・What are NFTs?

Non-fungible tokens (NFTs) are digital assets that are unique and cannot be exchanged for other assets on a one-to-one basis. They are stored on a blockchain, a decentralized digital ledger that allows for secure and transparent record-keeping. NFTs can represent a wide range of digital assets, including art, collectibles, in-game items, and more.

Unlike traditional cryptocurrencies, such as Bitcoin or Ethereum, which are interchangeable and have a fixed value, NFTs have unique characteristics and can have varying values depending on their rarity and demand. They also often have additional metadata attached to them, such as ownership information, provenance, and other details that make them unique.

Non-fungible tokens (NFTs) offer a number of benefits that make them a valuable technology for various industries. Following are some of the key benefits.

• Immutability: NFTs are stored on a blockchain. This means that the information contained in an NFT cannot be altered or tampered with, providing a permanent record of ownership and provenance.

• Scarcity: NFTs can be created in limited quantities, making them rare and valuable. This can increase the value and demand for NFTs, particularly in the case of digital art or collectibles.

• Ownership verification: NFTs provide a verifiable and immutable record of ownership, which can be important in industries such as art and collectibles where provenance is important.

• Other benefits: In addition to the above, NFTs offer several other benefits that make them a valuable technology. For example, NFTs can enable the creation of new business models, such as the ability to sell in-game items or assets as NFTs. They can also enable the creation of new types of digital assets, such as virtual real estate or virtual event tickets.
  As the use of non-fungible tokens (NFTs) has grown in popularity, questions have been raised about the cultural and societal implications of this new technology. Mentioning just some of the implications:

• Widening the gap between the haves and the have-nots. One potential concern about NFTs is that they could widen the gap between those who are able to afford them and those who are not. For example, if access to certain types of digital content is limited to those who can afford to purchase NFTs, it could exclude certain segments of the population.

• Democratising the art world. On the other hand, some argue that NFTs have the potential to democratize the art world by allowing artists to sell their work directly to buyers, bypassing traditional gatekeepers. This could enable a wider range of artists to gain exposure and sell their work, potentially leading to a more diverse and vibrant art scene.

• Changing the way we think about ownership: The concept of ownership is also being challenged by NFTs. For example, if a digital artwork is sold as an NFT, does the buyer truly own the artwork, or are they simply purchasing the right to display it?
  ・Use-cases

There is a vast number of NFT applications. Let’s mention some most popular ones:

Footprint categorization of NFTs

• Collections
  NFTs can be used to represent physical or virtual collectibles, such as trading cards, figurines, or in-game items. By creating an NFT for a collectible, the creator can prove ownership and scarcity, and buyers can verify the authenticity of the collectible they are purchasing.

Collectibles were the first type of NFT to go mainstream. Way back in 2017, people started paying top money for strange types of computer pictures called Curio Cards, Rare Pepes, and CryptoPunks. Within a few years, the word “NFT” became a household item and utility-free profile pics, meant for holding and collecting, became synonymous with this class of digital asset. Then came Bored Ape Yacht Club, MAYC, etc., all trying to turn the communities around these collectibles into something greater.

BAYC, MAYC and CryptoPunks are the largest collections by market cap, trading volume and floor price. They are the most popular projects compared to the art and digital asset game categories and are also listed in the NFT Blue Chip Index.

Footprint Analytics - Blue Chip NFT

• Art

Screenshot Source - OpenSea Art Types

Another popular genre of NFT is digital art.

NFTs can be used to represent digital art, such as paintings, illustrations, and other visual media. By creating an NFT for a piece of digital art, the artist can prove ownership and scarcity, and buyers can verify the authenticity of the art they are purchasing.

Most impressively, Beeple’s “Everydays: The First 5000 Days” sold for a whopping $69.3 million at auction in March 2021. It has prompted the NFT art type to set off a wave again, and NFT art projects continue to emerge. For example, the representative project is Art Blocks Curated, which ranks 7th in terms of transaction volume in the past 30 days.

Screenshot Source - Top Collections

• Games
  Many games currently have a play-to-earn model, where each character inside the game is an NFT, such as in-game avatars, equipment and cards. Players can acquire these digital assets by participating in the game, and they believe that the uniqueness, scarcity, transferability, and provable ownership characteristics of NFTs are of great significance in enhancing the value of in-game items.

However, after NFT began to gain popularity in early 2021, it became clear that the P2E game program combined with NFT had appealed to many. According to the data, the number of users participating in the games increased month by month until it reached an all-time peak in January 2022.

Footprint Analytics - Monthly GameFi Users

Axie Infinity was one of the first to use this model to get players to spend more and more time in the game. The most visible country is the Philippines, where hundreds of thousands of people play NFT games every day. During the epidemic, they were able to earn more income by playing games than with conventional employment. Then came the emergence of various modes of gaming-related applications such as M2E.

• Sports
  NBA Top Shot is one of the most successful cases of partnership between pro sports and NFTs. NBA Top Shot is essentially a basketball card collection in NFT form with its own marketplace.

One of the most famous clips from the NBA Top Shot is a clip of Lebron James dunking—part of the Throwdowns series—which currently sells for more than $380,000, making it one of the most expensive sports collectibles ever made.

• Domain names

ENS domains are built on the Ethereum blockchain and are custom crypto wallets that contain recognizable names or numbers. They simplify the typical Ethereum address, which is just a long string of alphanumeric characters, the most popular of which is “.eth”. They allow users to send and receive funds more easily.

ENS domain names can be used for website addresses and applications, and can also be sold as NFTs. Users can register domains on the Ether Name Service website for between $5 and $640 ETH.

ENS: Ethereum Name Service has ranked in the top 10 in terms of transaction volume for the past six months, according to Footprint Analytics’ rankings. In September alone, the number of new registrations reached 437,000. The surge in user interest is mainly due to the fact that these domains can be traded for millions of dollars.

However, the biggest disadvantage of encrypted domains is that most browsers don’t currently support them.

• Virtual worlds

Property in Decentraland by John Lam at (29,-5)

Virtual worlds include digital games and lands in the metaverse. While still highly speculative, this category of NFT has huge potential, with the possibility of being used for ads in digital games, creating virtual assets, and more.

These are just a few examples of the many types of NFTs that exist. NFTs can represent a wide range of digital assets, and the use cases for NFTs are constantly evolving.

・Why blockchain?

Blockchain technology plays a key role in the creation and functioning of NFTs. When an NFT is created, it is stored on the blockchain and given a unique identifier, known as a “smart contract.” This smart contract contains information about the NFT, such as its ownership, provenance, and other details that make it unique.

The use of blockchain technology in NFTs has several benefits. It allows for secure and transparent record-keeping, as the blockchain is decentralized and cannot be altered or tampered with. It also allows for verifiable ownership and provenance, as the information stored on the blockchain is permanent and cannot be altered. More technical details about the implementation within smart contracts will be provided later.

There are several NFT standards that have been developed to ensure interoperability and compatibility between different NFT projects. Here are a few examples :

• ERC-721: This is a standard for NFTs on the Ethereum blockchain. It defines a set of rules for creating and managing NFTs, including the ability to transfer ownership and track the history of an NFT.

• ERC-1155: This is a standard that combines the features of both ERC-20 and ERC-721, allowing for the creation of both fungible and non-fungible tokens in a single smart contract.

• ERC-998: This is a standard for “composable” NFTs, which are NFTs that can contain other NFTs as part of their metadata.

• BEP-721: This is a standard for NFTs on the Binance Smart Chain (BSC), which is a blockchain platform developed by Binance. It is similar to the ERC-721 standard, but is specific to the BSC.
  Those were just the examples for NFT implementations on EVM. As the use of NFTs continues to evolve, new standards may be developed to meet the needs of different projects and use cases.

・What’s Metadata?

Metadata is important in the NFT industry because it allows NFTs to contain additional information beyond just their unique identifier. This can be particularly useful for NFTs that represent digital assets such as art, collectibles, or in-game items.

For example, an NFT for a digital art piece might include metadata about the artist, the title of the piece, the date it was created, and other details. This metadata can help to provide context and background information about the NFT, making it more valuable and desirable to collectors.

In addition, metadata can be used to encode rules or restrictions on the use or transfer of an NFT. For example, an NFT for a virtual real estate asset might include metadata that specifies the terms of ownership, such as whether the owner can sell or lease the property.

In the case of the Moon Men collection, the metadata is the NFT’s name, photo, description, and other characteristic attributes. In the case of NFT game cards, the metadata may contain attributes such as level, rarity, and quality. The data for one of the NFT metadata in the Moon Men series above shows:

“name”: “Moon Men #1”

“description”: “Moon Men is a collection of 807 community-generated NFTs rooted in utility. Contributors who receive a Moon Man can use it as a PFP of astronomical awesomeness and receive a discount on a Footprint Business Plan. There are tons of other benefits.”

“image”: “https://static.footprint.network/moonmen/nft/1.png“

Click on the “image” link to display an image of the NFT. As shown in the figure:

NFT from Footprint Analytics Moon Men

In most cases, metadata is not stored directly on the blockchain. Rather, it is typically stored off-chain, with a reference or pointer to the metadata included in the blockchain transaction. This approach is used because the blockchain is a decentralized and distributed ledger, which means that it is designed to store and track the movement of digital assets rather than large amounts of data. Storing large amounts of data directly on the blockchain can be inefficient and costly, as it would require a large number of transactions to record all of the data.

Therefore, when creating an NFT, the metadata is typically stored off-chain, while a reference or pointer to the metadata is included in the blockchain transaction. This allows the NFT to contain additional information beyond just its unique identifier, while still maintaining the efficiency and cost-effectiveness of the blockchain.

・Where to store metadata?

Evaluate some storage protocols and storage providers:

• Poor: Project website hosting, suppliers are AWS, Geocities, etc.

• Good: IPFS, suppliers are NFT.storage, Filecoin, etc.

• Better: Arweave, the supplier is ardrive.io

• Best: Combination of Arweave and IPFS, supplier multiple
  For many users, IPFS is considered to be a very good storage protocol. It stores metadata in distributed storage IPFS and follows content addressing (understood that the same IPFS protocol link is opened any number of times and the content obtained is consistent). Therefore, there is no need to worry that the purchased NFT metadata will be tampered with by the organization. However, it is rated “good” because it does not guarantee storage persistence, and its CID (Customer Identifier) is public, requiring additional measures to keep the data private.

Arweave is similar to IPFS, the main difference with Arweave is that users pay a low fee of $2.927/GB (paid in AR, dynamically calculated) to store data permanently. Metadata cannot be tampered with by centralized organizations, but there is a loss of metadata when it is corrupted.

The combined data storage technology of Arweave and IPFS emerged as a way to upload data uploaded to IPFS to Arweave and keep the data on Arweave on its own IPFS nodes. This technology enables data storage on multiple nodes and builds a more robust data retention system.

Of course, there are many other storage protocols, such as Filecoin, Storj and Sia.

・Footprint Analytics

The raw data that a certain blockchain is holding should be known to you if you have ever used a block explorer. These details differ amongst chains, however as an illustration, the majority of chains powered by the Ethereum Virtual Machine (EVM) include:

• Blocks - groups of transactions appended to the chain

• Transactions - cryptographically signed blockchain state instructions

• Logs - events created by smart contracts

• Traces - step-by-step record of what happened during the execution of a transaction
  In actuality, the aforementioned entities make up the entirety of the blockchain. This indicates that by using them alone, any decentralized ecosystem may already be fully analyzed. Although the data in these tables may be read by humans (unlike bytecode), doing so needs a deep understanding of the blockchain.

Therefore, we do abstractions. Transformation of raw data into insightful information is never a trivial task. Although tough, working with it is feasible. Building and fine-tuning ETL models is only a small piece of the effort that many data entrepreneurs conduct on a daily basis. More about the design concept is in https://docs.footprint.network/docs/designconcept.

NFT domain in our database is having the abstractions as well - the complete simplified visual schema of ETL process related to NFTs could be seen on the following image:

Let’s analyze the ETL process using an example of indexing a transaction for the sale of an NFT on a marketplace. As shown in the diagram, our engine first saves the transaction as part of the token transfer, as the EVM of NFT blockchains represents a smart contract of a certain standard. Once our ETL receives this data from the blockchain, it can immediately identify the type of NFT it is (for example, ERC721) and store it in the corresponding silver table. Afterwards, an abstraction is made to the nft_transfer table, as the ERC721 smart contract is always an NFT. This is followed by further abstraction to the nft_transactions table. Finally, business metrics are generated according to a predetermined schedule, such as marketplace_nft_collection_daily_stats and nft_collection_transfers_daily_stats.

The specific table used will depend on your specific use case. A comprehensive list of all relevant tables, along with a detailed description of each, can be found at the following link: https://www.footprint.network/guest/chart/NFT-fp-267f52a1-38ce-4c51-b6b6-f5680d9a6a4c.

・Collections

In this chapter we will be analysing NFT collectibles in terms of price behavior, holder patterns, rarity characteristics, and leaderboards to understand supply and demand.

Indicators are not fixed rules for trading. They are a set of tools to build a comprehensive picture of projects and trends.

・Marketplaces

NFT marketplaces are online platforms where non-fungible tokens (NFTs) can be bought and sold. NFT marketplaces allow users to list NFTs for sale, browse and discover NFTs, and purchase NFTs using a variety of payment methods.

NFT marketplaces can be specialized, focusing on a particular type of NFT such as digital art or collectibles, or they can be more general-purpose, offering a wide range of NFTs from different categories.

Marketplaces are all different, but revolve around similar core actions for users :

• Create an account : Buyers and sellers register to use the platform.

• Set up a wallet : After registering, users can link their wallets to the account. Most major marketplaces have integrations with the popular crypto wallets, such as MetaMask, WalletConnect, and Coinbase, among others.

• List NFTs for sale : Sellers and creators can show their work on the marketplace listings, which includes information about the work such as name, description, floor price, and total NFTs in the collection.

• Browse NFTs : NFT marketplaces now have advanced search and filtering options to allow buyers to easily find the NFTs they are looking for.

• Buy or bid on NFTs : Buyers can buy, bid on, or send offers to purchase an NFT.
  All marketplaces have the above functionalities in common. But then they diverge. Here’s how they differ.

・Types of NFT marketplaces

General NFT Marketplace

A general NFT marketplace is the go-to for most collectors and creators, allowing people to list all types of digital assets across various styles, prices and features.

Examples of general NFT marketplaces are:

• OpenSea

• X2Y2

• Magic Eden

• LooksRare
  General NFT marketplaces currently have more trading volume than exclusive NFT marketplace or specific NFT marketplaces.

Footprint Analytics - 30D - NFT Volume by Marketplaces

Exclusive NFT Marketplace

Exclusive NFT marketplaces focus on high-end artworks typically issued in small quantities and with approval from the platform to list. The selectivity means that NFTs on this type of marketplace tend to have a much higher average selling price per item than on general marketplaces.

Examples of exclusive NFT marketplaces include :

• SuperRare

• Foundation

• Solanart
  These platforms mostly list art and collectibles rather than in-game NFTs and community NFTs.

Exclusive NFT marketplaces also have several disadvantages.

• Small selection

• High selling price

• Low liquidity

• Specific NFT Marketplace
  The third type of NFT marketplace encompases those that serve a specific collection or niche market segment. For example, a trading platform for in-game NFT purchases for a single game (like The Sandbox, for example), or a trading platform only for sports card NFTs by one company (NBA Top Shot). For collectors who track specific collections for research or investment purposes, specific marketplaces track market fluctuations and respond faster than general NFT marketplaces.

Examples of specific NFT marketplaces include:

• CryptoPunks

• Axie Infinity

• The Sandbox Marketplace

• Decentraland

Screenshot Source - CryptoPunk

By focusing on one niche, product or game only, these marketplaces have a relatively small volume of transactions.

Statistics from Footprint as of July 28th

The differences are much more than landing-page deep. These marketplaces aim to build communities around themselves with their own distinct characteristics. Which one is the best fit for you?

・Comparison

Footprint Analytics conducted extensive research on 11 mainstream NFT trading platforms to see how they differentiate themselves. Here are the results:

https://www.footprint.network/@
Shelly/All-you-need-to-know-about-NFT-marketplaces

Footprint Analytics - NFT Marketplace Basic

Footprint Analytics - NFT Marketplace Features

Footprint Analytics - NFT Marketplace Tokenomics

Footprint Analytics - Top Marketplace

・How to choose the right NFT marketplace

When choosing an NFT marketplace platform, ask these 4 questions:

• How long has the platform been around ?

  Although the length of establishment is not a decisive factor, the longer its been around, the more stable it’s likely to be.

• What does the data say about the marketplace?

  Platform-related data includes the number of collections. If this is small, then it is difficult to find a specific NFT. Low liquidity sporadic changes to the number of buyers and sellers can make purchasing or buying NFTs at a fair price more difficult.

• How often are listings updated?

  See whether the marketplace is regularly updated—you want to quickly see the latest and best NFT work.

• Can I pay for things with the available methods ?

  Some marketplaces now offer direct credit card purchasing of in-platform crypto onramps, which most require you to have a crypto wallet.