The Nonfungible Token (#NFT) landscape has evolved from a small ecosystem of collectors and enthusiasts to an emerging multichain ecosystem at the forefront of culture and technology.
To date, the NFT landscape has been dominated by Ethereum, Flow, and to a lesser extent Wax.
It’s likely that many NFT applications will transition from Ethereum mainnet onto Layer-2 solutions or test out other blockchains for specific applications.
Layer 2: Layer-2s & Sidechains
While the smart contract wars have blockchains fighting for DeFi applications, the battlegrounds between the upcoming Layer-2s will be waged for NFT supremacy.
Layer 3: Verticals / Applications
While non-fungible tokens(#NFTs) are created and transferred at the Layer-1 or Layer-2 level, the application layer is consumer-facing.
Ultimately, platforms will have to rely on unique utility propositions that they can provide to their users.
Layer 4: Secondary Applications
Composability ensures that other developers can build atop existing applications and protocols.
Decentraland and other virtual worlds will undoubtedly have various applications within their ecosystems such as the online casino, Decentral Games.
Layer 5: NFT Financialization
One of the largest layers of the NFT stack is the NFT financialization layer which unironically attempts to make non-fungible assets more fungible.
Similar to DeFi, NFTs require similar primitives like lending, liquidity, and asset management.
Layer 6: Aggregators
Aggregators can come in various forms. Some protocols aggregate supply while others focus on the demand (consumer) side. Within the NFT sector, there are really only two primary aggregators – OpenSea and Rarible.
Layer 7: Front Ends & Interfaces
There are many companies vying for eyeballs & building the de facto front-end for NFTs. With collectibles and crypto art as the first breakout use case, entrepreneurs have opted to build galleries/ interfaces for collectors to display their NFTs.
Unlike the DeFi ecosystem – which lies at the infra level – NFT assets are highly consumer-facing and attention-grabbing. As DeFi continues to build the financial rails of the future, NFTs will cyclically advance further into the cultural zeitgeist. messari.io/article/the-nf…
• • •
Missing some Tweet in this thread? You can try to
force a refresh
There are a few common crypto business models:
- Exchanges and marketplaces
- Transaction sequencing
- Asset managers
Let's dive into some examples 👇
Exchange Model
Subset 1) marketplace models – fee on transactions
- create a new asset and market (e.g. Polymarket, Perps)
- expand access to emerging asset (Coinbase and BTC)
- convenience fee (wallet swaps)
- SaaS enabled marketplaces – Proof marketplaces
Exchange subset 2): Liquidity servicing - build valuable pool of specialized liquidity and charge acces fee to end app (e.g. hooks) or match-maker fee (e.g. swaps)
- DEXs
- Lending
MEV / Transaction sequencing – own and monetize valuable order flow
- App PFOF (e.g. TG Bots)
- Sequencer model - own sequencer and MEV (e.g. L2)
- SaaS enabled tx sequencing and monitoring - RaaS, RPC providers, security providers, oracles etc.
When combined with new products, tokens – or the promise of tokens – have proven effective at alleviating the cold start problem.
But, networks that launch with a token from the jump, must find PMF in a shortened window amidst inorganic activity or otherwise these networks are just spending tokens for limited upside.
My friend and fellow investor, @howdai27 calls this the “hot start problem” where the presence of a token limits the window of time a startup has to find PMF and gain enough organic traction such that the startup can retain users/liquidity as token rewards diminish.
The hot start problem – launching tokens early and dealing with finding PMF amidst inorganic activity – is favorable to the cold start problem in two scenarios:
1) Startups competing in red ocean markets (markets with a high degree of competition and known demand)
Examples: Second mover defi protocols, Blur vs OpenSea, LRTs, etc.
2) Products and networks with passive-supply side participation
Examples: passive jobs to be done – staking (L1s), providing liquidity, or set-it and forget-it hardware (e.g. DePIN). masonnystrom.com/p/tokenized-ma…
Over 2 million compressed NFTs have been minted in just a few weeks.
Enabled by @metaplex's new NFT compression standard (Bubblebum), Compressed NFTs offer greater scale to NFT minting and open up a new array of use cases for Solana NFTs.
But what are compressed NFTs?
Normal Solana NFTs have metadata stored in on-chain accounts
Compressed NFTs group the state of many NFTs into a merkle tree and hash the merkle root on-chain with each leaf of the tree (e.g. NFT) verifiable on-chain while the metadata is offchain
Compressed NFTs allow minting NFTs at scale while securing them cryptographically on-chain.
Importantly, compressed NFTs can be redeemed/decompressed in which case the NFT is removed from the offchain merkle tree and then exits on-chain as a normal Metaplex NFT.
The magic of NFTs as an asset class is that the underlying assets are composable. But, this effortlessly destroys the moat of secondary trading liquidity that marketplaces have relied on to succeed.
NFT marketplaces must find proprietary liquidity that lives on their platforms, that drives users, and is unique.
Fluid secondary liquidity means marketplaces & NFT social networks must compete in the streets of the bazaar where trading occurs and not behind their castle moats.
Artists have earned over $5m in earnings on Sound Protocol.
Let’s take a brief look at the state of @soundxyz_ Protocol & Marketplace 🎧 🧵 sound.xyz
Sound Protocol by the numbers:
•$10m in NFT volume (4.4m Primary and 5.7m Secondary)
• Minted over 80,000 music
• Over 400 talented artists
• Nearly 13,000 collectors
Feb 2023 was Sound’s best month ever in terms of music NFTs minted.
The record month was aided by the launch of Sound’s curator rewards which enabled fans to earn 5% on primary mints generated through their referral links and playlists.
1) Network-driven protocol GTM focuses on building a protocol with broad distribution and permissionless access, and then evangelizes others to build on top of the network.