I’ve been thinking about the NFT market quite a lot lately, mostly scratching my head at some of the prices folks are willing to pay for certain ownership signatures on particular blockchains. I just can’t get that excited about a pixelated ape.
Notably, I am in the huge majority on that point, even amongst the crypto faithful. Data from DappRadar indicates that in the last 24 hours, just 31 traders swapped a mere 18 Bored Ape Yacht Club NFTs. That’s a pretty darn slim market. You might even call it illiquid.
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But there are areas of activity in the NFT market that are both liquid and lower cost that make far more sense to me.
Again leaning on DappRadar data, the busiest hive of NFT activity is Axie Infinity, which has seen 56,099 traders execute 88,027 transactions in the last day. Axie’s world is seeing a multiple of trading activity that the second-busiest NFT grouping saw in the last day, NBA Top Shot with 16,113 traders and 27,929 total transactions.
We can divvy up the NFT market into a few categories, I think, to help understand what we’re seeing here:
- Value-extracting NFTs: The transference of real-world value into a digital item. A famous sports moment, for example.
- Value-defending NFTs: Low-volume image sets that earn digital cachet, leading to low-volume but expensive digital items.
- Value-generating NFTs: NFTs that unlock an activity that are not artificially supply constrained.
NBA Top Shot fits into the value-extracting grouping, of course, as it is hoping to take real-world magic and convert it into digital worth. The Apes et al. fit into group two, though I’d hazard that most projects hoping to emulate standout early successes in this area will fail, as there’s only so much social capital that can make certain image sets hip enough to induce a speculative frenzy.
And Axie Infinity’s game sorts into the third category, where players actually use their NFTs to battle — based on my current understanding of the game — and thus create in-market utils. Axie Infinity’s game revolves around having different NFT critters fight one another, as a reference point.
As you would expect, there appears to be a correlation between Axie NFT quality — measured through stats like health or speed — and their value.
What’s nice is that Axies are pretty cheap. The 88,021 trades of the game’s NFTs in the last 24 hours were worth $22.43 million, or around $250 apiece on average. That’s a price range that a host of people can afford, unlike, say a particular smoking crypto punk or bird or whatever. And most Axies are cheaper than that, based on our dig through the game’s marketplace this morning.
NFTs in Pokémon-style collect-and-battle games make sense, as folks want to own unique beasts. Axie is a bit like MMO Pokémon, I suppose, but your Pikachu is the only one of its kind. I like that. If I was more into games of this sort than what I usually play, I’d get in on the fun.
The market is speaking with activity numbers that lower-priced, more useful NFTs connected to an interactive world can generate not only lots of economic value, but also lots of fans. This is an exciting NFT future; one in which the technology enhances a particular experience. In this case, gaming.
Crypto innovations tend to get galaxy-brained by fans. For example, during the ICO boom, folks were talking about tokenizing houses, which sounds miserable from a tax perspective, not to mention from a security viewpoint. But Axie’s use of NFTs? Very cool.
I have been generally disappointed that much of historical NFT gains appear to have gone to crypto insiders. Who wants to make the already wealthy even more so? Boring. What I would like to see is more delight and joy and access. The market selecting our third NFT grouping as the most interesting — voting with their time and money, essentially — is encouraging.
Much of NFT land today is silly and is nothing more than speculation and a real-time experiment in greater-fool investing. But there could be something super material and neat in the NFT technology that could extend the already huge gaming world into something slightly more unique and fun. Let’s hope that side of the tech wins out.