Nansen: NFTs "have achieved a major breakthrough" in 2021
Nansen: NFTs "have achieved a major breakthrough" in 2021

Research firm Nansen found that total non-fungible token sales volume reached $17 billion in 2021, while the Open Sea market briefly surpassed Uniswap in gas usage.

NFTs are poised to outpace cryptocurrencies 

In many ways, 2021 was a dizzying year for cryptocurrency and it was supported by growth in the NFT space, according to research from crypto analytics platform Nansen.

According to Nansen's State of the Crypto Industry 2021 report, at the end of the past year, total sales volume in the NFT space surpassed a staggering 4.6 million ETH, or $17 billion, with two major spikes recorded in May and August.

The August sales wave was particularly strong, driven by the excitement surrounding the Bored Ape Yacht Club spin-off Mutant Ape Yacht Club. This resulted in an unprecedented spike above 132,000 ETH (over $422 million) in combined trading volumes in a single day on August 29.

"This was just one of the drivers of growth in the NFT space over the year," said Alex Svanevik, CEO of Nansen 

"It's hard to single out one particular phenomenon that created the NFT wave," Svanevik noted. "Was it Axie Infinity, which pioneered play-to-earn games? Or OpenSea, which became a huge market for trading jpeg images? Or maybe the Bored Apes collection, which encourages celebrities to join the trend? It was really a movement with a lot of projects that played a big role."

The report states: 

"Instead of convincing people to buy bitcoin based on the principles of Austrian economics, we realized that buying and selling JPEG files of animals might be a better strategy."

Ethereum faces increased competition

The explosive growth of NFTs over the past year is illustrated by the increase in gas consumption on the leading NFT marketplace, OpenSea. According to Nansen, in September and October, it was the only project to surpass the gas consumption of the market's leading decentralized platform (DEX), Uniswap.

The process of creating or minting the non-fungible token still largely takes place on the Ethereum blockchain, which means that NFT creators bear the associated costs.

As the report notes, Ethereum remains the largest smart contract platform in market capitalization and total locked-in value (TVL) in decentralized applications (DApps). However, high gas prices, which have skyrocketed over the past year, have opened up "opportunities for Layer 1 and Layer 2 solutions to thrive as a must-have scalable solution."

While other chains offer cheaper alternatives, as well as EVM compatibility, contract deployment on the Ethereum blockchain has plummeted in the second half of 2021, from 2.7 million smart contract deployments in June to just 300,000 in October.

Meanwhile, smart contracts deployed on Polygon, an interoperability and scaling protocol for creating Ethereum-compatible blockchains and Layer 2 scaling solutions, outperformed Ethereum by 26,000 percent.

Ethereum's other notable competitors are the Binance Smart Chain, which boasted the highest number of active addresses of any Layer 1 chain during the year, and Fantom, a proof-of-stake based blockchain that seeks to solve scalability issues such as transaction cost, throughput and turnaround time.

Celebrities have already entered the NFT field

Since NFTs have become extremely popular among celebrities, many of whom have used the digital art for their profile pictures on social networks, Nansen says not all of their purchases were genuine and many projects have sent NFTs to celebrity wallets for self-promotion.

For example, after filtering the transactions on NBA star Stephen Curry's wallet, Nansen found that only 10 of the 1,011 NFTs in the wallet associated with the NBA star were genuine purchases.

Yet as the market matured, renowned NFT projects with high liquidity became valuable commodities, leading Nansen to introduce the NFT Bluechip Index, a series of the 20 most valuable and liquid NFT collections, including iconic CryptoPunks and the notorious Bored Ape Yacht Club.

The growth of the metaverse 

According to Nansen, the trends that were highly valued in 2021 would strengthen again this year. However, "winners will emerge based on the quality and number of DApps" with low fees and few withdrawal times to play a crucial role on the road to massive success.

The company added that while NFTs "achieved mainstream breakthrough" in 2021, early indicators also show a growing trend of investments in metaverses and gaming utilities.

"The multi-chain solution, DeFi and NFTs are not going away anytime soon. In particular, NFTs have already started a good year, and we have only seen the roots of their potential in games, art and social networks," Svanevik pointed out.

Singapore-based Nansen offers investors and traders a network of real-time dashboards and alerts focused on areas such as decentralized finance (DeFi) and non-fungible tokens (NFT). Through its Smart Money platform, Nansen enables clients to perform due diligence, discover new opportunities, and make strategic portfolio decisions.

All in all, it's worth noting that the company has noted a fairly obvious fact, given the hype happening around the NFT domain. That said, non-fungible tokens have a glorious future ahead of them, and industry players will naturally do their best to build on their success of the past year. While we wait for the situation to evolve, we suggest you stay on Cointribune to have the latest news from the crypto world at your disposal!

Will you join the Bitcoin revolution? It's up to you to get on board the crypto train! To do so, and start learning about this exciting world, don't wait to create an account on Binance, the leading Bitcoin and crypto exchange. Click here to signup and safe from the trading fees.

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Nathan George

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