What can the long-awaited Layer2 bring to the NFT field?

Original source: Cointelegraph Chinese

Recently, The NFT artwork "Everydays: The First 5000 Days" created by surreal artist Beeple successfully bid for more than US$69 million at Christie's auction, causing an uproar in the industry and abroad. Before Beeple, NBA team Dallas Mavericks owner and billionaire Mark Cuban (Mark Cuban) also made a bold attempt in the field of digital currency. First, he issued his own NFT tokens continuously on the NFT trading platform Rarible , and then in cooperation with the encrypted payment service provider BitPay, Dogecoin (Dogecoin) will be used as one of the digital currencies for payment. They are not the first star to make a bold attempt in the NFT field, nor will they be the last. As super-traffic KOLs, their entry into the NFT field will undoubtedly make whether the much-watched Ethereum network can carry the huge transaction demand has become a hot topic .

Overview of the current NFT track

NFT is called Non-fungilbe Token, meaning non- Homogeneous tokens adopt special token standards (such as ERC-721) to maintain their uniqueness, that is, irreplaceable, scarce and unique. Currently NFT can tokenize almost any content, and some media types are especially convenient. As of now, the most popular NFT application areas include: digital artwork, digital music, game props, membership badges, tokenization of luxury goods, etc.

With the rapid development of the digital currency market in 2020, as a subdivision track in the field of digital currency - NFT has also ushered in its development process, according to According to the data of Coinmarketcap.com, the current market size of Top100 NFT currency is about 10 billion US dollars, accounting for only 1% of the entire digital currency market, which is still very small in terms of proportion. The market value of Top 3 projects is about 8 billion, accounting for 80% of the entire track, indicating that the head effect is slightly obvious.  

< img src="https://image.theblockbeats.com/upload/2021-03-13/f834684d08a7fa093ef804938e0482aef67c1452.png" alt="" style="width:1527px">

Data source: Coinmarket.cap  Data as of March 4, 2021

Judging from the current trading volume of NFT products, the NBATopShot project is the best. Its daily trading volume of NFT tokens is as high as 8 million US dollars. Opensea, an NFT trading website, has a daily trading volume of 3.69 million US dollars, and the last one is Cryptopunk, with a trading volume of 2 million US dollars. In general, the NFT track is currently a very segmented market and is in a stage of rapid development.  

< img src="https://image.theblockbeats.com/upload/2021-03-13/ae702bea357bbff1a5553e5d3764391d5723c3cf.png" alt="" style="width:100%">

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Data source: Dapp Radar  Data as of March 4, 2021

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Although the development of the NFT market is in the early stage, a relatively complete ecosystem has been formed. From the figure below, we can see that the current ecosystem includes: trading platforms, game studios, collectibles, music , Funds, News and Research, Domain Names, Infrastructure, Metaverse, Tools, etc.  

< img src="https://image.theblockbeats.com/upload/2021-03-13/e215598898b5a0068243827cf919e53ed43eaca9.png" alt="" style="width:1038px">

Image Source: Fatcatfun.com

Among them, there are only a few relatively mature NFT tracks with a certain user scale, mainly trading platforms, collectibles, game studios, etc.

For trading platforms, the distribution and circulation of artworks are often inseparable from the platform. These platforms provide artists, collectors and players with a casting and The channel through which the item is sold. At present, the projects that operate relatively well and have formed a certain user scale include: Rarible and Opensea based on NFT digital collection and trading platforms.

In the field of collectibles, the current top players mainly build a fan economy around the sports ecology, making NFT products have the same collection value as physical cards, fans People will pay for this kind of collection. The NFT project NBA Top shot, which converts physical cards into highlights of online stars, is one of the projects that are currently on the ground and continue to make profits.

For game NFT projects, it mainly revolves around the economic system in the game to create a playable blockchain game. This type of game often has a complete development and combat system, and players can obtain benefits through various behaviors in the game. Currently popular projects include Axie Infinity, Sandbox, etc.

How will Layer2 empower the NFT track?

As we all know, although the Ethereum network has many limitations, such as slow confirmation speed and high gas costs, there is no doubt that it is still the blockchain world as of now The underlying platform of the blockchain with the most abundant and complete ecology is still the first choice for projects that want to carry blockchain technology. And what kind of development is the current NFT track on the Ethereum network, and how can the much-watched Layer 2 solution empower the NFT track?

1. Layer2 solves the congestion problem of Ethereum and provides greater combination for NFT

In early 2018, Cryptokitties, a game developed using the ERC721 token standard, exploded on the Internet, clogging the Ethereum network. Cryptokitties is a first-generation NFT project, in which each NFT corresponds to a cat and can be bred for multiple generations, and the value is determined according to the rarity of the bred offspring. Due to the serious congestion problem faced by the Ethereum network, Layer 2-two-layer network expansion came into being. Through expansion and speed up, Layer 2 can not only greatly improve the congestion situation of Ethereum, but also give the NFT track more room for development.

DeFi is called Money Lego because of its strong combination, and NFT also has the combination of DeFi Lego, which can form a rich ecosystem. From the bottom-up point of view, the entire ecology can be divided into three layers, namely: the first layer is based on the infrastructure as the lowest layer to build the foundation for the entire ecology; the second is various NFT projects, these projects will be based on their own To cast and create NFT works; the third layer will be the aggregator solutions of major trading platforms and Layer 2, in which the exchange will provide trading places for these NFT works to improve the liquidity of the works, and the aggregator will provide various Projects and exchanges attract users, speculators and collectors to the NFT market.

However, the current NFT projects based on Ethereum, due to the congestion of Ethereum itself, especially for NFT works with poor liquidity, to a certain extent It hinders the development of the entire NFT ecosystem. Therefore, the arrival of Layer2 will be one of the catalysts for the development of the NFT track.

2. Layer2 cross-chain aggregators will add value to major NFT public chains

At present, most of the high-quality NFT projects on the market are based on their own public chains. For example, NBA Top Shot is based on the Flow public chain, and Rarible is also built on its own public chain. This will cause a problem, not in Ethereum. For projects developed on Ethereum, due to the high transmission cost (Gas fee), most of its users' transaction activities are limited to their own public chain, and it is difficult to capture a huge number of stock users on Ethereum. If the existing NFT public chain can be linked to Ethereum and combined with Layer 2 solutions to reduce transmission costs, it can not only increase the mutual value of both parties, but also achieve the purpose of users returning to each other.

It can be considered that the combination of the NFT project's own public chain and Ethereum will be one of the development trends after Layer2 goes online, and currently Polygon (formerly Matic Network) has begun to focus on the development of Layer2 network solution aggregators, and there are already NFT projects connected to Polygon one after another. For example: the game company Atari (Atari) announced in early March that it will access Polygon and will bring its NFT and Atari Token to Layer2.

Therefore, aggregators focusing on Layer 2 solutions can not only improve the scalability of NFT projects, but also bring a large number of users in the DeFi system to excellent In many NFT projects, it brings value and even makes excellent projects go out of the circle.

Focusing on the incremental market may be the star of the sea

Recently, in Cointelegraph Chinese recently In the online HUB live broadcast, Miles Anthony from Decentral Games expressed a point of view: "For most current NFT players, NFT is their first entry into the digital currency field, not Bitcoin or Ethereum. Dapps. Players on the NFT trading platform provide a channel for investment and collection. However, if NFT works want to be truly valuable, they still have to return to the quality of the work.” Does this mean that the primary goal of NFT projects to break the circle? Yes, it attracts players in the same field but has no exposure to the blockchain, for example: sports NFTs attract all kinds of fans, collectible NFTs attract traditional collectors, game NFTs attract gamers, etc. Such incremental The users of the market are much larger than the users of Ethereum's stock market.

It is true that users on Ethereum are a huge stock market. Layer2 technology and cross-chain aggregators are attractive to NFT projects, but for a For the current niche market, what NFT needs is to break the circle and attract more users, so as to achieve greater development. After all, there are already some high-quality and sustainable profitable projects in the market (Flow public chain) , Once they break the circle, for them, the future journey will be a sea of stars.

Cointelegraph Chinese is a blockchain news information platform, the information provided only represents the author's personal opinion, has nothing to do with the position of the Cointelegraph Chinese platform, and does not constitute any investment and financial management suggestion. If you need to reprint, please contact the Chinese staff of Cointelegraph.

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