Nonfungible tokens (NFTs) exploded in popularity in 2021, with sales of NFT games reaching $5.17 billion, according to Nonfungible.com.
According to a report released by L’Atelier BNP Paribas and NonFungible.com on the entire NFT market, larger NFT sales for all markets will reach $17.6 billion in 2021, up 200 times from $82 million in 2020.
That means a lot of people thought NFTs were the next big thing, because they use the transparency and security of blockchain’s digital ledger to authenticate unique digital items. However, an equal number of people believe that NFTs are full of scams, pump-and-dump schemes, money laundering, and other consumer-unfriendly activities.
The thing about blockchain is that it’s transparent, so doing this kind of accounting isn’t difficult. More than 2.5 million digital wallets hold or trade NFTs, according to L’Atelier BNP Paribas and NonFungible.com, up from just 89,000 wallets the year before. If each of those wallets purchased NFTs last year, the average amount spent on NFTs during the year was $7,040. The number of people who bought NFTs increased from 75,000 in 2020 to 2.3 million in 2021.
“The year 2021 was incredible. According to Dan Kelly, CEO of NonFungible.com, “the explosion that surrounded the Collectibles segment is considered a “bubble” by many. “On the contrary, we believe that, by 2021, every community will have a digital identity.” As we begin to build a new web3 industry, it is critical that strong values are carried by strong communities.”
“Even though the figures for 2021 are very encouraging in all segments,” Kelly continued, “we can expect an overall decline in activity in 2022, which will undoubtedly be more mature.”
I believe this indicates that there is a small group of cryptocurrency enthusiasts who enjoyed purchasing NFTs as they became popular throughout the year, which would explain the artist Beeple’s $69 million sale of an NFT artwork in March 2021. Buying NFTs, like Bitcoin, became extremely popular in 2021 for whatever reason. The market, however, demonstrated that what goes up must also go down, and HODLing, or “holding on for dear life,” was not for the faint of heart.
According to the report, NFT projects will evolve from simple tradable collectibles to more sophisticated virtual assets aimed at the metaverse by 2021.
Blockchain game companies raised more than $3.3 billion in 2021, according to a separate report by Quantum Tech Partners, up from virtually nothing the year before.
Buying or reselling NFTs yielded a total profit of over $5.4 billion in 2021, with 473 wallets earning more than $1 million each.
Collectibles were the most popular category of NFTs, accounting for $8.4 billion in sales. CryptoPunks and Bored Apes are two examples of such collections.
NonFungible.com’s fourth annual study followed the rapid rise of a new asset class as the market became more mainstream.
NFTs are digital blockchain-linked assets that are completely unique and not interchangeable with any other asset, unlike cryptocurrencies. Programmable art, ownership records for physical assets, and virtual land plots in metaverse-like platforms are all examples. Because each NFT is one-of-a-kind and impossible to duplicate, they have the potential to bridge the gap between the virtual and physical economies by providing a potentially massive market of valuable digital goods that can be scaled, collected, and traded. According to Nonfungible.com.
The report used proprietary technology to track all on-chain transactions on the Ethereum blockchain using the ERC-721 token standard, as well as other leading NFT blockchains Flow, Ronin, and Starkware.
In order to provide a more accurate picture of the true market, the methodology excluded wash trading, bots, and volumes of trading that could not be linked to any specific project, as well as additional “noise” on the blockchain that could not be considered legitimate NFT activity.
The amount of activity on the market has also increased significantly. A total number of active wallets transacting NFTs (including buying, selling, holding, or using them in a blockchain application) increased from 89,061 in 2020 to more than 2.5 million in 2021 (2,574,302), representing a 1,822 percent increase.
NFT market by segment
NFTs have a wide range of applications. Collectibles were the most popular category, accounting for $8.47 billion in sales, owing to over-speculation in this asset class and the extremely high value of sales by a few large Profile Picture collections, such as CryptoPunks and the Bored Ape Yacht Club. NBA Top Shot, a collaboration between Dapper Labs and the NBA that captured basketball game highlights, was one of the biggest successes.
Games came in second with $5,17 in sales, owing to the success of the blockchain game Axie Infinity, which allowed players to profit from NFT item sales. This segment has a large number of active wallets, owing to Axie Infinity’s “scholarship” system, which allows people to give other players access to their game accounts and share the revenue generated, according to Nonfungible.com.
The total value of NFT art sales surpassed $2.79 billion. While this category may appear minor in comparison to collectibles and gaming, it is an important part of the NFT asset class, and as digital artists such as Beeple and Pak become more well-known, it remains one of the most stable parts of the ecosystem.
Sales in the metaverse category totaled $513.8 million. The last quarter of 2021 saw the most growth in this segment, which coincided with Facebook’s decision to rebrand to Meta. Consumer brands are increasing their investments in Metaverse projects, such as Nike’s acquisition of RTFKT, and this segment is expected to grow in the coming years.
In 2021, utilities will generate $530.8 million in revenue. This is a market segment that includes a wide range of use cases in finance, ticketing, insurance, and communities, such as new social clubs like Maxwell Tribeca, which require an NFT ‘passport’ to enter. This is likely one of the most complicated and promising segments on the market.
In the summer of 2021, the market reached a fever pitch, peaking in August with nearly $400 million in NFTs traded in a single week. By the end of 2021, NFTs had broken through into the mainstream: ‘NFT’ was named Collins Dictionary’s Word of the Year, and NFT artist Beeple appeared on The Tonight Show and The Joe Rogan Experience.
“In terms of transaction volume and value, mainstream brand interest, the emergence of new digital communities, and the tens of billions of dollars of funding that went into projects, 2021 was a breakthrough year for NFTs,” said Nadya Ivanova, chief operating officer at L’Atelier BNP Paribas. “How much of that translates into real products and tangible value for users remains to be seen.”
“While the NFT market will continue to be volatile in 2022, I expect the better projects to mature technologically, socially, and commercially,” Ivanova added. Aside from the current focus on NFTs as popular collectibles, there is a real need and opportunity to develop infrastructure and utility services for this emerging market and asset class, such as financial and risk management products. The NFT market has only recently begun to push the limits of its underlying technology.”