Updated Sep 1, 2023 - Economy

The fight over a shrinking NFT market as marketplaces foresee next big boom

NFT market by percent volume
Data: Dune Analytics; Graphic: Rahul Mukherjee/Axios

Marketplaces are fighting hard for market share right now, anticipating the next big boom in non-fungible tokens.

Why it matters: The NFT market is down from the heady days of 2021 — and it will look very different if and when it comes back.

State of play: NFTs are trading about $10 million a day, or $100 million a week, in volume, on Ethereum (still the main hub for big money NFT trading). Obviously, that's more than enough money to keep some nice businesses running.

  • But those numbers are way, way down from the prior highs. For several weeks in 2022, volumes broke a billion dollars.
  • Across the board, NFT sales are at a two-year low.

The intrigue: Volume fell through the latter half of 2022, but then it started to perk up.

  • The culprit seems to have been a new marketplace called Blur.

Between the lines: OpenSea — the standard bearer of NFT markets — is no longer the only game in town. It once represented basically all the volume in the market, but these days has about 24%.

Zoom in: Blur brought lots of innovation. It let buyers ignore NFT creators' requests for royalty payments (saving them precious margin), first of all.

  • In November Axios reported that NFT markets would give up on enforcing royalties. OpenSea — the most noteworthy holdout for royalties — capitulated last month.
  • More crucially, Blur changed the mechanics of buying and selling. Think of OpenSea as a retail store. Blur brought wholesale mechanics for folks looking to move volume.

Reality check: But Blur also did something that OpenSea has refused to do. It created a token.

  • The token was given to people who made trades and made liquidity on Blur. The company has continuously changed and refined and added nuance to how its token gets distributed, requiring traders to stay on their toes to maximize their yield.
  • But at the end of the day, it's simple: Blur put a new kind of free money into the arena, and people wanted that free money.

Zoom out: For good or bad, there tends to be a bit of a winner-take-all (or at least: winner-take-most) effect in any sort of marketplace.

  • The reason is simple: If all the stuff is in one place, it's easier to find what you want.
  • For sellers, particularly sellers who want to auction stuff, it's even better for all buyers to be in one place.

The big picture: The consensus outside of crypto is that NFTs are gone, never to return.

  • 💭 Brady's thought bubble: Mark my words, the sector will come roaring back one day. (This is not a prediction that I have any trepidation about making.)

Be smart: NFTs are understood broadly as the trading of pictures, but that's just the surface. They are, in fact, the trading of digital property.

  • NFTs came along in roughly 2017 (depending on which early iteration one counts), which means this notion of digital property is nearly 10 years behind Bitcoin.
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