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In Messari’s first NFT release on OpenSea, I authored a guest post to provide a short history of the NFT ecosystem. Enjoy the piece in full below!
A Short, Non-fungible Story
Data is just a story waiting to be told.
One aspect about data that I love is that it can tell stories of the past, the present, and opens the mind to the potential stories of the future.
Let’s start with the past.
The Past: Context For The Present
While non-fungible tokens have existed for a long time, the market for such tokens was historically small. Early marketplaces like OpenSea and SuperRare, which were founded in 2017, grinded through a market that was mostly dominated by Ethereum until blockchains like WAX and Flow finally launched offering application-specific chains for gaming and consumer applications. In 2020, OpenSea was averaging $1 million in sales per month and the tail-end of the first Covid-19 year experienced growth (now considered a kindling fire) in NFT art and collectibles sales.
December of 2020 witnessed some uptick NFT chatter with the growing excitement of NBA Top Shots and early Ethereum card games like Axie Infinity and Sorare.
What comes next, you may already know, but let’s break it down by the data anyway.
The Past & Present: 2021
The first NFT narrative to explode at the beginning of the year (as a continuation of 2020) was sports NFTs, specifically NBA Top Shot.
Combining financial incentives with sports is a tried and true recipe and cryptonetworks with tokenized digital goods are the natural steroids for which the industry will use to reach new heights.
In tandem with the breakout of sports NFTs, 2021 will go down perhaps most significantly as the year of the digital renaissance. As the mainstream media watched the birth of new business models and monetization strategies, platforms like Nifty Gateway and SuperRare dominated, offering artists a new format for monetizing their work.
NFT royalties are easily a 10x improvement from the legacy artist monetization system and nearly every artist’s endeavor is examining how to issue NFTs. The joy of digital painting continues into the summer as new platforms like Art Blocks and Foundation onboard new artists and collectors.
The NFT summer moment largely becomes overshadowed with the continued growth of pfp/avatar projects and Axie Infinity’s Ronin launch, which immediately experiences rapid growth in users and NFT secondary sales.
The final leg of our saga gets told through the lens of Solana. With Ethereum experiencing heightened gas prices, pfp creation and flipping, in part, moves to Solana which quickly marches towards surpassing Flow in Cumulative NFT volume.
In hindsight, August of 2021 was the peak with over $4.5 billion in NFT secondary sales, likely more when factoring in art sales and non-Cryptoslam tracked NFTs (e.g digital land).
The present has a funny way of misshaping our view of the past. Although the past few months still lagged compared to the peak, it’s worthwhile to realize that the NFT secondary market is still multiples stronger than where it was at the beginning of the year. In early January, $50 million in NFT sales was a massive achievement. Now, $50 million in NFT sales is a bad day for OpenSea.
The Multichain Future
The NFT market has officially surpassed $15 billion in secondary sales combined across a variety of categories including gaming, PFPs (profile pics), virtual worlds, sports, and collectibles. More importantly, while Ethereum leads, the future is growing more multichain by the day.
Several blockchains are developing robust ecosystems for consumer applications, built on the foundation of digital ownership enabled by NFTs. The burgeoning NFT multichain future is rapidly approaching. Three Layer-1 blockchains possess secondary volumes of nearly $1 billion (Ethereum, Flow, Solana) and Ethereum leads all blockchains and Layer-2s with nearly $10 billion in secondary NFT sales.
While much of the NFT market is inherently financial, the growth of all digital goods and services requires initial capital investment and the public nature of crypto makes capital readily available for individuals, creators, and developers who are willing to build unique NFT protocols and products.
Most of the NFT categories that witnessed explosive sales growth this year can be described as cultural NFTs – art, collectibles, sports, pfp/avatars, and more. As the world moves onto permissionless blockchains and tokenizes everything that can be tokenized, investing will become more democratized and naturally expand to hobbies including art, music, fashion, content, and more. The dawn of culture investing has only begun.
Over the past twelve months, the NFT landscape emerged from a small ecosystem with a few hundred million in sales volume to a multichain ecosystem amassing billions in capital. When you examine the data of NFTs, it unpacks a robust story of wealth, human achievement, and cultural wonder. Ultimately, the data can only tell the story until now, and while it gives us useful insight into how the future unfolds, what comes next you must imagine.
Messari 2022 Theses - Heroes and Battlefields NFTs
Messari’s Theses for 2022 takes a deep dive into crypto’s industry leaders, major trends, projects, themes and topics. Our Heroes and Battle Scene NFTs memorialize the most notable players and moments in the crypto ecosystem.