By Jessica Shen, Mint Ventures
1. NFT Market in 2022
NFT transaction volume and market value from 2020 to 2022
From 2020 to 2022, the NFT industry has undergone many changes in just two years. In the eyes of many people, NFT was just a castle in the air in 2020, but by 2022, the asset attributes and financial attributes of NFT have been deeply rooted in people's hearts. From the perspective of transaction volume, we have the following observations on NFT:
The overall market value of the NFT market grew rapidly in 2021, but NFT trading volume dropped sharply during the bear market in 2022
The explosion of PFP on Ethereum in 2021 ushered in the first year of NFT, but the transaction volume of NFT on Ethereum has dropped by more than ten times this year.
NFT assets of various public chains gradually show distinct characteristics
NFT started with NBA Top Shot on Flow in 2020 and Axie Infinity NFT, which was still on Ethereum at the time. By 2021, NFT assets have blossomed in all public chains, with the focus on Ethereum. PFP asset transactions with strong cultural and artistic attributes have taken the lead, opening up the industry's imagination of the future of NFT. In 2022, affected by the bear market environment, the NFT market cooled down, and the NFT transaction volume on Ethereum dropped by nearly 95%, but PFP transactions on Ethereum are still the main theme of the industry. At the same time, NFT asset transactions in public chains such as IMX, BSC, Solana, and Polygon, which gather more GameFi and SocialFi ecosystems, are relatively active.
From the perspective of public chains
Ethereum and Solana continue to lead NFT transactions. Ethereum and Solana continue to lead in NFT transaction volume, and both have relatively active PFP transactions. However, due to Solana's frequent downtime, the development of its ecosystem is limited, and the loss of user confidence has had a certain impact on its on-chain NFT transactions.
The limitations of the NFT OG public chain Flow ecosystem are highlighted. The old NFT public chain Flow used NBA Top Shot to educate the industry about NFT, but by 2022, the transaction volume dropped to less than 300 million US dollars, and the Flow chain NFT ecosystem is still growing around sports cards.
Polygon is undoubtedly the most promising NFT public chain. With its low cost, relatively stable performance and EVM compatibility, Polygon has become the preferred public chain for many brands and influencers, including Starbucks Odyssey, Donald Trump Digital Trading Card and Reddit Avatar. The NFT of the highly anticipated social protocol Lens Protocol is also based on Polygon.
The explosion of the NFT industry mainly relies on content. Art and creation are the soul elements of NFT at this stage. The market has recognized the cultural attributes carried by NFT and the expectations for future ecological development through real transactions, and has given many PFPs a higher valuation. After the NFT is issued, the model of ecological construction around it will gradually become a mainstream way in the industry. A few projects that first establish an ecosystem and then issue NFTs have a better user base, and NFTs without ecology have also attracted a lot of user attention in a short period of time. After the craze and bubble of NFT gradually fade away, people will pay more attention to the real meaning brought by its non-fungible non-homogeneity. Utility and surrounding ecology will be the strategic focus of the project party, and NFT will be the core carrier. Compared with PFP with stronger consumer attributes, NFT assets with more practical value have better liquidity and a stronger ecological foundation. This is also the reason why such NFT assets can grow against the trend during the bear market.
NFT-Fi Market in 2022
NFT-Fi Track Landscape
Compared with the NFT industry landscape in 2021, the NFT market landscape in 2022 has undergone subtle changes. Some anticipated tracks have not seen much improvement, and some tracks have unexpectedly seen a number of emerging players participating in the competition. Several trends we have seen in 2022:
Competition in the trading market is in full swing, and users are becoming more and more understood
From transaction fees, various token reward subsidies, discussions on royalty rules to AMM mechanism innovation, refresh frequency when aggregators sweep goods, and multi-chain deployment of various trading markets, we continue to see NFT trading markets and aggregators making continuous attempts and explorations to better serve users, although some have succeeded and some have failed. Although OpenSea is still the platform with the largest user base and the highest transaction volume, we have also seen that the emergence of Blur has been widely praised and welcomed by professional NFT traders. This new entrant seems to have the opportunity to break this pattern.
Aggregator business is not easy
In 2022, several NFT trading aggregator platforms emerged in the industry, but in terms of trading volume, the two first-mover trading aggregators, Gem and Genie, did not achieve good results. When trading platforms were competing with each other, the market demand and profit model of aggregators were more or less questioned by the market.
NFT lending is booming
A wave of BAYC and MAYC purchases triggered by Yuga Labs' airdrop in the first half of 2022 made NFT lending protocols a leverage tool for some players. Later, when the Ape Staking pledge function was launched at the end of December, multiple lending protocols launched matching functions and pledge income pools, which once again attracted many users to participate. 2022 also saw that NFT lending was the field with the most new competitors in the NFT-Fi sub-track. Compared with fragmentation, futures, options and other products, the product variety is rich and the products are relatively mature.
Fragmented protocols remain tepid
Although everyone knows that making non-fungible tokens homogenous is a way to increase liquidity, the fragmented protocols in the NFT-Fi track have not injected liquidity into the industry as expected. Niftex, which participated in the fragmented business in the early stage, has ceased operations, and Fractional.art has also changed its name to Tessara to reorganize its business this year. Some other fragmented protocol businesses are also tepid and have not become NFT liquidity valves as expected.
NFT-Fi Smart Pool is ready to go
The development of the first-layer NFT-Fi protocols such as lending, fragmentation, and derivatives has not yet taken shape, but the machine gun pool business based on these interest-bearing protocols is already preparing for the sprint. Projects such as Spice Finance, Insrt Finance, and Protecc are all targeting this uncultivated wasteland, waiting for the outbreak of NFT-Fi to provide C-end users with more convenient and easy-to-use products. However, the machine gun pool business is highly dependent on the first-layer NFT-Fi/DeFi protocol, and needs to have the ability to quickly capture market opportunities, adjust strategies in a timely manner, and update products. In addition, referring to the overall market of the machine gun pool business in the DeFi field, which accounts for less than 5% of the DeFi protocol, we have to think about how the market of the NFT-Fi machine gun pool can achieve a breakthrough.
