Will NFT be the next market explosion point after mining?

Author | Gisele

Editor | Doorman Operation | Xiao Shitou Feng Qingyang

Perhaps due to the recent drop in coin prices, mining income is far less than before, and the high threshold for mining, the voices in the community about mining are gradually getting smaller.

The MEME token skyrocketed 15 times in a week, surpassing Uniswap and becoming the most expensive airdrop project of the year. It also boosted the popularity of the NFT sector, and information about NFT poured in from all directions.

Many retail investors are confused. Why did the topic of major communities suddenly shift from mining to NFT? The push of major media outlets is also clearly leaning towards NFT. NFT airdrop projects in the market have sprung up like mushrooms after rain, and NFT seems to be the next explosion point.

But there are still many players who don’t know what NFT is, let alone how to play NFT.

What is NFT?

NFT stands for Non-Fungible Token, which is usually translated as non-fungible token. It first appeared in 2017 and is mainly used in games, artworks, domain names, collectibles and other fields.

What are non-fungible tokens? First of all, we need to understand homogeneous tokens, that is, tokens of the same type can be exchanged with each other. For example, I have $100 worth of Bitcoin, which can be exchanged with your $100 worth of Bitcoin. In essence, the value of both tokens is the same, there is no difference, and what is ultimately changed is only the transaction record on the chain.

Non-fungible tokens refer to digital assets that are unique and non-interchangeable. That is, each NFT is unique and provides different uses and values.

For example, I have a ticket for Mulan and you have a ticket for Eight Hundred, but the two tickets are not interchangeable because the movie's screening time, cinema, seats, excitement and other information are different, so the viewing experience is completely different.

When it comes to non-fungible tokens, we have to mention ERC721 and ERC1155.

ERC721 and ERC1155 are both standards for defining NFT tokens, namely the so-called token standardization. Tokens issued according to this standard have unique and irreplaceable properties.

ERC721 was first proposed in 2017. At that time, the CryptoKitties game, which was issued based on Ethereum's ERC721 standard, became popular and single-handedly caused congestion in the Ethereum network, and also brought the concept of NFT to the market.

In this game, each cat is unique, and users can collect, trade, and breed CryptoKitties. The most popular CryptoKitty was once sold for a sky-high price of $100,000, causing a sensation in the market.

In 2018, the Enjin team proposed a new token standard, ERC1155, which mainly serves virtual game props on Enjin. If ERC721 is used to sell 100 pieces of equipment, 100 smart contracts need to be called, which wastes too much resources such as handling fees. However, if ERC1155 is used, only one smart contract needs to be called.

Among the projects that use ERC721 and REC1155 today, the most representative ones are Mana and Enjin, which are also the better-developed projects in the NFT field.

However, NFT has been developed since 2017 and is still in its early stages of development. It is still a relatively niche field, and the sudden popularity is somewhat confusing.

"MEME rose more than 15 times in a week. Will the NFT market go crazy again?"

Some users may still remember that when Binance launched the IEO project Sand, the market also experienced a very short-lived NFT fever, which led to a gratifying increase in the prices of a number of currencies in the NFT sector.

A careful observation of the so-called NFT fever in the past week shows that the popularity is not concentrated in early projects such as Mana and Enjin, but is concentrated in so-called DeFi+NFT model projects such as MEME.

Among them, long before MEME, the DeFi+NFT model project Aavegotchi appeared in the Aave community. Users deposit assets into the Aave lending pool, can obtain aToken vouchers, and then pledge aToken vouchers to generate Aavegotchi (little ghost). The value of Aavegotchi is determined by the number, characteristics and scarcity of the pledged assets. Generally, the more scarce NFT-like things are, the higher the price will be.

It’s just that Aavegotchi has attracted only a small part of the popularity. The project that really drives this wave of popularity is MEME.

However, who would have thought that MEME originated from an ironic tweet?

At that time, liquidity mining was hot, and various imitation projects emerged one after another. So Jordan Lyall, a developer of Consensys, mocked these imitation projects on Twitter: "Introducing Degenerator (a fictional project) that can start a DeFi project in 5 minutes." Jordan also named it MEME.

However, what is even more magical is that someone actually created a MEME token project, and there are community members willing to work hard to develop the product, hoping to make it a DeFi project.

As a result, Degenerator has transformed from a fictional project into an NFT decentralized platform that supports mining, which is what everyone calls the DeFi+NFT combination.

In the early days, MEME tokens were almost all airdropped to Telegram community users, who obtained pineapple points through staking. Pineapple points can be used to redeem NFT collectible cards, which can be traded in related markets.

Moreover, the total number of MEME tokens was 28,000, all of which were airdropped to early users of the Telegram group. Later, the price of MEME coin soared all the way, reaching a maximum of nearly $2,000. The average profit of MEME's airdrop users was hundreds of thousands of dollars, and it was also considered by the community to be the largest airdrop of the year.

Uniswap's airdrop of 400 UNI caused a stir in the cryptocurrency market, not to mention hundreds of thousands of dollars? So retail investors began to look to MEME, and the price of MEME continued to rise, leading to more serious fomo sentiment.

Afterwards, many similar projects began to appear in the market. These projects also adopted the same method and chose to airdrop tokens in Telegram groups to attract users and funds.

"Can NFT take over DeFi and continue the market's popularity?"

When the founder of Morgan Creek announced that he would enter the NFT market, invest in digital art collections, and invite artists to create works and collections, the NFT community was excited, believing that this would greatly promote the development of the NFT field.

So, does NFT really have the potential to set off the next wave of craze?

At present, it is probably difficult. Because the limitations of NFT are still quite obvious, most of the NFT projects with high popularity or that have accumulated a certain user base are mostly in the field of games or art collections, but in this round of NFT fever, these projects still maintain their own pace, as if this round of fever has nothing to do with them.

The founder of YFI also stated on his Twitter that NFT should not be equated with scarcity, but can be explored in the fields of insurance, options, bonds, assets, etc.

As for the recent popularity of DeFi+NFT projects, is it because those large financial institutions or users believe that this model can become the next detonation point? It is more because liquidity mining has shown signs of weakness and the market is in urgent need of other hype hotspots.

One of the reasons for the surge in MEME coin prices is that it issued coins in the form of airdrops, which just took advantage of the recent popularity of Uniswap airdrops. The surge in MEME tokens triggered community fomo, leading many people to believe that NFT may be the next hot spot.

However, for now, NFT is still in the early stages of industry development and has a relatively small audience. Even with the recent high popularity, the transaction volume of the NFT market in the past week was less than 4 million US dollars, which is not a good figure strictly speaking.

Image source: nonfungible.com

Obviously, NFT is not ready to take on the market's hot spots. One of the labels many retail investors give to DeFi is "nesting dolls", because the ecological development of DeFi is relatively mature and highly composable. However, NFT does not seem to have this composability. Although both are games, the NFT on Mana and the NFT on Enjin seem to have nothing to do with each other. Of course, the popular MEME has nothing to do with the NFT on Enjin and Mana.

At present, the ecosystem in the NFT field is almost non-existent, mainly manifested in the poor user experience when conducting NFT transactions, the lack of a platform that can support multiple NFT transactions, and the lack of applications that can support a large number of transactions.

This means that even though NFT has taken advantage of DeFi's momentum, it is still far behind DeFi in terms of its ability to attract money and the number of users it attracts.

In addition, there are relatively few projects with good quality in the NFT field. Even if the market places its hopes on NFT, unfortunately, whether in terms of infrastructure construction, user scale, funds, etc., NFT is far from meeting the conditions that can detonate the market.

In the future, when the infrastructure construction of NFT is gradually improved, more new ways of playing may be unlocked. By then, the probability that NFT may become a hot spot in the market will be much greater.