Even at this point in Bitcoin’s evolution, it’s still relatively rare for cryptocurrencies to hit mainstream headlines unless volatility hits dramatic extremes. It is even more remarkable that blockchain apps are being picked up by the global media.
Cryptokitties is one of those rare exceptions. When it launched in December 2017, at the height of crypto price madness, it was an instant hit. In the first days after launch, people spent more than $ 1 million ETH on digital feline artwork. It was so popular that it became the first app to cause congestion on the Ethereum blockchain, attracting the attention of mainstream outlets including Bloomberg and the BBC.
Cryptokitties was one of the first applications to use the ERC721 token standard, which allows developers to create non-replaceable tokens (NFTs). The game’s popularity sparked speculation that there would be a boom in NFT-based applications. However, the craze cooled as the crypto winter of 2018 began.
Now NFTs are definitely making a comeback. In fact, the trends we see are similar to the inexorable increase in total value locked in DeFi applications.
Weekly volumes of NFT transactions were up in September $ 1 million mark. In December had that number increased up to $ 2 million. In addition, unlike in 2017 when trading volumes were driven out of a single application, transactions are now spread across a wide variety of apps and use cases.
The rising popularity of NFTs
Even at a time when Bitcoin is flying high, Ethereum 2.0 has just launched its genesis block and DeFi continues to dominate, but NFTs are now more common in the crypto news as well.
In some cases, they even get the support of celebrities. Over the summer, Hollywood stalwart and blockchain investor Ashton Kutcher auctioned a piece of digital art via Cryptograph. More recently the 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 items.
Elsewhere, Christie’s auction house with a decidedly analogous flavor announced 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 So rare platform, which runs a global fantasy football league, has signed up more than 100 clubs, including Juventus, Paris Saint-Germain, Atletico Madrid and FC Bayern Munich.
Sorare allows users to collect and trade digital cards of their favorite players to build their own fantasy football teams. Sorare has become one of the most popular NFT games, with more than $ 5 million traded volume since launch, according to the aggregator website. Non-tangible.
A Match Made in Heaven?
While the global gaming market is huge and has huge potential for NFTs, there could be another killer use case for NFTs on the horizon: DeFi. According to DeFi Pulse, 2020 was undeniably part of decentralized financing, with the market growing more than 20 times since January last year.
Despite the growth in popularity of NFTs, they remain relatively illiquid compared to the rest of the cryptocurrency markets, limiting their value. Now a growing number of projects are starting to see the potential in merging the DeFi and NFT segments to increase value in both.
While this is still a very young field, a core feature that is emerging is enabling NFT holders to deploy their tokens in DeFi applications. So someone who owns a rare Cryptokitty or piece of land in Decentraland can use their NFT as collateral to get a loan in the same way ETH.
This is the starting point NFTfi, which profiles itself as a ‘simple marketplace for collateralised NFT loans’. The borrower agrees to put their NFT into a smart contract, which will be unlocked to the lender if the borrower doesn’t make their refund.
Aavegotchi goes one step further. Aavegotchis are ERC721 tokens displayed as pixelated collectible artwork. Each has specific attributes that determine its overall value and rarity within the Aavegotchi universe. Each Aavegotchi ERC721 token manages an escrow contract address containing an Aave-backed aToken, generating a return on Aave lending pools.
It basically means that those who own Aavegotchis can use them for liquidity farming.
Connecting DeFi to other assets
If this seems gimmicky, remember that the whole NFT concept started with digital cat artwork, but now globally recognized legacy brands like Christie’s are getting involved. Taking the idea further, the merger of DeFi and NFTs offers the intriguing potential to connect DeFi to other assets, including those in the real world.
Currently, the only way to get involved with DeFi is to use cryptocurrencies. Now imagine if whoever bought the artwork from Christie’s could use that piece, worth $ 130,000, to get a loan. Further, imagine that a real-world artwork, whether a car or real estate, was displayed as an NFT on the blockchain and could be used as collateral.
While these developments may be a long way off, there are other reasons to believe that the NFT trend will gain further momentum in 2021. When Cryptokitties first launched, there was little infrastructure to support an NFT economy. Stablecoins were in its infancy, meaning users had to trade in volatile cryptocurrencies such as ETH. Crypto derivatives had not yet taken off and DeFi’s concept was unheard of.
All these developments today provide a solid foundation on which an NFT economy can thrive.
While it is difficult to make concrete predictions, it does not seem bizarre to suggest that NFTs have the potential to become the second biggest trend in crypto right now as we head into the new year.
When combined with DeFi, it seems very likely they could see even more rapid growth.
Written by Reuben Jackson.
Reuben Jackson is a blockchain security specialist and freelance writer living in New York. He writes about everything related to cryptocurrency and technology. You can learn more about Reuben’s work and contact him here: https://about.me/reuben.jackson
Do you agree that the future for NFTs is bright? Share your thoughts in the comment section below!
This is an OP-ed. The opinions expressed in this article are those of the author. Bitcoin.com is not responsible or liable for any content, accuracy or quality in the op-ed. Readers should do their own due diligence before taking any action on the content. Bitcoin.com is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any information in this op-ed.
Image Credits: Shutterstock, Pixabay, Wiki Commons, Marc van der Chijs, licensed under CC BY-ND 2.0