Decrypt’s Art, Fashion, and Entertainment Hub.
The NFT space was booming last March when Formfunction—a Solana marketplace focused on one-of-one, single-edition artwork—announced that it had raised nearly $5 million in funding from prominent backers. Just one year later, however, amid changing tides in the NFT world, Formfunction revealed that it’s closing up shop.
The company announced the decision today, writing that it will shutter its NFT marketplace on March 29. In a blog post, the founders did not offer much detail into what prompted the decision.
“We’re proud of what we’ve built towards our mission to help creators make a living, and we’re grateful for the support and love we’ve found in this community,” the post reads. “This was an extremely difficult decision; however, after much discussion and careful consideration, we’ve come to the conclusion that we cannot continue to operate Formfunction.”
We’re proud of what we’ve built towards our mission to help creators make a living, and we’re grateful for the support and love we’ve found in this community.
To all the creators and collectors who’ve used Fofu over the past year—you are what really made our platform shine.
— Formfunction (@formfunction) March 15, 2023
Decrypt reached out to Formfunction co-founder Katherine Liu for further comment but did not immediately hear back.
Formfunction launched in February 2022 and announced its $4.7 million seed funding round the following month. The round was led by Variant Fund with backers like OpenSea Ventures, Solana Ventures, Pear VC, Canonical Crypto, and Palm Tree Crew Crypto also in the mix. Decrypt also reached out to Variant Fund but has not heard back as of publication.
The NFT market has shifted dramatically since last spring. Back then, the broader market was generating billions of dollars’ worth of organic NFT trading volume each month, with surging prices for “blue chip” projects like the Bored Ape Yacht Club and successful NFT mints that yielded tens or even hundreds of millions of dollars’ worth of sales.
But demand for high-value NFTs fell sharply starting last May as the wider crypto market struggled, yielding falling trading volume and declining prices for assets. According to data from DappRadar, monthly organic NFT trading volume remained below the $1 billion mark each month from July 2022 through January 2023.
Sales surged again last month, with DappRadar pointing to over $2 billion worth of sales—more than double the January tally. However, much of that additional activity comes from traders on the upstart Ethereum NFT marketplace Blur that are rapidly flipping assets to yield token rewards. One data startup, CryptoSlam, has classified such transactions as “wash trading," though it acknowledged that the activity doesn't meet the classic definition of wash trades.
There’s less organic NFT trading happening in the market, but upstart marketplaces have also grabbed away market share by cutting their own platform fees while also trimming down the amount of royalties going to artists and creators from secondary sales. And the incumbent marketplaces have had to follow suit to remain remotely competitive.
In other words, it’s a tougher time to operate an NFT marketplace. Even so, it’s not yet clear why Formfunction opted to shut down now.
Just four months ago, in November 2022, Formfunction boasted of having the third-largest weekly trading volume of any Solana NFT marketplace. It claimed to have handled 34,210 SOL in sales that week—$491,000 worth at the time of the tweet. Formfunction takes a 3% cut of secondary sale prices, and 5% share of primary mints on the platform.
But the Solana NFT pie, across all marketplaces, has been getting smaller. Solana NFTs generated about $76 million worth of total trading volume in February 2023, according to CryptoSlam, down over 50% from January—and down sharply from the $209 million tally from March 2022 when Formfunction announced its funding.