A new report on the exploding market for non-fungible tokens (NFTs) reveals that transactions tripled in 2020, reaching more than $250 million in total.
Known as NFTs, these unique digital assets, which exist on the Ethereum blockchain, can be anything from BBC-branded Dr Who trading cards and Ubisoft Raving Rabbids tokens to luxury art pieces. The biggest sale to date is a set of plots of virtual land, which went for $1.5 million on blockchain game Axie Infinity last week.
The market saw astonishing growth last year, with use cases expanding, buyers vastly exceeding sellers, and plenty of traders making six-digit profits, according to the report, which was released today by leading NFT analysis firm NonFungible.com and foresight business, L’Atelier.
“2020 has been a historic year for NFTs, and we’ve seen healthy growth across many metrics,’ Dan Kelly, CEO of NonFungible, told Decrypt. “Equally exciting is the explosion of different use cases, communities and projects that have developed over the last year,” he added.
A historic year for NFTs
The report is based on NFT on-chain transactions on the Ethereum blockchain using the ERC-721 token standard, which is common among NFTs.
According to the data, the total value of all NFT transactions (which includes sales and all other transactions, such as “breeding” Cryptokitties, “minting” tokens, and renting virtual space) increased from over $62 million in 2019 to in excess of $250 million in 2020.
In 2020, NFT art sales alone grew by 2,800%, per the report, and big brands like Turner Sports and watchmaker Breitling have jumped aboard, making the asset class firmly mainstream.
“Traditional brands like Nike, Louis Vuitton, and Formula 1 are already spearheading the first generation of commercial uses for NFTs,” Nadya Ivanova, chief operating officer at L’Atelier, told Decrypt. “We expect to see more brands entering and investing more resources in this space as they find new ways to engage virtually, and profitably, with their customers via NFTs,” she added.
L’Atelier, which is part of the French international banking group BNP Paribas, gave a foretaste of things to come in May last year—when it demonstrated how people were earning six-figure salaries in the "Virtual Economy" of gaming platforms like Fortnite, and virtual worlds such as Decentraland.
NFTs: A major driver of economic activity in virtual worlds
The new report finds that NFTs are “primed to become a leading emerging asset class for the Virtual Economy in the years ahead, both in terms of their financial value and their practical uses, and a major driver of economic activity in virtual worlds.”
According to the report, the total number of active wallets transacting with NFTs grew 97%, between 2019 and 2020 (from 112,731 to 222,179,). On top of this, the accelerating growth of NFTs throughout 2020 suggests a strong upward trend in 2021, according to the report.
Focusing purely on NFT sales, virtual worlds that house numerous virtual assets, as well as land, form the biggest sector of the market, with 25% of total sales.
But virtual art was the strongest performing segment in terms of growth and made up 24% of the market. Sales rose from $456,885 in 2019 to $12.9 million in 2020.
Gaming that involved NFTs made up 23% of the market in 2020 and provided the largest number of sales (at 629,553). Collectibles linked to sports, such as F1 or NBA, were another growing sector, and made up 13% of total sales.
Seizing the NFT opportunity
The report attributes the growth of the NFT market partly to increased online activity following the pandemic but adds that it also reflects a wider, accelerating trend towards spending more time, and money, on virtual goods, services, and experiences.
And major financial players are quickly moving in on this trend and “seizing the opportunity to capitalize on a broader shift to virtual finance already evident in the rise of cryptocurrencies and decentralized finance,” according to Ivanova.
This, she said, is already leading to a dedicated economic infrastructure and services, and NFT-backed financial products, such as insurance and collateralized loans.
Kelly predicted that future activity will scale as new layers are built on Ethereum, and will further extend to the new generation of high-throughput blockchains in the coming years.
NFT boom-time is only just beginning.