Few people will object to the fact that the three trends leading the crypto market in 2021 are De-fi, games, and NFT. Ethereum, which has led such trending possible by providing smart contracts, is at the center of change. However, due to soaring gas costs to process Ethereum transactions, other mainnet, or Binance Smart Chain supporting smart contracts, Solana, Cardano, Polka Dot, Terra, Avalanche, Clayton, Flow, and sidechain or Layer 2 chains such as Polygon, Abitroom, Optimism are also growing rapidly around De-fi, Game, and NFT. It can be said that it is an explosive expansion of smart contracts. What we should pay attention to here is that each of these three areas started as independent areas, but began to be closely related to each other in the process of growth.
However, NFT is not the only thing needed for crypto games. Money used in the game is needed. It is also possible to use the cryptocurrency used on the mainnet as it is, but project's own token is much more advantageous to design its own monetary economy. Based on the ERC20 token standard or compatible standard, additional elements necessary for the game are issued.
NFT and ERC20 issued in the game naturally require an exchange market. Transactions are possible through the NFT market such as OpenSea, which exists outside the game, but specialized trading markets that suit the unique characteristics of the game are often needed. Even if people buy and sell their NFTs on OpenSea in its early stages, it is very advantageous to form project's own trading market. These trading markets should also become decentralized markets based on smart contracts, which naturally leads to the de-fi market. ERC20 token transactions are bound to be directly combined with existing De-fi protocols including Uniswap. Incentives for liquidity supply are also needed. DEX models specialized in games are also likely to be popular.
The rental market for NFT and ERC20 needed for games will also be decentralized by smart contracts. As Axie Infinity showed the possibility of the NFT rental market through the scholarship program, the rental market itself will grow into a decentralized De-fi market that does not require centralized repeaters in the future. There is a possibility that it will be established as a standard protocol for the popular spread of games. This is because if ordinary game users initially ease the burden of purchasing NFTs, easily access games, secure game tokens through play, and use them to purchase their NFTs again, they can easily overcome major barriers to entering the crypto market.
Interchain solutions are also needed to move game NFT and ERC20 tokens to Ethereum Mainnet or to other chains. In terms of the size of the De-fi and NFT markets, Ethereum Mainnet is by far ahead, so games on other chains need to be connected to this market to expand the trading market. Various interchain solutions, including decentralized bridges, are likely to be developed.
There is even a possibility that there will be a leverage market and a derivative market for game NFTs and tokens. Fund-type ERC20 tokens may be issued or index-type investment products may be released as underlying assets for several major games NFTs. Game assets themselves are very volatile products, but if leverage and hedge measures come out for them, the demand will not be small.
Compared to the size of the total game market, which amounts to $173 billion, Crypto Games are still in its infancy. Considering the reorganization and innovation of the entire game industry that the expansion of crypto games will bring in the future, the size of the NFT and De-fi markets through games is also very likely to continue to grow rapidly.
First of all, the transaction cost related to NFT is relatively very high. In the case of Ethereum, the same fee is incurred whether one ERC20 token is sent or 10,000 ERC20. Since it sends homogeneous tokens, it is possible to process all the necessary numbers in one transaction. However, in the case of NFT, 100 transactions must be processed to transmit 100 NFTs. Of course, 100 transmissions can be processed in a loop within one transaction to reduce gas costs by 20 to 30%, but if the number increases, gas costs will inevitably increase in proportion to this. In addition, the cost of processing most NFT transactions is higher than that of ERC20. It is inevitably very difficult to create an operating market using NFT on Ethereum Mainnet, where gas costs are soaring.
Even NFTs in the same collection cannot be evaluated at the same price because they are separate products. In order for the market to revitalize, liquidity supply must be large and there must be a volume with the same price, but it is not easy to meet these conditions. Therefore, it is often evaluated based on the lowest transaction price (floor price) of NFTs belonging to the same collection, but there are many limitations in using it to understand the overall market condition.
The open NFT trading market based on smart contracts such as Opensea can also be viewed as a form of DPI. Opensea still accounts for an overwhelming portion of the total NFT transaction volume. However, Opensea does not provide any means to operate or utilize his NFT. Imposing 2.5% as a fee for providing a simple trading market shows that a sufficient competitive market has not yet been formed.
ETH price changes
Game-based NFT and De-fi
The direct Intersection in three areas is a crypto-based game. Even if a publisher that provides a game server fails, characters and items needed for the game as NFT will survive permanently and can be used as it is in other games. It is a very natural phenomenon that NFT, which made game items that relied on game servers sustainable as independent assets, is the basis for crypto games.However, NFT is not the only thing needed for crypto games. Money used in the game is needed. It is also possible to use the cryptocurrency used on the mainnet as it is, but project's own token is much more advantageous to design its own monetary economy. Based on the ERC20 token standard or compatible standard, additional elements necessary for the game are issued.
NFT and ERC20 issued in the game naturally require an exchange market. Transactions are possible through the NFT market such as OpenSea, which exists outside the game, but specialized trading markets that suit the unique characteristics of the game are often needed. Even if people buy and sell their NFTs on OpenSea in its early stages, it is very advantageous to form project's own trading market. These trading markets should also become decentralized markets based on smart contracts, which naturally leads to the de-fi market. ERC20 token transactions are bound to be directly combined with existing De-fi protocols including Uniswap. Incentives for liquidity supply are also needed. DEX models specialized in games are also likely to be popular.
dex./katana-analytics (Axie)
The rental market for NFT and ERC20 needed for games will also be decentralized by smart contracts. As Axie Infinity showed the possibility of the NFT rental market through the scholarship program, the rental market itself will grow into a decentralized De-fi market that does not require centralized repeaters in the future. There is a possibility that it will be established as a standard protocol for the popular spread of games. This is because if ordinary game users initially ease the burden of purchasing NFTs, easily access games, secure game tokens through play, and use them to purchase their NFTs again, they can easily overcome major barriers to entering the crypto market.
Interchain solutions are also needed to move game NFT and ERC20 tokens to Ethereum Mainnet or to other chains. In terms of the size of the De-fi and NFT markets, Ethereum Mainnet is by far ahead, so games on other chains need to be connected to this market to expand the trading market. Various interchain solutions, including decentralized bridges, are likely to be developed.
There is even a possibility that there will be a leverage market and a derivative market for game NFTs and tokens. Fund-type ERC20 tokens may be issued or index-type investment products may be released as underlying assets for several major games NFTs. Game assets themselves are very volatile products, but if leverage and hedge measures come out for them, the demand will not be small.
Compared to the size of the total game market, which amounts to $173 billion, Crypto Games are still in its infancy. Considering the reorganization and innovation of the entire game industry that the expansion of crypto games will bring in the future, the size of the NFT and De-fi markets through games is also very likely to continue to grow rapidly.
The operation of NFT market
The market where NFT, which has the characteristics of digital art and collections, can be utilized is still very limited. There are several problems that are difficult to revitalize the market.First of all, the transaction cost related to NFT is relatively very high. In the case of Ethereum, the same fee is incurred whether one ERC20 token is sent or 10,000 ERC20. Since it sends homogeneous tokens, it is possible to process all the necessary numbers in one transaction. However, in the case of NFT, 100 transactions must be processed to transmit 100 NFTs. Of course, 100 transmissions can be processed in a loop within one transaction to reduce gas costs by 20 to 30%, but if the number increases, gas costs will inevitably increase in proportion to this. In addition, the cost of processing most NFT transactions is higher than that of ERC20. It is inevitably very difficult to create an operating market using NFT on Ethereum Mainnet, where gas costs are soaring.
Average price change rate of NFTs
Even NFTs in the same collection cannot be evaluated at the same price because they are separate products. In order for the market to revitalize, liquidity supply must be large and there must be a volume with the same price, but it is not easy to meet these conditions. Therefore, it is often evaluated based on the lowest transaction price (floor price) of NFTs belonging to the same collection, but there are many limitations in using it to understand the overall market condition.
The open NFT trading market based on smart contracts such as Opensea can also be viewed as a form of DPI. Opensea still accounts for an overwhelming portion of the total NFT transaction volume. However, Opensea does not provide any means to operate or utilize his NFT. Imposing 2.5% as a fee for providing a simple trading market shows that a sufficient competitive market has not yet been formed.
In addition to the simple decentralized trading market, the most intuitive way to operate NFT is to introduce the concept of staking, which is popular in De-fi. If you can deposit the NFT in a staking vault and receive compensation in anticipation of an increase in future value, there will be little reason to refuse it except for security concerns. From the perspective of project teams and long-term holders that provide staking services, it can be seen that it helps maintain the stable price of NFTs because it absorbs the number of NFTs distributed in the market and reduces supply. The person who entrusts the NFT to staking will receive the governance token as an incentive as a reward by limiting the possibility of the NFT's transaction, and the token will let the holders participate in the long-term decision-making of the NFT.
The problem to be solved here is the utilization and price mechanism of the tokens received in this way. Of course, the right to participate in governance is important, but it is not easy to maintain the price of incentive tokens by itself. It is also a concern that many De-fi projects already have. After all, this problem should be resolved as follows. After staking the NFT, the place where the staked NFT can be effectively utilized should be activated, in which additional commission income can be generated.
Also, based on the experience of the De-fi market, we should pay attention to the possibility of the rental market of the staked NFT. As mentioned earlier, it is already becoming a key component in the game area, but it is necessary to consider whether the rental market can be activated in digital art, collection NFT, and even social NFT.
Another possibility is to revitalize the specialized trading market based on the staked NFT volume and secure commission income and compensation mechanisms generated here. Since Oeansea can only do a very generalized simple trading market function, it will be possible to revitalize the market by introducing a more dynamic trading method. For example, introducing a method such as "Radical Market" that opens ownership transfer at any time if anyone is willing to pay a higher price, rather than granting permanent ownership to the purchased NFT, can greatly help boost the transaction. Instead of giving up permanent ownership, you will be able to receive staking incentives.
A few days ago, the LEEDO project (formerly squid card game NFT) launched an NFT staking service and a service that mints LEEDO tokens as compensation. The token name LEEDO after King Sejong, who invented Hangeul, is said to emphasize that the concept of this project is Korean consonant NFT. As all smart contracts and UI source codes are 100% open, it is not difficult to understand what logic they are operating with. What's unusual is that it not only staks the NFT, but also issues a new Liquidity Provider (NFT) token that responds one-on-one to the staked NFT. Thanks to this, it is possible to use it for other games even while staking, or even move to other chains through the polygon bridge. It can continue to be used as an NFT while receiving compensation through staking It seems to be the first attempt in the industry. I wonder what role this architecture will play in the ecosystem to be built in the future.
The amount of coins locked up in the De-fi is very large and continues to grow, but in fact, the funds invested by a small number of whales often account for a large portion. This is the why t the actual number of participants using De-fi is not increasing noticeably despite the rapid increase in the total number of coin investors. On the other hand, the participation of the general public in NFT and games is relatively much higher. It can be expected that NFT and games will greatly contribute to the expansion of the base of the decentralized crypto market. Would it be an exaggeration to say that the era of crypto heyday is coming in earnest with the fusion of NFT, games, De-fi, and even metabus flows?
The problem to be solved here is the utilization and price mechanism of the tokens received in this way. Of course, the right to participate in governance is important, but it is not easy to maintain the price of incentive tokens by itself. It is also a concern that many De-fi projects already have. After all, this problem should be resolved as follows. After staking the NFT, the place where the staked NFT can be effectively utilized should be activated, in which additional commission income can be generated.
Also, based on the experience of the De-fi market, we should pay attention to the possibility of the rental market of the staked NFT. As mentioned earlier, it is already becoming a key component in the game area, but it is necessary to consider whether the rental market can be activated in digital art, collection NFT, and even social NFT.
Another possibility is to revitalize the specialized trading market based on the staked NFT volume and secure commission income and compensation mechanisms generated here. Since Oeansea can only do a very generalized simple trading market function, it will be possible to revitalize the market by introducing a more dynamic trading method. For example, introducing a method such as "Radical Market" that opens ownership transfer at any time if anyone is willing to pay a higher price, rather than granting permanent ownership to the purchased NFT, can greatly help boost the transaction. Instead of giving up permanent ownership, you will be able to receive staking incentives.
A few days ago, the LEEDO project (formerly squid card game NFT) launched an NFT staking service and a service that mints LEEDO tokens as compensation. The token name LEEDO after King Sejong, who invented Hangeul, is said to emphasize that the concept of this project is Korean consonant NFT. As all smart contracts and UI source codes are 100% open, it is not difficult to understand what logic they are operating with. What's unusual is that it not only staks the NFT, but also issues a new Liquidity Provider (NFT) token that responds one-on-one to the staked NFT. Thanks to this, it is possible to use it for other games even while staking, or even move to other chains through the polygon bridge. It can continue to be used as an NFT while receiving compensation through staking It seems to be the first attempt in the industry. I wonder what role this architecture will play in the ecosystem to be built in the future.
NFT staking
The amount of coins locked up in the De-fi is very large and continues to grow, but in fact, the funds invested by a small number of whales often account for a large portion. This is the why t the actual number of participants using De-fi is not increasing noticeably despite the rapid increase in the total number of coin investors. On the other hand, the participation of the general public in NFT and games is relatively much higher. It can be expected that NFT and games will greatly contribute to the expansion of the base of the decentralized crypto market. Would it be an exaggeration to say that the era of crypto heyday is coming in earnest with the fusion of NFT, games, De-fi, and even metabus flows?
source : https://www.facten.co.kr/news/articleView.html?idxno=208458
Find your content thoroughly engaging! Do you have twitter where I could follow you on? Thanks.
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