Non-fungible Token (NFT) is a virtual token that uses blockchain technology to prove the owner of digital assets and is used to show its unique originality and ownership by attaching a password that cannot be copied or forged as a certificate. The advantage of NFT is that since it is a digital product, it is relatively easy to produce and reproduce, it can be stored conveniently, it can be easily traded through transmission between individuals, and its rarity can be proved due to the genuine product authentication feature. Unfortunately, however, the current NFT market is under an oligopoly dominated by several global NFT trading platforms, and it is showing the same old negative sides of the centralized market of the old Web 2.0 era. In other words, NFT trading platforms are created by investments from large-scale venture capitals and entrepreneurs, and they absorb users from all over the world with low fees and capital as their weapons; at the same time, they are a kind of e-commerce rather than the token Economy, which is the core of the blockchain economy. These platforms raise the market entry barriers for potential creators by biased disclosure of NFTs with market dominance, while creating an exclusive market centered on a small number of closed investors and participant communities to make the NFT industry that is about to bloom into a winner-take-all operator-centric, degenerating the newly blooming NFT industry into a winner-take-all, operator-centered, profit-seeking business model. This trend goes against the decentralized, participatory economy that blockchain aims for, and it is not in harmony with the protocol economic philosophy and principles of participation and compensation. In addition, as we have seen in the recent case of OpenSea, the world's largest NFT platform, thefts have occurred, such as malicious hackers stealing NFTs, so the security problem of centralized NFT trading platforms is also emerging as a challenge for the development of the NFT industry. The core of the blockchain economy is a token economy that has fair compensation through cryptocurrency as a premise, P2P decentralized transactions between suppliers and users, guaranteed opportunities for all participants, an individual-centered economic system that shares the wealth created by contributions in a fair way, and the community revitalization by autonomous organizations and rules by users. Therefore, the current centralized market bias of large NFT platforms must be cthe token Economy must operate normally onverted to an NFT provider and consumer-centered market, and the challenge we face is that and fair values must be distributed in all fields such as NFT creation, trading, and utilization.
According to DAppRader, the global NFT market reached an all-time high of $10.7 billion in the third quarter of 2021. This is an increase of more than 700% compared to the second quarter, which recorded $1.3 billion. Trading in The world's largest NFT trading platform, OpenSea, also increased by 20 times in one year. According to Huobi's survey of 3,144 Americans, a majority of respondents said they knew NFT and Metaverse. (Source: Maeil Economic Daily, Tokenness, 2022.01.17)
The global NFT market is already heavily leaning towards oligopolistic operators. The United States’ OpenSea accounts for more than 80% of global NFT trading volume.
OpenSea’s transaction fees vary depending on the market price of cryptocurrencies (Ethereum, Polygon, Klay), so we can’t say with certainty, but roughly, if we include Ethereum purchase and transfer fee of 50,000 won to 60,000 won, the registration fee at the time of initial registration of NFT ( 0.03 - 0.05ETH), a fee of about 200,000 - 300,000 won may occur from minting to sales. Since Klay is a Korean coin, the market is small and it is inconvenient for users in other countries, so it is not used frequently, and recently, polygons are being used more frequently because it’s gas fee-free. In the future, as for minting and fee issues, we believe that the competition for a free or minimum fee will be accelerated along with technological advancement, but as OpenSea, which has an overwhelming market share, dominates the market, it is fundamentally difficult to resolve the unfair value sharing practices with suppliers, buyers, and platform operators.
The global NFT market is divided into institutional investors and individual investors. Individual investors are divided into whales and ordinary small investors. According to DAppRadar, NFT sales in the third quarter of 2021 recorded a total of 10.6 billion dollars (about 17 trillion won), which is a sharp increase of about 704% compared to the second quarter. In the month of August 2021, sales of about 5.2 billion dollars (about 6 trillion won) were recorded. Investors now perceive NFT as a technology worth investing in and a digital asset that can be used in many places, and it is considered a relatively reliable new asset due to the decentralized distributed ledger, ownership, and traceability provided by blockchain. And owning an NFT represents a kind of social status, which is flexing similar to having a Rolex or Lamborghini in the past. By using the NFT you purchased as an avatar in the form of PFP (Profile Pictures) on Twitter, Instagram, Facebook, and Discord, you are using it as a means of showing off (flexing) your social status. In addition, as the NFT market grows, sports stars, movie stars, and famous singers purchase NFTs, leading to cases that lead to exclusive community memberships allowing you to socialize with them, and the status of a branded NFT is being created.
NFT is a kind of digital asset investment. Therefore, there will be profits and losses from the investment. An analysis of which investors are profiting from smart investments is very important for NFT investing. According to Chainalysis, 28.5% of NFT buyers in a minting stage are making profits in OpenSea, the largest NFT market; On the other hand, it was found that investors who continued to buy and sell NFTs after purchasing NFTs through the secondary market made about 65.1% of profits.
Usually, popular NFTs do community publicity about NFTs that will be issued in the future on Twitter or Discord before issuing them. In the process, they meet and gather loyal collectors, and by including them on a whitelist, NFT creators give them the opportunity to purchase newly issued NFTs at a much lower price. According to OpenSea, there is a big difference between the returns of investors included in the whitelist (75.7%) and those who are not (20.8%).
It has been demonstrated that rather than reselling NFTs in the minting process, buying and selling NFTs with frequent transaction records in the past is showing a much higher rate of return. In OpenSea, investors with this strategy got a return of 65.1%, and out of a total of 2,000 collections, only 250 collections accounted for about 80% of secondary market transactions. In other words, we can see that investors getting high returns are characterized by focusing on popular collections and taking a buy-and-sell strategy. About 20% of user addresses take up about 80% of the secondary sales market, and only 5% of addresses account for 80% of the revenue generated in the secondary market. Source: Chainalysis 2021 NFT Market Report