AI & Machine Learning

Web3 Development

NFT & Metaverse

Blockchain Development

Blockchain Solutions

Products

Get in Touch
arrow-left Back to ‘Today at Nextrope Blog’

Top NFT trends in 2022

Maciej Zieliński

05 Apr 2022
Top NFT trends in 2022

NFTs - 2021 was their year. The world went crazy searching for new NFT projects to generate record secondary sales revenue. What will 2022 bring? This article summarizes everything you need to know about the upcoming NFT trends.

Table of Contents

NFT boom 

Surprisingly, NFT tokens are older than many would expect. It was in 2014 when the first NFT token - rainbow Bitcoin was created. The project didn't get even a fraction of the attention gained by its fungible cousin. ERC-721, a non-fungible token's standard on Ethereum, initially suffered the same fate. While fungible ERC-20 quickly became a fundament of the DeFi industry, ERC-721 remained relatively unknown, without any significant use-cases on a horizon. 

Things began to change with an inconspicuous collectible game - CryptoKitties. Created by DapperLabs, the game was the first commercial use of ERC-721 tokens and NFT in general. Essentially,  it allows players to buy, collect, and sell virtual kitties. The game is based on a simple collectible game pattern, yet with a blockchain technology twist. All the collectibles are stored as non-fungible tokens; moreover, exchanges and transactions in-game are facilitated on a blockchain. The game quickly gained tremendous popularity in the crypto community, bringing DapperLabs revenue of 200 million in just a few months. 

How NFT ownership became a thing in 2021

The game was a breakthrough for NFTs that accelerated processes that later resulted in worldwide usage and mainstream popularity of this technology. Yet, the true boom in the non-fungible assets market began only in 2021. NBA’s opening their NFT marketplace, digital artist Beeple on Sotheby's auctions, or astronomic values of virtual land plots in Axie's Infinity - those events got an immersive coverage in conventional media and attracted the public attention to NFT for good. 

Suddenly, underrated non-fungible tokens became the most discussed element of the blockchain world. Masses of people who had never been interested in Blockchain started searching for new collections, buying tokens, and discussing the most efficient strategies. 

With such a boom in popularity, NFT ventures flourished. Dozens of new collections were created every day. Crypto punks, Bored apes yacht club, Axie Infinity- to name a few - with the highest sales volume. NFT digital art started being displayed in museums all over the world. At some point, NFT collectibles crossed with gaming resulting in exciting NFT gaming projects and redefining the play-to-earn concept. Moreover, Ethereum blockchain more and more often began to be replaced by more efficient solutions, such as Polygon or Solana. 

With such dynamic development in 2021, one question became inevitable: what will 2022 bring? What will be the hottest NFT trends in 2022? 

1. The growing share of Solana 

Solana is a third-generation blockchain that, unlike other blockchains, uses a hybrid consensus algorithm. To be more precise, it combines proof-of-history (PoH) with proof-of-stake (PoS). Due to that, it can process over 50,000 transactions per second. To compare, Ethereum can't handle more than 30 at the same time. 

Launched in 2020 by the Solana foundation, Solana Blockchain aims to solve scaling problems that struggle with most current blockchain protocols. Its main objective is to support DeFi ecosystem growth by fitting in the so-called blockchain trilemma: decentralization, security, and scalability.

Combining those three factors seems to be the holy grail of the blockchain world. Many projects succeed in supporting one or even two of the factors but fail when it comes to others. Solana engineers believe that they have implemented all three. 

Solana NFTs 

OK, so we have a fast, very promising blockchain with quickly increasing popularity. Why shouldn't we use it for NFT minting? Many recently emerged NFT ventures prove that it might be a fantastic idea. 

What new possibilities can the Solana ecosystem bring to the world of NFTs? Think about 3D NFT or whole NFT-based games with mechanics primarily performed on-chain. Because of high gas prices, it would never be possible on Ethereum. The low fees and high speed that Solana offers may open entirely new doors for NFT development. 

Ethereum pushed aside

Ethereum is still the leading Blockchain among NFT ventures. Yet, according to many analyses, including the one done by JPMorgan, it's substantially losing its share. 

According to the bank's report, in 2021, Ethereum's market share of NFTs has dropped from about 95% to around 80%. The same publication stated that the Solana blockchain captured most of the lost volume share. 

2. Fractionalized NFT art

Offering fractionalized NTFs of real-world artworks is one of the most prominent trends on the NFT market that might fill the gap between traditional art and its new redefined form that NFTs initially proposed. For centuries the art market was associated with lucrative investment opportunities. Yet, what has been stopping ordinary investors were high entry barriers. Investing in Picasso or Rothko can generate vast profits, but thinking realistically, how many people would be able to afford them? What fractionalized NFTs offer is the democratization of high art investment. 

Filling the gap between real-life's and digital art

Notwithstanding how futuristic it may sound, the trend already has its beginning with STO's boom and tokenization project backed by art. For example, in 2021, Switzerland-based digital asset bank - Sygnum and art investment business - Artemundi teamed up to mint 4,000 security tokens backed in Picasso's Fillette au béret. Each could be bought for a fraction of the full artwork value. However, if we wanted to distinguish the beginning of art's tokenization, we'd have to go back to 2017 when Maecenas tokenized Andy Warhol's 14 Little Electric Chairs.

Essentially, those projects didn't differ substantially from other tokenization of unconventional assets, such as cars or precious metals. Furthermore, it is notable that in both cases, fungible tokens were used, which means that every single one of them has an equal value and can be traded directly for another. At the same time, none of them represent a particular part of an artwork. But this matter can be changed by applying NFTs.

What NFTs bring to the art world

What differentiates NFT's art tokenization and the one facilitated by fungible tokens is the fact that the first one involves "dividing" an artwork into pieces and minting tokens that represent them. Here every token is unique and represents different parts of an artwork. NFTs give that extra layer of uniqueness that previous forms of fractionalized art ownership were missing. 

The relationship between pop art and NFTs is rather obvious; therefore, it shouldn't be surprising that one of the first artworks tokenized was the one created by a true contemporary pop art icon - Banksy. In 2020, Exposed Wall extracted his mural, Gorilla in a Pink Mask, from one of the buildings in Bristol and tokenized it into 10,000 fractionalized NFTs. Each was sold for $750, which made an ordinary consumer buy their unique part of a piece created by one of the most influential artists of our time.

3. Big brands start to use NFTs

It's quite a common pattern for new technology solutions that the success of smaller projects eventually attracts the greatest of this world. NFTs, for sure, aren't an exception.

Currently, more and more brands are starting to explore opportunities that NFTs can bring them. So far, leading industries are fashion and, surprisingly, food. Companies such as Gucci, Louis Vuitton, and even McDonald's or Taco Bell have already released their limited digital collectibles. For big brands, minting NFTs allows them to build stronger brand awareness and increase customer engagement. 

What's important, such projects stimulated the significant interest of NFT holders. A great example of that is Pringles, which created a limited collection of NFT crisps with "virtual flavor." Limited to just 50 versions, tokens were sold by the company for the price of the normal pack of crisps - $2. But today, their price hovers around 4 ETH on OpenSeaand Rarible.

The music industry is another branch where we're likely to see more and more applications of NFTs coming this year. Artists all over the world started to notice and use the potential of this technology, which allows them not only to embrace their relationship with fans but also creates new revenue streams. 

American band Kings of Leon was one of the first to leverage this technology in the industry. Their eighth studio album, When You See Yourself, was released in March 2021 as an NFT token. The sale of NFTs, in which the company Yellow Heart was represented, ended on March 19, generating over $2 million in revenue. 

The NFT tokens released by the band in many ways resemble the typical merch of artists: they guarantee access to future concerts, covers, or a limited vinyl edition. The applied technology makes NFT tokens unique. Because NFT tokens use smart contracts, a set of rules may be taken into account by their creator to determine what should happen when an NFT is used or changes hands. It is precisely this aspect of NFT tokens that is the most valuable for the music industry.

Thanks to NFT tokens, musicians can retain direct ownership of the rights to the song and collect royalties for playback and sales without the intervention of intermediaries.

NFT music market flourishes

Kings of Leon were quickly followed by other prominent artists who decided to release their own NFT collections or even whole albums saved as non-fungible-tokens. In 2022 this trend will be even more visible as today artists don't have to launch their own page to sell NFTs; instead, they can use one of the already created NFT marketplaces. 

Band Royalty NFTs is an excellent example of such a venture. This music NFT marketplace not only enables musicians to release their music in the form of NFT, but also allows them to earn a share of income every time their song is played.

5. Personality NFT 

Apps that enable artists to perform as an NFT personality could be the next big thing in 2022. "I think this year [2022] we'll definitely start seeing more of these personalities that are NFTs," says Jace Kay, Bored Ape Yacht Club and Stereoheadz founder. 

Substituting your real-life personality with digital isn't something new for musicians and other stage performers. Yet, what was started by Gorillaz in 1998, is now being taken to a new level in NFT space. 

6. Playable NFTs

NFT games might be the hottest trend in the gaming industry right now. As we mentioned before, the current NFT boom started with a game. Therefore the link between non-fungible tokens and the gaming industry seems almost natural. 

The gaming industry is a powerful branch fueled by its consumers' passion. When gamers launch their favorite title, they immerse themselves in a new, alternative world. A quick look at the most popular games of the last decade, like League of Legends, Fortnite, or Counter-Strike, should be enough to see how modern gamers care about their characters, skins, and other in-game items. They treat them as an extension of their creative self. And what's important, they can pay a lot for it.

The games have shown us how far beyond the real world urge to build a collection of unique items can go. But do the purchased gaming collectibles become their property? Do these items differ somehow from the ones possessed by others? What is the actual value of an asset? Often, the answer is not so simple. In 2021, NFTs showed us that they might change that. 

Everywhere where users collect and trade in-game assets, NFTs can highly improve their experience. Essentially, they assure players about the authenticity and scarcity of gaming assets allowing them to keep full ownership of the purchased assets. 

Collectible games seem to be a perfect environment for NFTs. That's why we have seen a rapid growth of projects of such type during the last year. Yet, the potential of NFT gaming solutions goes far beyond them. Just think about online board games or PVP battle games. 

Currently, the NFT market is the fastest developing branch of the DeFi world. Since 2021, we've been observing an actual boom in the NFT space. Thanks to blockchain technology, new possibilities are constantly emerging, and we can expect even more groundbreaking implementations in 2022.

Last years’ experience shows that even the most prominent companies are not afraid to stray from the path, and introduce innovations. NFT can become one of them. Obviously, in some industries, a more expansive use is only a song of the future, but all signs point to it happening quicker than we may anticipate.

Are you thinking about your own NFT project? In the industry, there is still a lot of space for development, so this may be the perfect moment. Consult our experts at Nextrope for free. Contact us at contact@nextrope.com.

Tagi

Most viewed

Never miss a story

Stay updated about Nextrope news as it happens.

You are subscribed

Aethir Tokenomics – Case Study

Kajetan Olas

22 Nov 2024
Aethir Tokenomics – Case Study

Authors of the contents are not affiliated to the reviewed project in any way and none of the information presented should be taken as financial advice.

In this article we analyze tokenomics of Aethir - a project providing on-demand cloud compute resources for the AI, Gaming, and virtualized compute sectors.
Aethir aims to aggregate enterprise-grade GPUs from multiple providers into a DePIN (Decentralized Physical Infrastructure Network). Its competitive edge comes from utlizing the GPUs for very specific use-cases, such as low-latency rendering for online games.
Due to decentralized nature of its infrastructure Aethir can meet the demands of online-gaming in any region. This is especially important for some gamer-abundant regions in Asia with underdeveloped cloud infrastructure that causes high latency ("lags").
We will analyze Aethir's tokenomics, give our opinion on what was done well, and provide specific recommendations on how to improve it.

Evaluation Summary

Aethir Tokenomics Structure

The total supply of ATH tokens is capped at 42 billion ATH. This fixed cap provides a predictable supply environment, and the complete emissions schedule is listed here. As of November 2024 there are approximately 5.2 Billion ATH in circulation. In a year from now (November 2025), the circulating supply will almost triple, and will amount to approximately 15 Billion ATH. By November 2028, today's circulating supply will be diluted by around 86%.

From an investor standpoint the rational decision would be to stake their tokens and hope for rewards that will balance the inflation. Currently the estimated APR for 3-year staking is 195% and for 4-year staking APR is 261%. The rewards are paid out weekly. Furthermore, stakers can expect to get additional rewards from partnered AI projects.

Staking Incentives

Rewards are calculated based on the staking duration and staked amount. These factors are equally important and they linearly influence weekly rewards. This means that someone who stakes 100 ATH for 2 weeks will have the same weekly rewards as someone who stakes 200 ATH for 1 week. This mechanism greatly emphasizes long-term holding. That's because holding a token makes sense only if you go for long-term staking. E.g. a whale staking $200k with 1 week lockup. will have the same weekly rewards as person staking $1k with 4 year lockup. Furthermore the ATH staking rewards are fixed and divided among stakers. Therefore Increase of user base is likely to come with decrease in rewards.
We believe the main weak-point of Aethirs staking is the lack of equivalency between rewards paid out to the users and value generated for the protocol as a result of staking.

Token Distribution

The token distribution of $ATH is well designed and comes with long vesting time-frames. 18-month cliff and 36-moths subsequent linear vesting is applied to team's allocation. This is higher than industry standard and is a sign of long-term commitment.

  • Checkers and Compute Providers: 50%
  • Ecosystem: 15%
  • Team: 12.5%
  • Investors: 11.5%
  • Airdrop: 6%
  • Advisors: 5%

Aethir's airdrop is divided into 3 phases to ensure that only loyal users get rewarded. This mechanism is very-well thought and we rate it highly. It fosters high community engagement within the first months of the project and sets the ground for potentially giving more-control to the DAO.

Governance and Community-Led Development

Aethir’s governance model promotes community-led decision-making in a very practical way. Instead of rushing with creation of a DAO for PR and marketing purposes Aethir is trying to make it the right way. They support projects building on their infrastructure and regularly share updates with their community in the most professional manner.

We believe Aethir would benefit from implementing reputation boosted voting. An example of such system is described here. The core assumption is to abandon the simplistic: 1 token = 1 vote and go towards: Votes = tokens * reputation_based_multiplication_factor.

In the attached example, reputation_based_multiplication_factor rises exponentially with the number of standard deviations above norm, with regard to user's rating. For compute compute providers at Aethir, user's rating could be replaced by provider's uptime.

Perspectives for the future

While it's important to analyze aspects such as supply-side tokenomics, or governance, we must keep in mind that 95% of project's success depends on demand-side. In this regard the outlook for Aethir may be very bright. The project declares $36M annual reccuring revenue. Revenue like this is very rare in the web3 space. Many projects are not able to generate any revenue after succesfull ICO event, due to lack fo product-market-fit.

If you're looking to create a robust tokenomics model and go through institutional-grade testing please reach out to contact@nextrope.com. Our team is ready to help you with the token engineering process and ensure your project’s resilience in the long term.

Tagi

Quadratic Voting in Web3

Kajetan Olas

04 Dec 2024
Quadratic Voting in Web3

Decentralized systems are reshaping how we interact, conduct transactions, and govern online communities. As Web3 continues to advance, the necessity for effective and fair voting mechanisms becomes apparent. Traditional voting systems, such as the one-token-one-vote model, often fall short in capturing the intensity of individual preferences, which can result in centralization. Quadratic Voting (QV) addresses this challenge by enabling individuals to express not only their choices but also the strength of their preferences.

Table of Contents

In QV, voters are allocated a budget of credits that they can spend to cast votes on various issues. The cost of casting multiple votes on a single issue increases quadratically, meaning that each additional vote costs more than the last. This system allows for a more precise expression of preferences, as individuals can invest more heavily in issues they care deeply about while conserving credits on matters of lesser importance.

Understanding Quadratic Voting

Quadratic Voting (QV) is a voting system designed to capture not only the choices of individuals but also the strength of their preferences. In most DAO voting mechanisms, each person typically has one vote per token, which limits the ability to express how strongly they feel about a particular matter. Furthermore, QV limits the power of whales and founding team who typically have large token allocations. These problems are adressed by making the cost of each additional vote increase quadratically.

In QV, each voter is given a budget of credits or tokens that they can spend to cast votes on various issues. The key principle is that the cost to cast n votes on a single issue is proportional to the square of n. This quadratic cost function ensures that while voters can express stronger preferences, doing so requires a disproportionately higher expenditure of their voting credits. This mechanism discourages voters from concentrating all their influence on a single issue unless they feel very strongly about it. In the context of DAOs, it means that large holders will have a hard-time pushing through with a proposal if they'll try to do it on their own.

Practical Example

Consider a voter who has been allocated 25 voting credits to spend on several proposals. The voter has varying degrees of interest in three proposals: Proposal A, Proposal B, and Proposal C.

  • Proposal A: High interest.
  • Proposal B: Moderate interest.
  • Proposal C: Low interest.

The voter might allocate their credits as follows:

Proposal A:

  • Votes cast: 3
  • Cost: 9 delegated tokens

Proposal B:

  • Votes cast: 2
  • Cost: 4 delegated tokens

Proposal C:

  • Votes cast: 1
  • Cost: 1 delegated token

Total delegated tokens: 14
Remaining tokens: 11

With the remaining tokens, the voter can choose to allocate additional votes to the proposals based on their preferences or save for future proposals. If they feel particularly strong about Proposal A, they might decide to cast one more vote:

Additional vote on Proposal A:

  • New total votes: 4
  • New cost: 16 delegated tokens
  • Additional cost: 16−9 = 7 delegated tokens

Updated total delegated tokens: 14+7 = 21

Updated remaining tokens: 25−21 = 425 - 21 = 4

This additional vote on Proposal A costs 7 credits, significantly more than the previous vote, illustrating how the quadratic cost discourages excessive influence on a single issue without strong conviction.

Benefits of Implementing Quadratic Voting

Key Characteristics of the Quadratic Cost Function

  • Marginal Cost Increases Linearly: The marginal cost of each additional vote increases linearly. The cost difference between casting n and n−1 votes is 2n−1.
  • Total Cost Increases Quadratically: The total cost to cast multiple votes rises steeply, discouraging voters from concentrating too many votes on a single issue without significant reason.
  • Promotes Egalitarian Voting: Small voters are encouraged to participate, because relatively they have a much higher impact.

Advantages Over Traditional Voting Systems

Quadratic Voting offers several benefits compared to traditional one-person-one-vote systems:

  • Captures Preference Intensity: By allowing voters to express how strongly they feel about an issue, QV leads to outcomes that better reflect the collective welfare.
  • Reduces Majority Domination: The quadratic cost makes it costly for majority groups to overpower minority interests on every issue.
  • Encourages Honest Voting: Voters are incentivized to allocate votes in proportion to their true preferences, reducing manipulation.

By understanding the foundation of Quadratic Voting, stakeholders in Web3 communities can appreciate how this system supports more representative governance.

Conclusion

Quadratic voting is a novel voting system that may be used within DAOs to foster decentralization. The key idea is to make the cost of voting on a certain issue increase quadratically. The leading player that makes use of this mechanism is Optimism. If you're pondering about the design of your DAO, we highly recommend taking a look at their research on quadratic funding.

If you're looking to create a robust governance model and go through institutional-grade testing please reach out to contact@nextrope.com. Our team is ready to help you with the token engineering process and ensure that your DAO will stand out as a beacon of innovation and resilience in the long term.

Tagi