Where would you mint an NFT?

Ethereum is the largest ecosystem of the DeFi (decentralized finance) sector, so it’s no surprise that this is where you’ll find the majority of NFTs being minted. Ethereum also takes the lead with a much bigger pool of buyers and sellers, which is why Ethereum-based OpenSea, a very popular NFT marketplace, is often the first stop for many NFT producers, because that’s where they potentially get more exposure and people willing to buy or place bids on their NFTs. 

Ethereum’s data architecture and security components are the reason why so many developers are building on top of its blockchain. But there are some ‘cons’ to the network. Rather frequently, the network suffers a major transaction backlog, which leads to an enormous spike in transaction fees, and this limits the number of users who can afford to mint NFTs. On the other hand, whilst paying elevated gas fees can be a crippling experience sometimes, the upside is there’s more money flowing in Ethereum, so the flipping ceiling is way higher.

The move to Solana

In response to this, NFT creators and collectors look to alternative blockchains with higher throughput, scalability, and lower gas fees. So far, Solana seems to be Ethereum’s most serious competitor, due to the fact that it’s a high-performance blockchain that leverages different cryptographic mechanisms to scale its network.

But it is still chasing Ethereum. Data from CryptoSlam shows that Ethereum has had a whopping selling volume of over $1.8 billion in the last 30 days, compared to $120 million from Solana-based marketplaces. Plus, the most popular NFT collections in the market exist on the Ethereum blockchain, i.e. Bored Apes and CryptoPunks.

But Solana takes the lead in terms of technology, functionality, and versatility. It uses a consensus mechanism called Proof-of-History, which leverages a set of protocols to execute transactions with high throughput. Its transaction fees are less than one dollar, and there appears to be some migration to Solana amongst NFT projects and collectors in order to benefit from the scalability and cheap transaction fees. It also appears that Solana is becoming the preferred blockchain for more general and utility-focused NFTs.

In conclusion, whilst Ethereum still has the major market share, Solana’s share is growing. In fact, Solana’s user base has been growing at a much faster pace since the beginning of 2022, and even JP Morgan believes it could overtake Ethereum in the long term.

NFTs escape the crypto crash

DappRadar has published an interesting report on how NFTs appear to have escaped the current crypto market crash relatively unscathed. It points out that while ‘fear’ is the sentiment dominating the crypto market, the very opposite appears to be true of NFTs, or non-fungible tokens.

So, what is happening on the NFT scene that is contributing to this growth. The report first points to the celebrities and big brands that are joining it daily. Some of the celebrities have an enormous social media reach, such as Kevin Hart with +192 million followers on Twitter and Instagram. Hart and footballer Neymar Jr (+200 million followers) have publiicised their entry into the Bored Ape Yacht Club (BAYC), one of the prime NFT projects right now.

Furthermore, Twitter, perhaps the most popular social media platform across crypto and NFT enthusiasts, enabled its first web3 functionality inside the social platform a few days ago. The other social media platforms are expected to follow, and even Walmart has filed several trademarks for NFT use.

Google has also revealed that searches for ‘NFTs” have now outstripped those for ‘crypto’, another telling sign that NFTs are in the ascendance, and there is increased interest from Asia. Prior to this the market was dominated by North America and Europe, but an Asian fan club could make a massive difference.

Some NFT metrics

On their own, NFTs “produced one of the most impressive metrics we saw in the blockchain industry last year,” DappRadar says. “In total, $25B was generated by this type of asset in 2021 alone. That’s a whopping 18,414% more than the four previous years combined.”

And whilst most cryptocurrencies are struggling at the moment, it is necessary to look at Ethereum, the blockchain used by the majority of NFT projects. ETH may be facing challenges, but Ethereum was responsible for 75% of last year’s volume. For example, since December 2021, more than 53,300 UAW have connected to Ethereum NFT dapps on average per day. That’s 43% higher than the numbers seen during Q3 of last year. Furthermore, before the end of January 2022, a record 1.6M unique traders propelled Ethereum NFTs to generate more than $3.7B in sales, and were on track to break the record set in August 2021 of $4.5B.

A store of value?

According to the report, a recent floor price analysis for some essential Ethereum collections signals that NFTs behave like assets that store value. The floor of an NFT collection is the minimum asking price and represents the lowest entry barrier. According to the floor price market cap for the top 100 NFT collections, the value of NFTs has decreased by $2.4B from November and is currently estimated at $14.8B. On the other hand, despite the 50% hit to ETH, the value of the most traded collections only experience a 15% dip, showing that the category resisted the crash. 

There is a lot of positive sentiments around NFTs, much of it down to the growing fame of BAYC. In November, when BTC and ETH were showing all-time highs, the floor price at BAYC was 30 ETH. One week later the BAYC floor increased over 60% to surpass 50 ETH despite a 15% drop in ETH’s price. By the end of December, the cheapest BAYC could be purchased for 60 ETH, and it has now passed 90 ETH. By the report’s calculations, you need more than $225,000 at current ETH prices to buy the most affordable Bored Ape.

Essentially, NFTs have gradually become an asset class of their own. Although they remain tied to cryptocurrencies, NFTs are slowly creating an economy for themselves. What we are seeing now is the proverbial tip of the iceberg, but perhaps most importantly, NFTs are proving themselves as digital assets capable of storing value.

You can read the DappRadar report at https://thedefiant.io/dappradar-nft-report/