap, Kyber, Compound, 1inch, and Aave. It is higher than DeFi star projects such as yearn.Finance, MakerDAO, Balancer, Curve, and its month-on-month growth has accelerated in the past two months, and it has gradually shown the potential for an explosion.

In general, as long as the transaction volume and the number of active users can continue to maintain this growth trend, the pace of various innovations will naturally accelerate, and various attempts will begin to explode , many of which will be quite innovative.

Take Async Art, which was discovered on Twitter, for example. Async Art allows users to create, sell, buy, collect and trade NFT artworks, and each NFT artwork is programmable - after each NFT artwork goes online, any holder can add their own creations to update its appearance, just like a relay work where successive buyers "add bricks and tiles".

There are even some innovations that break boundaries. Attempts at NFT+DeFi have begun to emerge. The most representative one is the NFT lending platform Rocker NFT, which adopts a decentralized autonomous organization structure and allows users to pledge NFTs to borrow DAI.

Among them, the NFT artwork created by artist Josie Bellini was mortgaged on Rocket NFT, and 1,000 DAI was borrowed for a period of 6 months with an interest rate of 15%, becoming the first decentralized mortgage loan based on artwork. Of course, it is only a trial phase at present. After all, it is difficult to price NFT in the fair market, so this first 1,000 DAI NFT mortgage loan with strong symbolic significance, "reputation" played a key role.

But with this as a representative, DAI, as one of the leading stablecoins in the DeFi ecosystem, has also begun to be deeply embedded in the genes of NFT. From these perspectives, as cross-linkages continue to deepen, the boundary between NFT and DeFi will undoubtedly become more and more blurred, and it is very likely that NFT will gradually become an indispensable building block in DeFi Lego.

Hype is not a long-term solution, NFT is still in its early stages

What will be the next wave of blockchain innovation (hype hotspot) after DeFi? This is a question that almost the entire industry is thinking about, and NFT is also one of the recognized possible directions.

It is also for this reason that the NFT market, which is full of hype, is currently in a delicate state of balance. Once there are signs of a "quasi-phenomenal project", it will quickly attract market funds and traffic, and then lead to vicious speculation. The "Pineapple" MEME is the most typical example.

How to reduce the influence of the hype and direct more resources and attention to the next development of NFT is a key test for whether NFT can achieve transformation in the future.

On the other hand, the market size of NFT seems to have some ceilings that are difficult to overcome. Although there is huge room for imagination in mapping and linking non-homogeneous real assets such as collectibles, artworks, and real estate, many existing old problems can be solved by granting liquidity and simplifying proof of ownership.

However, it must be said that the mapping of off-chain real assets requires consideration of many factors, and it is by no means a one-day job . Therefore, the most likely path to quickly open up the situation is to rely directly on on-chain native assets, just like the "GameFi" publicly proposed by YFI founder Ander Cronje on September 10. The collision and integration with popular fields such as DeFi and encrypted games may be the next major innovation direction of NFT.

Although the NFT market has been flourishing in terms of trading volume and innovation recently, objectively speaking, there are currently no super-hit products that have "gone viral" in terms of innovation. Overall, it is still a relatively niche and primary market.

However, the future always comes much faster than most people imagine. Just like since the beginning of 2020, beyond the expectations of most people, DeFi has emerged wildly, with a Cambrian explosion in trading volume and innovation diversity.

So whether the current NFT is the DeFi at the end of 2019, and whether NFT can replicate the rise path of DeFi and become the next big wave in the crypto world, remains to be seen.

Do you think the NFT field has potential for development in the future? Welcome to leave your comments in the comment section.