Even at this point in Bitcoin’s evolution, it is still relatively rare for cryptocurrencies to hit the headlines unless volatility reaches dramatic extremes. It is even more extraordinary when blockchain apps are picked up by the global media.
Crypto kittens are one of those rare exceptions. When it hit the market in December 2017 at the height of the crypto price craze, it was an instant hit. In the first few days after it launched, people spent over $ 1 million worth of ETH on digital artwork for cats. It was so popular that it was the first app to overload the Ethereum blockchain and caught the attention of mainstream outlets like Bloomberg and BBC.
Cryptokitties was one of the first applications to use the ERC721 token standard, which allows developers to create non-fungible tokens (NFTs). The game’s popularity led to speculation of a boom in NFT-based applications. However, the excitement cooled when the crypto winter of 2018 set in.
Now NFTs are definitely making a comeback. In fact, the trends we see are akin to the unstoppable increase in total value stored in DeFi applications.
By September, the weekly volume of NFT transactions had reached the $ 1 million mark. By December that number had risen to $ 2 million. Unlike 2017, when trading volume was driven out of a single application, transactions are now spread across a variety of apps and use cases.
The rising popularity of NFTs
Even at a time when Bitcoin is soaring, Ethereum 2.0 has just launched its Genesis block and DeFi continues to dominate. NFTs are also mentioned more frequently in the crypto news now.
In some cases, they even get support from celebrities. Over the summer, loyal Hollywood investor Ashton Kutcher auctioned a digital work of art through Cryptograph. More recently, well-known gamer and YouTube star Pewdiepie confirmed a collaboration with a blockchain-based game called Wallem, which uses NFTs for skins and other in-game assets.
Elsewhere, the downright analog auction house Christie’s announced that it had sold a digital portrait of the Bitcoin code for the princely sum of $ 130,250 – more than seven times the highest estimate for the work. And the Sorare platform, which operates a global fantasy football league, has signed over 100 clubs, including Juventus, Paris Saint-Germain, Atletico Madrid and Bayern Munich.
With Sorare, users can collect and trade digital cards depicting their favorite players and build their own fantasy football teams. According to aggregator website NonFungible, Sorare has become one of the most popular NFT games and has seen over $ 5 million in trading volume since launch.
A match made in heaven?
Although the global gaming market is huge and has great potential for NFTs, another killer use case for NFTs could be looming on the horizon: DeFi. 2020 is undeniably part of decentralized financing. According to DeFi Pulse, the market has grown more than twenty-fold since last January.
Despite the increasing popularity of NFTs, they remain relatively illiquid compared to the rest of the cryptocurrency markets, which limits their value. Now more and more projects see the potential to merge the DeFi and NFT segments to add value in both.
While this is still a very young field, a key feature is that NFT holders can use their tokens in DeFi applications. Someone who owns a rare cryptokitty or piece of land in Decentraland could use their NFT as collateral to get a loan the same way they got down from ETH.
This is the requirement for NFTfi, which describes itself as the “Simple Marketplace for Secured NFT Loans”. The borrower agrees to put his NFT in a smart contract that will be unlocked for the lender if the borrower fails to make his repayment.
Aavegotchi goes one step further. Aavegotchis are ERC721 tokens that are represented as pixelated collectibles. Each has specific attributes that determine its overall value and rarity within the Aavegotchi universe. Each Aavegotchi ERC721 token maintains an escrow address that contains an Aave-supported aToken, which generates a return on Aave loan pools.
This effectively means that those who hold Aavegotchis can use them for liquidity farm.
Connect DeFi to other assets
If this doesn’t seem easy, keep in mind that the whole NFT concept started with digital cat graphics, but now globally recognized legacy brands like Christie’s are getting involved. The merger of DeFi and NFTs offers the fascinating potential of connecting DeFi to other assets, including those in the real world.
Currently, the only way to get involved in DeFi is to use cryptocurrencies. Now imagine whoever bought Christie’s artwork could use that $ 130,000 piece to get a loan. Also imagine if a real work of art, a car or a property were represented as an NFT on the blockchain and could be used as security.
While these developments may still be a long way off, there are other reasons to believe that the NFT trend will continue to gain momentum in 2021. When Cryptokitties was first introduced, there was little infrastructure in place to support an NFT economy. Stablecoins were still in their infancy, which meant that users had to conduct transactions in volatile cryptocurrencies like ETH. Crypto derivatives hadn’t started yet, and the concept of DeFi was unknown.
All of these developments today provide a solid foundation on which an NFT economy can thrive.
While it’s difficult to make concrete predictions, it doesn’t seem like much to suggest that at this point, NFTs have the potential to become the next biggest crypto trend as we near the New Year.
Combined with DeFi, it is very likely that they will see even more meteoric growth.
Written by Reuben Jackson.
Reuben Jackson is a blockchain security specialist and freelance writer based in New York. He writes about everything to do with cryptocurrency and technology. You can learn more about Rubens work and contact him here: https://about.me/reuben.jackson
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