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Jul 9, 2021

Is the NFT renaissance real?

Brian Krogsgard
Brian Krogsgard

Cofounder and CMO

The NFT landscape went ballistic, within and outside of crypto, extremely quickly. It was an easy tack-on to the massive increase in interest for collectibles in the physical world, and a natural outlet for risk-on appetites within crypto.

There was a crescendo as NFTs were featured on an SNL skit, Beeple sold his every-days for $69 million, and 7 figure punks were flying left and right.

It all cooled down, but now renewed interest is here. If you just look at Open Sea monthly volume, it looks like it never went away. But top-end prices definitely went down. Floor prices went down on major collections. However, cumulative users kept growing, total collections increased a ton, and the liquidity spread out, causing a mini bear market in individual NFT prices.

Axie Infinity is leading the charge of the resurgence, but it's not alone. All the big collections (punks, meebits, hashmasks) are seeing increased activity, and new ones are finding communities (bored apes, craniums). But the gaming space appears to be in the lead of the resurgence, whereas some avatar-based projects are doing well, most are junk and appear to be doomed to be worthless.

NFTs can be much more than art, and the most common NFT art collections have been for avatars. Gaming integrations is the most obvious integration. Axie has an entire world I don't fully understand, but you have to begin the game with three characters, which currently set you back about .1 ETH each. From there, the game is play to earn.

And people are playing. Amy Wu has a great thread on the enormous growth of Axie, which recently earned $1 million in revenue in a single day.

NFTs go beyond art, and beyond gaming. Uniswap version 3 liquidition provision includes NFTs as receipts, and there are even some interesting tax implications for that.

I like to think of NFTs as titles. Receipts of ownership, and presumably of authenticity. Such receipts can be used in a myriad of ways. Art is simply a fun example. Unfortunately, I think it too strongly silos NFTs so that most people put them in a "for fun" mental lane and have a hard time escaping that mindset.

Uniswap v3 is a great way to start breaking out of that thinking. Eventually, I think the ERC-721 spec (the primary NFT specification) will be just as popular as the well-known ERC-20 spec. Both are incredible innovations just beginning to be fully explored. ERC-1155 opens up an even wider array of possibilities, particularly around fractionalization.

So, is the speculative renaissance real? Sure, NFTs are fun again. I don't know that it can get as red-hot as it was; and it makes me think that perhaps it's a dead-cat bounce for these art collections' monetary value.

But NFTs as core technology within the crypto ecosystem is as real as it gets. And if you aren't already, it's time to start paying attention to the various ways they are being introduced to Defi protocols and other smart contract applications.

See you soon,

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