7 NFT trends of the year
Introduction
The NFT market has experienced explosive growth over the past year, recording record sales and being used in a variety of fields. From digital art to Metaverse real estate to Twitter memes, NFTs have been used to prove ownership of a wide variety of digital assets. The NFT market is still in its early stages and predicting future growth directions is a difficult task. Still, it’s clear why you should be interested in what the future holds for NFT technology. Because the history of mankind repeats itself only by changing the protagonist.
Past examples that can be used as a reference for the direction of NFT development are the iPhone and the App Store. On October 17, 2007, Steve Jobs opened the App Store for developers to sell their apps. This led to the release of the I Am Rich app a year later. The app sold for $999.99, but had no extra features other than displaying only red gems on a black background. At the time, most people dismissed smartphones as show-off phones for the wealthy. However, some foresaw the changes that smartphones and apps would bring. Uber founder Travis Kalanick, Tinder founder Sean Ladd, and Kakao chairman Kim Bum-soo. They quickly noticed the change and seized the business opportunity.
left. Available on I Am Rich / App Store. I Am Rich running on iPad/ Right Cryptopunk NFT
The NFT market today is not much different than it was when the App Store first launched. Most NFTs are used as PFPs (Profile Pictures), so the public perception of NFTs is profile pictures for the rich to show off. However, if you have a little interest in the NFT market, you can discover the potential for NFTs to go beyond simple profile pictures and be used as digital assets and proof of ownership. The NFT market in 2023 is expected to grow more than usual, so we have picked up seven notable NFT trends.
1: Cash Flow NFT
Cashflow NFTs have been selected as the first trend to watch in 2023. Cashflow NFTs were judged to improve the market to a healthier and more mature one. It is hoped that this will lead individual and institutional investors to recognize NFTs as an alternative investment.
When looking at NFT as an asset, the greatest utility of the asset is “profit”. Profits come in two main ways. The first is “sales profit” from the sale of NFT, and the second is “cash flow” generated while holding NFT.
Most NFTs in existence today are sold by the NFT owner to the next buyer at a higher price in order to generate revenue. Because of this structure, the current NFT market has been criticized for ponzinomics waiting for a bigger fool. However, the second cash flow method can generate revenue without selling NFTs. Typical NFT collections that generate cash flow include Yuga Labs on Ethereum and Dust Labs on Solana. Yuga Labs has moderately airdropped NFTs to existing owners.
For example, BAYC holders can receive 1 MAYC NFT, 1 BAKC NFT, 1 Otherside NFT and 10,000 APE coins as an airdrop, equivalent to approximately KRW 105 million as of January 4, 2023. To do. Until airdropped NFTs are sold, it is difficult to assess that they are truly free from Ponzinomics. Dust Labs’ y00ts NFT takes this one step further. You can sell y00ts NFT traits (NFT traits) in your own store. Property sellers can receive royalties or sell the right to sell properties using y tokens. This method is similar to how developers sell their apps through the Apple App Store. However, the drawback of y00ts is that the market size is limited to 15,000 y00ts NFT holders. Both NFT collections have their strengths and weaknesses, but unfortunately it is the most traded NFT collection on Ethereum and Solana.
In addition to the two flagship NFTs, other collections of NFTs expected to generate cash flow are Solana’s Abracadbra (ABC) and Ethereum’s Valhalla. Abracadabra is an NFT collection released by hge.sol, with Hade Swap protocol transaction fees 100% owned by the owner. ABC NFT is the 4th highest NFT collection by December 2022 monthly trading volume based on Magic Eden. Ethereum’s Valhalla NFT is an NFT expected to be available on a video streaming platform called Staked.com. Founder Alex Lin told Valhalla NFT owners that they are looking at ways to publish their videos at the top of the staked streaming homepage.The corresponding NFT holders will be able to generate revenue through this. expected to be possible. In addition to this, Valhalla NFTs available on the staked platform have led to high trading volumes. Valhalla NFT was the most traded Ethereum NFT collection after Crypto Punk and BAYC based on December 2022 Open Sea.
left. Opensea Volume Top 4 Collection / Right. Magical Eden Trading Volume Top 5 Collection
In 2023, the release of cash flow NFTs that can be used in the digital economy with a clear business model is expected. However, this is based on a perpetually sustainable business model and it has been determined that indiscriminate NFT airdrops and token airdrops will do more harm than good to collection growth.
Trend 2: NFT rating change (relative rating -> absolute rating)
If cash flow NFTs dominate the market, it will be judged that not only the current relative valuation method but also the absolute valuation method can be considered for NFT valuation methods. There are four main NFT evaluation methods. NFT valuations currently use a comparative approach that looks at recent transactions within the same NFT collection and a cost approach that buys NFTs of similar rarity. However, the above two methods have the disadvantage of being extremely skewed in valuations during death spirals and bull markets. Therefore, NFT valuations can be determined by an income approach that values future cash flows against the NFT’s fundamentals. This is a more useful valuation method in the NFT market where price volatility is high.
Below is an overview of the four NFT evaluation methods.
✅Comparison market analysis
It is a method of comparing the recent transaction history between NFTs similar to the evaluation target and determining the value.✅Cost approach
It is a method of determining the value by estimating the cost of purchasing NFTs of similar rarity.✅ Income approach
This is how we determine the value of NFTs based on the future revenue that they are expected to generate. However, the limitation is that current NFT cash flows are mostly one-time airdrops, requiring fairly subjective assumptions to calculate cash flow values.✅Supply and demand approach
This is how we determine the value of NFTs based on the level of supply and demand for NFTs in the market. Variables such as bid-ask spreads and WETH trading rates can be taken into account.
In a highly volatile NFT market, accurate valuation measurements can be a stepping stone to growth in the NFT industry. Accurate valuations can be used for loan selection on mortgage loan platforms and can also be used effectively in the NFT derivatives market for risk hedging.
Trend 3: Expansion of NFT loans (secured loans → BNPL)
NFT BNPL finance can also be seen as a promising growth sector in 2023. BNPL Finance is an abbreviation for Buy Now Pay Later, and is a financial service that allows NFT purchasers who have a large bulk purchase burden to purchase in installments.
Currently, the main financial service in the NFT financial market is NFT-backed loans for assets held by NFT holders. Through our secured loan service, holders can liquidate their assets without having to sell their NFTs. However, the biggest drawback of the current mortgage scheme is that it is only available to NFT holders and has limited access to NFT buyers. BNPL Finance solves the pain points of the current market. When purchasing NFTs, prospective buyers can use BNPL finance to pay a down payment upfront and pay the difference in installments. Some NFT marketplaces may offer a BNPL option, but most require access to and use of a BNPL dapp. Typical BNPL platforms include Zumer Protocol, Halliday, and Cyan.
Trend 4: The Emergence of a Secondary Market for NFT Financing
It is expected that the growth of the NFT financial market and the secondary NFT financial market derived from it will grow together. NFT loan secondary market refers to the market where NFT loans are bought and sold. Secondary market participants can buy and sell loans backed by NFTs. In the secondary market, delinquent and non-performing loans are likely to become tradable.
The secondary market can offer borrowers and investors benefits such as increased liquidity, risk management and portfolio diversification. However, we also need to calculate risks such as credit risk (the risk that the borrower will not be able to repay the loan), interest rate risk (the risk that changes in interest rates will affect the value of the loan), and market risk. (the risk that changes in market conditions will affect the value of the loan). do.
The secondary market for NFT financing is expected to be similar to that of existing traditional financial assets such as bonds. Given that the 2008 US economic crisis erupted in the subprime mortgage defaulting loan and bond securitization markets, the secondary market for NFT lending also needs a cautious approach.
Trend 5: NFT Marketplace for Beginners
We have selected “NFT Marketplaces for Beginners” as the fifth trend to watch in 2023.
Over the past year, new NFT marketplaces have challenged Opensea’s stronghold, but nothing has stopped Opensea’s dominance. However, it has been determined that by 2023, a marketplace for “beginners” could bring a higher share than OpenC. The marketplace understands that mobile-optimized UI/UX is a differentiator, and even those who are new to NFTs can use Web2 ID/PW, which supports simple payments such as credit cards. Signing up is easy.
While the NFT industry is aiming for mass adoption, the marketplace is made for a small number of “pro traders”. As a result, it is not possible to appeal to beginners, who make up the majority of market participants, and it is rather an obstacle to the spread of NFTs. We compare the current NFT investor and market composition and summarize it in the glacier picture below.
NFT investor status and market composition. Source: Alphanons
The reason we decided that a beginner-friendly NFT marketplace would be the first gateway to mass adoption is because of a common problem experienced by novice NFT investors. The following are the survey results for investors who are new to NFT investment or who have never invested in NFT. If the NFT marketplace with the following four features is launched, it is expected to occupy a large market share.
✅ Fiat currency price display
The difficulty of pricing was chosen as a common barrier to entry for NFT beginners. It was often difficult to convert the price of ETH to fiat currency. They wanted NFT prices to be displayed in fiat currency instead of ETH prices.✅Web2 method registration and login
Having to create a seed phrase and wallet instead of the simple Web2 method of membership registration and login was also annoying for beginners. One of the survey respondents evaluated the storage and management of Seed Phrase as a cumbersome and unnecessary procedure, similar to the traditional “issue of official certificates and OTPs”. Therefore, it is thought that there is a tendency to prefer marketplaces that can be accessed by member registration and login using physical authentication methods such as Web2’s social ID and Face ID.✅ Easy payment
The third difficulty for NFT newbies was the payment method. Digital natives are accustomed to simple payments such as Face ID and fingerprint payments. Therefore, beginners rated the current four-step payment method (bank <> exchange <> personal wallet <> marketplace) for purchasing NFTs as cumbersome. I was hoping it would be easier to buy at✅Mobile app
As a final difficulty, NFT marketplaces based on computer browsers were a common factor. This is a factor that reduces mobile accessibility. Therefore, we need a marketplace that configures UI/UX suitable for mobile apps and provides customized notification services. Marketplaces that require computer access are expected to lose market share if there are optimized marketplaces that can be accessed from apps at any time.
The above findings can be confirmed from the trading volume of each marketplace over the last year. OpenSea has recorded a trading volume of 7.54 million ETH in 2022. This accounts for 70.6% of the total trading volume of the top 10 NFT marketplaces. In particular, OpenSea has the highest transaction fee of 2.5%, but please note that NFT investors are not using the new market. This is believed to be because most newcomers to the NFT market saw no reason to move to the cumbersome and complex Sudoswap and Blur alternatives to OpenSea.
Annual trading volume by NFT Marketplace from January to December 2022. Source: NFTGo
Trend 6: Large companies entering the NFT market
2022 can be summarized as a “NFT rush” for big companies. This trend is expected to accelerate in 2023. However, NFTs focused on large enterprises are very different from Web3 native projects. As Web3 native projects seek to build a digital economy around NFTs, NFTs in large companies are only being used as an add-on to their current offline/online business model.
Below is a timeline of brands launching NFT collections or supporting NFT transactions. Brands in various fields, such as restaurants, fashion, sports brands, and Web2 companies, support NFT. Companies that are currently promoting the NFT business company-wide include Nike, Meta, and Starbucks. Nike will sell digital sports apparel and footwear through swoosh.nike. With the acquisition of RTFKT NFT studio, Nike is being recognized for approaching the market in a more Web3 native way than others. Meta has added the ability to buy and sell social media posts as NFTs on the Instagram app. We are currently testing with a small number of American creators and plan to expand the number of countries that support NFT sales and trading. Finally, Starbucks will launch the Odyssey program, which will incorporate NFTs into its own rewards program. More companies are expected to incorporate NFTs into their existing business models in 2023.
Branded NFT launch schedule. Source: Messari
Some domestic companies are incorporating NFTs into their business. The domestic conglomerates that have issued NFTs on the Clayton network are Shinsegae and Lotte Home Shopping. They issued “Pubilla” and “Belligom” NFTs respectively. In the case of membership NFT, it has a strong tendency to complement the business model of Web2 companies. Puvira NFT holders receive benefits such as first lounge access, free parking, valet parking, discount coupons and dining coupons when visiting Shinsegae Department Store. Beligom NFT holders can receive Lotte Hotel accommodation coupons, Lotte World Seoul Pass coupons, and discount coupon benefits. For reference, prices of NFTs in Puvira and Beligom fell by 26.8% and 9.7% compared to Mintinga (up 63.3% in won terms and 66% in clay terms). For Naverline, Citi (DOSI) NFT was launched and added marketplace functionality. Such large players are expected to continue to enter the NFT market in 2023.
Topic 7: NFT Securities?
The final topic to watch in 2023 is whether NFTs will be recognized as securities. The US Securities and Exchange Commission (SEC) is known to have been investigating whether Yuga Labs has violated federal law since last March. A key part of the investigation is whether Yuga Lab’s sale of digital assets violates securities laws. This ruling is a hot topic this year, as it will affect not only Yuga Labs, but also future NFT-related laws.
The pros and cons of whether NFTs qualify as securities are clear. Proponents of classifying NFTs as securities argue that the law provides investors with legal protection. Securities are subject to strict regulation, including disclosure requirements designed to protect investors and increase transparency in financial markets. Therefore, NFTs enjoy the same level of legal protection as buying securities. It can also be a trigger for institutional investors to start investing in NFTs. On the other hand, some argue against securitization because NFTs are different from the definition of securities. NFT is a technology that is applied in various fields. Therefore, there is an opinion that classifying NFTs as securities can be a positive regulation that hinders new industries from the growth stage. Ultimately, we need to consider whether NFTs are classified as securities.
Conclusion
The NFT market is a new industry that started to grow in earnest from 2021. Without a clear definition of Bitcoin, it will be difficult to analyze and predict the industry, let alone define NFTs. Additionally, pongenomics, security and scalability issues are just a few of the many challenges to be solved. Despite these uncertainties, there is no denying the innovation NFTs bring to digital ownership and the digital economy. It is hoped that more creators, investors and businesses will utilize NFTs to create and authenticate digital assets.
Source: Xangle(https://xangle.io/insight/research/63d090ab279d2edabcc1ffac?order=desc&isFollowing=false&page=8&nowPeriod=%EA%B8%B0%EA%B0%84+%EC%A0%84%EC%B2%B4)
