• Blockchains compete for the NFT market, but Ethereum remains the dominant player — Report

  • Ethereum dominates the NFT market, accounting for more than 97 percent of recent sales, while Flow, Polygon, and WAX compete.

    This month, a comprehensive report on nonfungible tokens, which will discuss NFTs in depth and provide a step-by-step guide to entering this market.

    The report will evaluate the technology behind NFTs, their regulatory challenges, and their prospective growth and current market positions in collaboration with multiple partners, including Enjin, NFTBank, The Sandbox, and others. The report will also outline the challenges that the market may face in the future, as well as potential solutions.

    There was increased interest in NFTs at the start of 2021, with the largest NFT marketplace, OpenSea, experiencing a hundredfold sales increase in half a year. In the first half of 2021, the total volume of NFT sales reached $2.5 billion, nearly eight times the total amount in all of 2020.

    OpenSea, as the market leader, primarily uses Ethereum, though Polygon and Klaytn are also supported. Other marketplaces allow the use of alternative blockchains as well, but Ethereum has dominated the space in recent months, representing at least 97 percent of every NFT market sector, including games, collectibles, and marketplaces, on a weekly basis.

    Importantly, the drop in Ethereum trading volume at the start of the year was primarily caused by NBA Top Shot, Dapper Labs’ NFT collectibles project based on the Flow blockchain, which generated approximately $500 million and attracted over 800,000 users in the first quarter. However, despite its lower gas fees (cents vs. tens of dollars) and higher number of transactions per second, Flow was unable to secure a significant market share in the long run.

    Despite Ethereum’s current dominance, the market is crowded with significant competitors. As shown in the graph below of total NFT sales and traders, the Worldwide Asset eXchange (WAX), Polygon, and Flow are formidable competitors. So far in 2021, every third trader has used Flow, and every fourth trader has used WAX, despite the fact that Ethereum has accounted for nearly 90 percent of total sales this year.

    Although WAX only accounted for around $100 million in sales in 2021 (slightly more than 1%), its website claims that it is backed by a number of top-tier companies, including Google, Atari, Funko, Topps, and others.

    Given the sector’s large number of unique traders and the potential for growth through the release of new NFT collectibles and games in collaboration with well-known companies, WAX blockchain activity may increase in the future. Furthermore, the ease of use of NFT transactions on WAX may attract new traders, increasing blockchain-based sales. However, its busiest period ($15 million in sales per week) was in the middle of April. Since then, the blockchain has processed between $2 million and $3 million in sales per week, with no indication that those figures will increase anytime soon.

    In contrast to Flow and WAX, Polygon has achieved consistent, rapid growth over a longer period of time, recently generating the majority of its sales through marketplaces such as OpenSea and Aavegotchi’s Baazaar. Outside of the NFT market, Polygon’s popularity, combined with low gas fees ($0.01 to register an NFT on OpenSea vs. $230 with Ethereum), may stimulate NFT market activity on the Polygon blockchain in the long run.

    Other notable blockchains, such as Waves (best known for the Waves Ducks game), Binance Smart Chain, and Tezos (best known for Hic Et Nuc, a crypto art NFT platform), are present in the market but account for less than 1% of total NFT sales in 2021. Other blockchains, such as the Devvio blockchain, which focuses on play-to-earn gaming, are also making inroads into the space.

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