Growing NFT asset market

From 2019 onwards, there was a surge of NFT experimentation. NFT trading volumes were tiny relative to crypto currency trading volumes and the experimentation largely stayed out of the mainstream purview until late 2020. But a small, passionate community of true believers worked to develop the ecosystem.

In late 2020, bluechip artists like Pak and Beeple dropped notable works on SuperRare and NiftyGateway. In 2021, PFPs(Profile Picture) exploded (Bored Apes, Nouns, Toadz) and traditional auction houses like Sotheby’s and Christie’s and mainstream consumer brands like Adidas and Nike got involved in a big way.

This year NFTs impacted visual art, gaming, photography, music, fashion, and consumer brands broadly. What started in 2017 as a wacky idea on Ethereum (a game for （trading and mating virtual cats on-chain has grown into a multi-billion dollar global asset class that has helped tens of thousands of creatives and millions of consumers. And we are still in the early innings of this movement. In this report, we aim to present a comprehensive data-driven view of NFTs for those who’d like to understand what is happening beneath the surface.

In the past few years new blockchains have launched that are more centralized but boast faster block times and lower fees than Ethereum. Many of these chains have subsequently followed Ethereum in creating their own NFT standards. Some are “Layer 2s” built on top of Ethereum that still rely on Ethereum for consensus like Polygon and Ronin. Others are separate and competing “Layer 1s” like Flow and Solana. There’s lots of noise around competing L1s right now, but Ethereum and its L2s still make up 90%+ of NFT volume (see below). With a lot more L2 innovation coming in 2022 and beyond (e.g. Quixotic on Optimism), we expect the Ethereum ecosystem to continue its dominance. But adoption of other chains is likely to grow as well.

NFTs had a breakout year in 2021 but the asset class is still small relative to cryptocurrency broadly. The total market cap of NFTs is ~$31.4B, just ~1.36% of the total market cap of cryptocurrency ($2.3 trillion).We believe that NFTs will ultimately be larger than cryptocurrencies by the end of this decade.