The Non-Fungible Token Revolution

Market Insights Apr 08, 2021

Non-Fungible Tokens (“NFTs”) are the latest crypto craze disrupting the world of art, entertainment and media. A non-fungible asset is “one-of-a-kind” with unique features that makes it not interchangeable. On the opposite, a US dollar is said to be fungible as it can be swapped to any other US dollar. NFTs emerge as a way to manage and secure intellectual property rights of digital artwork. Before the blockchain, it was almost impossible to authenticate a work as original. NFTs use blockchain technology (through smart contracts) to prove actual ownership, deny or restrict distribution rights. Each NFT token is entirely unique as it represents the digital certificate of ownership of an original crypto artwork.

Major benefits of NFTs:

  • Security and traceability of ownership
  • Fractioning copyrights: see examples of rappers Big Zuu (UK) and Taylor Bennett (US) who both sold within a few minutes 75% of their copyrights to fans. The successful owners will receive monthly royalties on the sales of the upcoming album
  • Flexibility: artists may issue any kind of tokens. As an example, the rock band King of Leon is to release three types of tokens:special album package, fan perks such as front-row seats and exclusive audiovisual art.

NFTs were first created in 2017 and in the early days, they developed in collectible fine art and gaming, video games offering players unique rewards. NFTs have now spread to a much wider area. Big names have recently jumped in, with use cases covering fashion (Vogue Business, Gucci), art collectibles Christie’s, Sotheby's, sports memorabilia, music (DJs and Rock bands), gaming (Animoca Brands, Axie Infinity, Sorare, Star Atlas) and even tweets.

"NFTs are the single biggest reorientation of power and control back into the hands of the artist basically since the Renaissance and the printing press," says Robert Alice, London based artist who promotes blockchain culture within the visual arts.

This new space creates a new form of 'social media scarcity', that was lost with digital images copied on the internet.

The most expensive NFT for now is the digital collage by Beeple sold at Christie’s at $69.3 (11 Mar 2021)

Today, the largest NFT network is Theta (THETA) with $13bn market capitalisation. Theta is a blockchain powered infrastructure for decentralised video streaming.

Theta itself amounts for almost half of all NFT protocols market capitalisation ($29bn).

Currently, most NFTs are a part of the Ethereum blockchain, but there are various other blockchains that can also implement their own versions of NFTs. All blockchains are rushing to become NFT issuance hubs and power the future NFT economy. Among these, Tron, Tezos, Binance Smart Chain, Crypto.com, and Solana are all starting to incorporate NFT projects.

An interesting network to take a look at is Flow (FLOW), a Layer 1 blockchain built by Dapper Labs, the company which launched Crypto Kitties a few years ago. Since its inception, Flow has been very focused on the NFT market. Through partnerships with sports (NBA), gaming (Ubisoft) and media entities (Warner Music), it is already home to some of the most successful NFT Dapps. One such Dapp is NBA Top Shot, the most successful NFT Dapp and Marketplace, with almost 300,000 users and $500m in transaction value as of April 2021.

Other marketplaces have emerged, on which thrives a flourishing NFT secondary market, with collectors, gamers and speculators trading NFT in a decentralised fashion. Some of the most famous marketplaces are Opensea, Rarible and Nifty Gateway.

Source: https://dappradar.com/nft/marketplaces

While many experts think NFTs are here to stay, others might worry about price volatility, low liquidity and legal uncertainty.

Source: Coingecko data from 19 Aug 2020 to 6 April 2021

Regarding volatility, NFT is a very nascent space, prices are still in a discovery mode turning from overheated to corrections. Prices increased massively since the beginning of the year to culminate on March 17. Would it evolve like Bitcoin as the market matures, with low points getting higher with time?

Also, from a legal standpoint, although the blockchain secures authentication and tracks the provenance of  NFTs, there are so many protocols that the uniqueness of each NFT might not be guaranteed.

At Trakx, we offer the Top 10 NFT, an instrument that replicates the performance of the 10 largest NFT protocols by market capitalisation with a cap at 15% to enhance diversification. Trakx index rebalances every month, making sure investors don’t miss out the latest trends.


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Carole Laizet

Senior marketing manager with 15+ years of experience in the Financial Industry (traditional Banking as well as Crypto Assets). Responsible for market research @trakx.io