In-depth analysis of the NFT-based public chain track

Author: Zixi Jun 0xRank

1. Development History of NFTs and Industry Value Chain

1.1 Recent Rapid Development of NFTs and Significant Increase in Trading Volume

Recently, NFTs have developed rapidly, with trading volume significantly increasing. According to Dune Analytics data, Opensea's trading volume reached a historical peak of $3.426 billion (equivalent to 1 million ETH) in August 2021, a 941% increase compared to July. The star product in the NFT space, Cryptopunks, contributed a trading volume of 200,000 Ethereum in August.

After August 2021, Opensea's trading volume gradually declined, but from mid to late November, it became evident from Opensea's daily trading volume that the NFT market was recovering. In January 2022, Opensea (based on Ethereum) saw its monthly trading volume surpass $4 billion, with many star products emerging.

Figure: Opensea Monthly Trading Volume Opensea Daily Trading Volume

Source: DuneAnalytics

1.2 The NFT Industry Value Chain is Divided into Three Layers

Currently, the NFT industry value chain is divided into three layers. The infrastructure layer mainly includes public chains, side chains/Layer 2, token standards, development tools, storage, wallets, etc.

Infrastructure projects typically benefit first from the industry's upward trend. For example, public chains and side chains/Layer 2 capture the Gas Fees from the primary market Mint and secondary market transactions of NFTs; in terms of storage, Arweave's recent high growth in storage services is partly due to the buoyancy of the NFT market.

The protocol layer mainly includes NFT minting protocols, primary market, liquidity protocols, DeFi + NFT, etc. In the protocol layer, art/collectibles and gaming/metaverse projects stand out—BAYC has a cumulative trading volume of $2 billion, Cryptopunks has a cumulative trading volume of $1.9 billion, and Axie Infinity has a cumulative trading volume of $3.3 billion.

The application layer mainly includes general NFT vertical applications, general secondary markets, and finance, etc. Among them, the secondary market represented by Opensea occupies a large share and plays a crucial role in the market.

This article will detail the public chain and side chain/Layer 2 parts of the NFT industry value chain.

Source: A&T Capital

1.3 The Development History of NFTs—Currently in the Explosive Growth Phase

NFTs originated from Ethereum. 2017 was the introduction period for NFTs. At that time, John and Matt relied on the ERC20 standard to create pixel-based character avatars called CryptoPunks and issued them on Ethereum. The punk spirit of CryptoPunks was a breath of fresh air on Ethereum and inspired many practitioners.

Subsequently, DapperLabs was inspired by this and launched the ERC 721 standard based on NFTs, introducing the game CryptoKitties, making each crypto cat unique and promoting the idea that "scarcity maximizes value."

2018-2020 was the construction period for NFTs. During this period, major NFT infrastructure began to be built. For example, the NFT public chain Flow, exchanges Opensea and Rarible, and metaverse games Sandbox and Decentraland began to emerge, marking the arrival of the NFT infrastructure era.

From 2021 to now is the explosive growth period for NFTs. At this time, NFTs experienced explosive growth. For example, the trading volume of Cryptopunks can reach 200,000 ETH in a month; Opensea's trading volume in August 2021 increased nearly tenfold compared to July; Jay Chou's Phantabear rose from 0.26 ETH to a floor price of 8 ETH.

At this time, NFT projects exploded in development, with various projects emerging, active users increasing significantly, and trading amounts surging, but this also came with the risk of an NFT bubble.

Figure: NFT Development History

2. Why Ethereum Remains the Main Battlefield for NFTs

2.1 Currently, NFTs based on Ethereum and its side chains/Layer 2 still dominate the mainstream.

Currently, NFTs based on Ethereum and its side chains still account for an absolute majority, with trading volume exceeding 90%. According to Cryptoslam data, Ethereum-based NFTs remain the absolute mainstream.

Ethereum's NFT trading volume accounts for about 76% of the top 10 public chains, with the trading volume of Ethereum side chain Ronin based on Axie Infinity reaching 14.63%, and the trading volume of Ethereum side chain Polygon, aided by Opensea, also reaching 0.61%.

In addition to Ethereum, rapidly developing chains include Solana, Flow, and WAX. Solana's ecosystem developed rapidly in 2021, achieving $1.02 billion in trading volume through the two major NFT marketplaces Solanart and MagicEden; Flow is an established NFT public chain, with its star project NBA Top Shot performing well this year; while WAX leveraged the GameFi boom, gaining traction with games like Farmers World in 2021.

Figure: Current NFT Trading Volume by Chain

Figure: NFT Trading Volume by Public Chain

Note: Data from Cryptoslam, with significant discrepancies in trading volume for some public chains. According to DappRadar data, for example, BSC's NFT trading volume should be around $100 million.

2.2 Why Ethereum Remains the Main Battlefield for NFTs?

One of the most important reasons is that the first NFTs were born on Ethereum. The initial success of CryptoPunks and CryptoKitties brought massive traffic to Ethereum-based NFTs and created significant wealth effects for users.

In 2020 (and even now), the ecosystems of other public chains have not fully developed, and Ethereum has overwhelming TVL, developers, artists, collectors, and merchants in the public chain competition. Therefore, compared to other public chains, Ethereum has a strong first-mover advantage.

The supporting infrastructure for NFTs is quite complete. This includes not only the most important secondary trading markets but also NFT applications such as metaverse games, fragmentation, collateral lending, NFT + DeFi, databases, etc., greatly increasing the utility value of NFTs.

Ethereum has a strong brand effect. The so-called brand effect refers to the mental positioning of a project in the user's mind; projects with a more prominent mental positioning are more likely to be mentioned, used, and recommended by users. In both the recognition of users within the circle and media coverage outside the circle, valuable NFT transactions and issuances are mostly based on Ethereum.

When project parties want to issue NFTs, they will first consider issuing them on Ethereum. This path will further influence users, stimulating more users to join Ethereum's NFT trading. This further reinforces the "path of prioritizing issuing and trading NFTs on Ethereum."

At the same time, Ethereum is also making continuous progress towards 2.0. Although it will take years to fully develop, Layer 2 has made rapid progress, and NFTs are also developing rapidly on side chains represented by Ronin and Polygon.

However, it must be acknowledged that Ethereum-based NFTs also have many issues: 1. Transaction fees are too high, with minting fees often around $200; 2. Transactions are slow, typically taking one to two minutes to confirm when minting.

High transaction fees make it difficult for mid-to-low net worth players to enter the Ethereum ecosystem, leading them to choose new public chains represented by Solana and BSC. The development of NFTs requires new users, and new users hope to enjoy the benefits that early Bitcoin and Ethereum holders experienced, making them willing to engage with new public chain ecosystems.

In summary, the core success factors for Ethereum-based NFTs are:

1. Ethereum's first-mover advantage (users, TVL, collectors, developers, etc.)

2. The NFT ecosystem and supporting infrastructure are well-developed on Ethereum.

3. Ethereum-based NFTs have a brand effect.

The drawbacks of Ethereum are: Transaction fees are too expensive for mid-to-low net worth players, and transactions are relatively slow.

NFTs exploded in 2021, and their development may accelerate even more in 2022. Just as DeFi developed rapidly in its early stages, with Ethereum's DeFi dominating, it was gradually overtaken by new public chains, as reflected in the decline of Ethereum's DeFi TVL from 90% of all public chains at the beginning of 2021 to 60% by early 2022. The development path of NFTs on public chains may be similar to that of DeFi. Therefore, we believe that various NFTs will also thrive on new public chains like DeFi.

We will scan new public chains one by one for comparison.

3. Overview of Leading Projects in MusicFi & SocialFi

3.1 Brief Overview of Leading MusicFi Projects

MusicFi may be the next NFT trend, with leading projects including Audius, Pianity, Royal, Rocki, and Melos. Their specific situations are as follows. Among them, Pianity differs from other projects as it is built on the decentralized cloud storage Arweave.

3.2 Brief Overview of Leading SocialFi Projects

SocialFi may be the next NFT trend, with leading projects including Monaco Yacht, BBS, Secondlive, Decentralized Social, and Mirror. Their specific situations are as follows. Deso is a dedicated SocialFi Layer 1 public chain, which will be analyzed in detail later.

4. Comparison of Public Chains: Tokens, Fundamentals, Ecosystems, Developers, Users

4.1 Comparison of Public Chains: Token Situation & Fundamentals

4.2 Comparison of Public Chains: Ecosystem & Developers & Users & Social

5. Mapping of Various Public Chains

5.1 Ronin: Ethereum Side Chain Specialized in NFT Games

Axie Infinity is one of the most successful GameFi games of 2021. The success of Axie Infinity and its reasons for success need no elaboration. Sky Mavis, the parent company of Axie Infinity, is not satisfied with just making a single game and has set its sights on the more lucrative public chain track—launching the Ethereum side chain Ronin in February 2021.

The purpose of Ronin is to become the most commonly used Ethereum side chain for NFT games. Ronin public chain has the following characteristics: 1. Ronin is specifically designed for GameFi; 2. Instant confirmation of seamless transactions; 3. Significantly reduced Gas fees, which are retained for future competitions and rewards; 4. RoninBridge allows for unrestricted withdrawal and transfer of Axie assets.

Although GameFi thrived in the fall of 2021, the essence of GameFi at that time was unsustainable. With the collapse of leading projects, the overall buoyancy of GameFi rapidly declined. In Q1 and Q2 of 2022, a large number of new games will be launched, and if a star project innovates its mechanism and brings wealth effects, the buoyancy of GameFi is likely to rebound.

This presents a very good development opportunity for Ronin, which specializes in GameFi. In addition to the frequent demand for gold mining transactions in GameFi, another major demand is NFT transactions based on games. Therefore, the future development direction of NFTs on Ronin is likely to focus on NFT transactions of assets within games (or just Axie Infinity), with the price of trading NFTs anchored to the utility value based on the game.

Figure: Axie Infinity Revenue

Source: Dapp Radar, Token Terminal

5.2 Ronin: Short-term Development May Not Be Satisfactory

Ronin's ecosystem is currently relatively singular, with only DEX Katana and Axie Infinity. Due to the declining buoyancy of GameFi, the prices of mining tokens SLP and AXS are significantly decreasing. Users previously estimated Ron's price to be around $10, but the current futures price is only $3.4, far below the estimated price.

The profits from mining are far less than the losses from the tokens. Additionally, liquidity on Katana is gradually decreasing, having halved from a peak of $1.48 billion, and trading volume on the DEX is also gradually declining, with Ron's value capture still unclear. Ronin's short-term development may not be satisfactory.

Figure: Ronin DEX Katana Liquidity

Figure: Ronin Perpetual Contract Price

Source: FTX, Katana, CMC

5.3 Immutable X: Ethereum Layer 2 Specialized for NFT Transactions

Immutable X is specifically designed for NFT transactions on Ethereum Layer 2. The team initially created a Hearthstone-like game called Gods Unchained based on Ethereum in 2018, later rebranding to Immutable X and launching its own Ethereum Layer 2 exchange, raising nearly $70 million.

Immutable X uses StarkWare's StarkEx, which has high security, can achieve over 9000 TPS, and can essentially realize instant transactions with Gas-free fees, greatly enhancing user experience.

Immutable X has strong partners, including well-known entities in and out of the industry such as Opensea, Tiktok, Marvel, and Disney. Currently, the NFT category with the broadest collection on Ethereum, but there are no similar blockbuster collectible projects on Immutable X, with only some imitation and game NFTs choosing to establish on Immutable X.

The biggest characteristic of game-related NFTs is that their prices are anchored to their utility value. Detached from the game, the fundamental value and premium of NFTs are minimal. Currently, strong project parties prefer to build NFTs on Ethereum rather than on other public chains. How to attract strong projects to launch or migrate to Immutable X is also a consideration for its future.

It is worth noting that in April 2021, Opensea tweeted that it was integrating Immutable into Opensea to reduce Gas fees. Additionally, on February 3, 2022, Immutable X and Gamestop launched a $100 million fund to invest in NFT game projects. The Immutable X ecosystem is expected to gradually improve in 2022.

Figure: IMX Partners

Figure: IMX Ecosystem

Source: Immutable X

5.4 Immutable X: Value Capture is Acceptable, Potential for Growth with Blockbuster Projects

IMX has an initial total token supply of 20 million, with a 1:100 split in October 2021, currently totaling 2 billion. Specific allocation: 1. Ecosystem development (51.74%)—the team allocated 60 million for airdrops, with 10 million for early users who participated before July 22, 2021, 40 million for early users before September 21, and the remaining 10 million for other activities.

The remaining portion is used for user rewards, developer grants, market operations, etc. Different uses have different lock-up periods, ranging from 6 to 24 months, and the team will adjust based on actual conditions. 2. Project development (25%) is locked for one year, then released every 28 days for the next three years. 3. Private placement (14.26%) is locked for one year, but a portion of tokens is added to the waiting period every 28 days, unlocking after one year, with the remaining tokens released every 28 days. 4. Public offering (5%) 5. Foundation (4%).

IMX uses: 1. Pay fees (the Immutable X trading market charges a 2% fee, of which 20% must be paid in IMX) 2. Staking 3. Governance.

IMX has not yet launched staking and governance features. If Immutable X launches blockbuster games or NFTs in the future, IMX's value may have some room for growth.

Figure: IMX Price

Figure: IMX TVL

Source: Immutable X, CMC

5.5 Polygon: Currently Rapidly Developing Ethereum Side Chain for NFTs and GameFi

Polygon is currently Ethereum's side chain, aiming to support and expand Ethereum's community. By utilizing Ethereum's mature, decentralized security layer, along with Polygon's scalability in transactions and performance, users need not worry about security issues.

Reasons why Polygon is suitable for NFT development: 1. From an ecosystem perspective, NFTs/GameFi currently occupy the mainstream of Polygon's DApps; 2. Polygon has fast transactions and very low transaction fees, suitable for NFT development based on GameFi; 3. The leading exchange Opensea, in addition to Ethereum, is also compatible with Polygon.

Polygon's ecosystem is worth mentioning; the development of NFTs and GameFi is rapid, with currently 50%-60% of projects being NFT-related. Its leading projects include the ghost-collecting game Aavegotchi based on the Aave ecosystem and the NFT exchange Opensea. Polygon can currently be seen as the preferred settlement layer for most Ethereum NFT projects migrating to Layer 2.

In April 2021, Polygon launched a $100 million ecosystem incentive program, and on-chain projects and active wallet addresses have maintained rapid growth, but in the past two months, the number of active wallet addresses has fluctuated around 350,000.

Figure: Polygon Ecosystem

Figure: Polygon Active Wallet Addresses

Source: Polygonscan

5.6 Flow: Star Team Formation, Correct Development Direction, but Currently Low Momentum

Flow is a public chain aimed at NFTs. Its team, DapperLabs, created CryptoKitties, NBA Top Shot, and the ERC720 protocol. The team believed that Ethereum's high transaction fees and slow transactions could not meet future NFT trading needs, thus creating Flow, a public chain centered on NFTs.

Flow adopts a pipeline approach, streamlining operations based on four major nodes: collection, consensus, execution, and verification, increasing network throughput. Currently, Flow's development route mainly combines with real-world IPs, obtaining licenses and developing them into NFTs, allowing products to have a fan base from the outset, forming a moat, but it is limited by the potential loss of external IP authorization, which could significantly reduce the value of NFTs.

Flow is mainly used for: 1. Paying transaction fees; 2. Data storage or creating other tokens, with Flow serving as storage fees or collateral assets; 3. Governance tokens.

Flow's partners include many star IPs.

Figure: Flow Price

Source: Flow, CMC

5.7 Flow: Low Price Mainly Due to Large Token Unlocking and Defeats in Public Chain Competition

Currently, Flow's low price is caused by several factors:

1. From the token perspective, since September 2021, a large number of low-priced tokens have been unlocked from institutional parties. The public offering and Dutch auction price of Flow was $0.1, while the institutional price was at least below $0.1, leading to a high profit multiple and subsequent large token unlocks, causing Flow to fall into a spiral decline.

2. From the ecosystem perspective, Flow has built 213 projects on-chain, including NFT exchanges, DEXs, data browsers, wallets, etc., and the ecosystem is taking shape. However, Flow's current star project is essentially only NBA Top Shot.

In the historical sales volume of NFTs on Flow, only NBA Top Shot approaches $1 billion, while the trading volume of other projects pales in comparison to Ethereum's NFT trading volume. Moreover, Flow's original intention was to create a public chain based on NFTs, but currently, star projects are choosing to build on Ethereum rather than Flow. Flow has relatively lost in public chain competition.

Figure: Flow Token Release Situation

Figure: Flow Star Project Sales Volume Situation

Source: Flowverse

5.8 WAX: NFT Public Chain Rising from the 2021 Chain Game Boom

WAX is one of the public chains that rose from the chain game boom in 2021. WAX is based on EOS and follows the DPoS consensus to support the high throughput required for games while attracting chain game developers.

WAX quickly gained traction with the explosive trading volume and user growth of two popular games, Alien Worlds and Farmers World, becoming the second-largest chain for chain games after BSC. However, with the current downturn in GameFi, the trading volume and users of GameFi projects on WAX are gradually decreasing.

WAX claims on its official website to be the "King of NFT." WAX's approach is similar to Flow, focusing on collaborations with well-known offline IPs, having partnered with Topps (Major League Baseball), Capcom (Street Fighter), Funko, Sony Funimation, and famous movies (Princess Bride and SAW), as well as world-renowned artists (Deadmau5, Weezer, and William Shatner). However, in terms of IP recognition, WAX is slightly inferior to Flow.

Figure: WAX On-chain NFT Trading Data

Figure: WAX Partner Projects

Source: Atomatichub, WAX

5.9 WAX: The Downturn in GameFi is One of the Core Factors for the Decline in On-chain NFT Trading

The trading token on WAX is WAXP, which mainly serves for staking, paying transaction fees, and participating in voting. WAXP can also be minted on the Ethereum public chain at 100 times the price on the WAX chain to facilitate WAX price circulation. WAXE's main function is to allow users to enjoy a portion of the trading fees from WAX NFTs through staking, with rewards in ETH and WAXG (governance token).

WAX's price opened at a very high level, then remained dormant for two years, until recently, when GameFi projects based on WAX, such as Farmers World and Alien Worlds, gained popularity. However, due to the current downturn in GameFi, the popularity of GameFi on WAX is gradually decreasing, and trading volume is also declining, compounded by the current market downturn, leading to a continuous decline in WAX's price.

However, star projects have already emerged on WAX, and if GameFi's popularity rebounds in Q1 and Q2 of this year, WAX and NFTs on WAX may see renewed buoyancy.

Figure: WAX Price

Figure: WAX Partner Projects

Source: Atomatichub, CMC

5.10 Tezos: The Public Chain Saved by NFTs in 2021

Tezos can be said to be the public chain saved by NFTs in 2021. Tezos raised nearly $230 million in two weeks in 2017, making it one of the largest fundraisers at that time. Its main selling point, PoS, was popular in 2017, but operational issues led to slow development of the Tezos ecosystem.

With the NFT boom in 2021, its NFT exchange Hic Et Nunc exploded in popularity, attracting many traditional artists, giving Tezos a chance for a comeback. The reasons for Tezos's explosion in 2021 were mainly: 1. Recognition of PoS's environmental benefits by artists outside the circle, and rejection of Ethereum's POW's negative environmental impact; 2. Cheap Gas fees; 3. The unity of the Hen community, where artists are leaders in algorithm-generated art; 4. The algorithmic artworks are very affordable.

Interestingly, on Hen, artists set their works as multiple editions, each priced very low. Artists purchase collectibles at extremely low prices, which resembles a form of tipping for others' creations, building a social circle for crypto artists, and has already formed a prototype of SocialFi.

Figure: Tezos Price

Figure: Hic et Nunc Related Data

Source: CoinMarketCap, DappRadar

5.11 Tezos: Thin Ecosystem and Slow Development

Although Tezos adopted PoS to solve the high Gas fee issue, its TPS is only 40, which is significantly slower compared to new public chains represented by Solana and Avalanche, leading to severe transaction delays.

In addition, the ecosystem on Tezos is developing slowly, with only 64 projects currently. Although ecosystem incentive measures have been introduced, their effectiveness is poor, mainly due to the relatively niche programming languages used on Tezos, making it difficult to attract developers.

There are also certain issues with leading projects on Tezos. Taking HEN as an example, HEN does not have an invitation/review system for self-listing like Ethereum's art trading platforms SuperRare and Foundation, leading to many instances of plagiarism and copying on the platform (which is also a criticism of Opensea). Additionally, HEN's interface is overly abstract, and its minimalist design is far less user-friendly than Opensea.

Tezos has a thin ecosystem and slow development.

Hic et Nunc's interface is quite abstract.

Source: Tezos, HicEt Nunc

5.12 Deso: A Layer 1 Public Chain Based on SocialFi, Currently Developing Rapidly

Decentralized Social (Deso) is a Layer 1 public chain based on SocialFi. Deso adopts a POS+POW consensus, with transaction fees around $0.00001. Currently, the public chain processes posts slowly, handling fewer than 10 posts per second, which is significantly lower than Twitter's processing speed of 6000 posts per second, indicating that Deso has considerable room for improvement.

In the future, Deso will gradually implement the following measures to enhance scalability, aiming to support a social platform for 1 billion users: 1. Shift consensus to POS; 2. Increase block size; 3. Warp Sync; 4. Sharding.

There is limited information about Deso's related team, but its backing is strong, with 21 investors including Sequoia, Coinbase Ventures, and a16z.

Currently, there are 155 projects on Deso, most of which are creator tools, developer tools, investor tools, etc. Although the ecosystem is relatively thin, it has developed rapidly overall in 2021. In October 2021, Deso launched a $50 million ecosystem incentive fund aimed at developing the public chain ecosystem, but this amount is relatively small compared to other public chains. Currently, there is no data on active developers and wallet addresses.

Figure: Some Investors of Deso

Figure: Some Star Projects on Deso

Source: Deso

5.13 Deso: Web3 May Not Emerge on Existing New Public Chains

Currently, new public chains perform well with applications like DeFi, GameFi, and NFTs because these applications are lightweight in storage. However, Web 3-based SocialFi tends to be heavy storage applications, and the aforementioned new public chains cannot scale to handle heavy storage applications.

Executing 10,000 DeFi transactions on a new public chain may only generate zero-byte new state data, but 10,000 SocialFi social transactions may produce data requiring storage, indexing, and querying that reaches dozens of megabytes (on-chain storage is very expensive). This is because the current public chain architecture is designed to support limited state applications, where project parties must ensure that each user retains a limited amount of data or state.

In a DeFi program, to verify a swap, the dApp only needs to know the user's current balance, displaying the last data without continuously updating the state. However, in SocialFi, users need to continuously like, follow, comment, and post text.

Projects need to continuously synchronize and update this data, thus making such applications infinite state applications. Deploying infinite state applications on new public chains incurs significant costs.

Deso is a public chain custom-built to support social applications. Compared to new public chains, Deso's storage is 10,000 times cheaper than Avalanche and Solana, while specialized decentralized cloud storage projects like Filecoin and Arweave charge $0.1-$1 for storing a link, whereas Deso only charges $0.00002.

Additionally, Deso allows all nodes to provide instant queries for all relevant data: if a username is updated, nodes need to check for duplicates, which may require querying hundreds of thousands or millions of users. Such operations are expensive on current new public chains, while Deso can perform queries efficiently and cheaply by accessing bare metal.

Deso has very low storage costs compared to other new public chains.

Source: Deso

5.14 Solana: Currently Rapidly Developing On-chain NFTs, but Overall Wealth Effect is Weak

Solana's NFT trading platforms have rapidly developed over the past six months. Backed by SBF, Solana has secured a place in the public chain space with extremely fast transaction speeds and very low transaction fees, previously having the second-highest TVL after Ethereum and BSC, with a considerable user and funding base. Starting in August 2021, NFT exchanges represented by Solanart began to rapidly gain traction on Solana.

Thanks to Solana's support, Solanart experienced rapid growth in September/October this year, but trading volume is gradually decreasing. In November 2021, another major exchange on Solana, Magic Eden, began to see explosive trading volume. Currently, Magic Eden has become the fifth-largest NFT exchange, second only to Opensea.

Currently, the ecosystem on Solana is developing rapidly, with 831 NFT projects established on Solana, and significant trading volume from leading projects has already emerged. However, the wealth effect and breakout effect of NFTs on Solana are relatively weak compared to Ethereum. But since NFT development on Solana has only been ongoing for six months, once a blockbuster project emerges, its development may proceed more smoothly.

Solana Ecosystem

Solana Top NFTs

Magic Eden is already the fifth-largest NFT exchange

Source: Solana, DappRadar

5.15 BSC: Phenomenal GameFi Products Emerge on Public Chains, but NFT Development is Relatively Lagging

Among new public chains, BSC also performed well in ecosystem development in 2021. BSC experienced explosive growth last year, attracting a large number of users and developers due to its cheap and fast transactions and EVM compatibility.

In 2021, BSC led the GameFi boom, with star projects like CryptoMines, DNAxCat, and BinaryX being leaders in chain games, with CryptoMines accounting for 25% of BSC's daily trading volume. During this period, NFT trading on the BSC chain was frequent, but these NFTs were all based on GameFi. Once detached from the game itself, they held no value.

With the downturn in GameFi, NFT trading on BSC has cooled down. Currently, the main NFTs traded on BSC are represented by metaverse and SocialFi projects like Mobox and SecondLive. Thanks to its strong project incubation and investment capabilities, BSC often produces phenomenal products. If a phenomenal SocialFi, MusicFi, or metaverse project emerges in BSC in mid-2022, it could significantly boost NFT development on BSC.

BSC NFT Ecosystem

Source: BSCScan, BSC

5.16 Near, Aurora: Rainbow Bridge Enables Fast Transfer of NFTs from Ethereum

Aurora is a Layer 2 on Near. Near offers fast transactions, low Gas fees, and features a unique Nightshade protocol that ensures shard security and theoretically achieves infinite scalability. Near is not only EVM compatible, attracting developers, but also has the Rainbow Bridge protocol, enabling fast and cheap transfers of ERC20 and ERC721 standard tokens between Ethereum, Aurora, and Near.

Currently, ERC20 asset transfers are possible, while ERC721 (NFT) asset transfers are still in development. Transfers of assets between Near and Aurora incur zero fees and are extremely fast, but transferring Ethereum assets still requires around $60-$200 in fees and about a 16-hour waiting period.

Compared to other new public chains at the same time, the Near ecosystem is still relatively thin. Currently, the only phenomenal product related to NFTs is Mintbase, an NFT trading platform based on Near and Ethereum, which promotes differentiated niche NFTs. In November 2021, Near launched an $800 million ecosystem incentive program, which is relatively large compared to other new public chains, and combined with the Nightshade protocol and Rainbow Bridge technology, it is expected to bring significant development to the Near ecosystem.

The number of active addresses on Near has recently declined from its peak, with daily activity around 20,000, indicating considerable room for growth compared to leading public chains like Solana and BSC.

Near Ecosystem

Near Daily Active Status

Source: Explorer.Near

6. Conclusion

The development of NFTs was vigorous in 2021, and as users both within and outside the cryptocurrency circle gradually recognize NFTs, the buoyancy of NFTs in 2022 may be even higher. This is reflected in the industry scale, as the market value of NFTs will continue to rise over the long term, although there may be some degree of correction following the recent NFT bull market.

Currently, NFTs are predominantly based on Ethereum, but in the future, NFTs based on new public chains/side chains will begin to capture market share from Ethereum-based NFTs in various forms.

In GameFi, NFT trading based on public chains like Ronin, BSC, and WAX is mostly centered around in-game NFTs, with trading value emphasizing the utility of NFTs. The buoyancy of NFTs on such public chains is strongly correlated with the buoyancy of GameFi. Directly participating in NFT investments in such GameFi projects carries significant risks, but during the upward trend of GameFi in the fall of 2021, the market capitalization of these GameFi public chains saw considerable increases.

In SocialFi, Deso has emerged as a dedicated platform for SocialFi, addressing some of the pain points of current public chains in developing SocialFi. Future interactions between SocialFi and NFTs based on SocialFi may largely occur on Deso. Currently, Deso's market capitalization is only $400 million, having fallen 75% from its peak. If the logic of SocialFi is recognized, it may be worth considering some investments.

Moreover, NFTs based on Deso in the future will likely be more abstract than current NFTs, but their value will lean more towards utility value (for example, NFTs as proof of exclusive experiences, keys to unlock post content, historical proof of participation in projects, etc.), while the premium aspect will be weakened.

In traditional collectibles, Solana and Tezos experienced rapid growth in 2021, especially with MagicEden on Solana becoming the second-largest comprehensive NFT exchange after Opensea. Coupled with recent leaks suggesting that Opensea may integrate Solana, it is advisable to continue monitoring NFTs based on Solana.