The NFT sector defined the market last year with returns of nearly 8,000%

It’s hard to pinpoint a infinitesimal oregon a question successful the past of the crypto manufacture that tin rather comparison to the popularity NFTs person seen past year. The interaction the comparatively caller plus people had was some heavy and wide, seeping done to mainstream media and accepted quality outlets.

The occurrence NFTs person seen successful 2021 becomes adjacent greater erstwhile compared to different sectors of the crypto industry.

Their popularity was truthful large adjacent beyond the realms of the crypto industry—so overmuch truthful that Collins Dictionary chose “NFTs” arsenic the connection of the year.

“2021 was indisputably the twelvemonth of the NFT,” Pete Humiston, the manager of Kraken Intelligence, told CryptoSlate. “The assemblage surged from near-obscurity to mainstream headlines successful a substance of months. Not lone did newcomers admit the appeal, but truthful excessively did a divers scope of companies, from video crippled developers to established manner houses, who released their ain branded NFTs successful the 2nd fractional of the year, giving the assemblage the second-wind that helps explicate its standout outperformance.”

Diving heavy into the satellite of NFTs

While NFTs person been the astir fashionable plus people successful 2021, the occurrence they’ve seen wasn’t accordant passim the year. The archetypal question of popularity took disconnected successful Q1 2021 pursuing dependable maturation successful the last months of 2020.

At the opening of the year, arts and collectibles dominated the NFT world—everyone from celebrities to lesser-known integer artists issued their ain non-fungible tokens passim the archetypal quarter. Even accepted auction houses similar Christie’s and Sotheby’s leveraged the powerfulness of NFTs to grow and scope their offerings.

Chart showing the quarterly income number and income worth of NFTs successful 2021

According to Kraken Intelligence’s 2021 Crypto-in-Review report, the occurrence collectibles person seen seeped implicit into Q2. By Q3, astir of the NFT adoption was happening with in-game NFTs, pursuing a broader macro inclination that enactment much absorption connected metaverses and blockchain-based games. In the 2nd fractional of 2021, NFTs became progressively integrated into the euphony industry, with artists looking for caller ways to monetize their music.

By the extremity of 2021, the booming NFT marketplace had a precise divers assemblage and was comprised of respective distinctive sectors, including art, collectibles, DeFi, gaming, metaverse, and utility-driven NFTs. As CryptoSlate reported successful December, the largest maturation was seen successful the gaming sector, which saw a 70% maturation successful income count. The biggest summation successful the income worth was seen successful the collectibles sector, which recorded a 59% summation YoY, contempt having a humble 21% summation successful its income number erstwhile compared to 2020.

Kraken Intelligence’s information presents an absorbing conclusion—while collectibles saw the biggest summation successful income worth YoY, gaming tokens recorded a overmuch higher income count. This means that much radical adopted gaming NFTs than collectibles, but those that invested successful collectibles did truthful with importantly much wealth than successful 2020.

Chart showing the apical NFT sectors by income worth and income count

However, focusing connected 2021 unsocial paints a overmuch antithetic picture.

In presumption of income value, gaming NFTs saw the top maturation from Q1 2021 to Q3 2021—a whopping 7,302%. By Q4 2021, portion the hype astir NFTs successful astir sectors cooled off, metaverse and inferior NFTs continued to turn successful income value.

“This illustrates the level of involvement successful creation and collectibles astatine the opening of the year, and a gradual displacement towards the metaverse and inferior NFTs by the extremity of the year,” Kraken Intelligence wrote successful the report.

This enlargement into the gaming and metaverse assemblage caused galore planetary brands to motorboat their ain NFTs, NFT-based games, and metaverses. Nike launched Cryptokick, a level that issues NFTs with each footwear purchase, enabling buyers to verify the authenticity of their acquisition and store their footwear successful a virtual locker. Its rival Adidas announced soon aft that it volition beryllium issuing its ain “rare NFTs” this year. Even Louis Vuitton dabbed successful blockchain gaming, launching “Louis the Game,” an adventure-based NFT collecting crippled designed successful collaboration with Beeple.

It’s not conscionable large brands that saw the imaginable of NFTs—musicians, celebrities, and athletes alike each jumped astatine the accidental to disseminate their content.

Table showing the astir fashionable personage and jock NFT collections connected Ethereum successful 2021 (Source: Kraken Intelligence)

The imaginable of the NFT assemblage and the problems it needs to solve

The popularity of NFTs meant that they were the absorption of galore reports successful the mainstream media. And portion the crypto manufacture was falling caput implicit heels for the innovative approach to ownership, bequest media was alternatively reserved erstwhile reporting connected the caller plus class, focusing mostly connected the outrageous prices immoderate NFTs sold for.

What the bequest media failed to recognize were the implications NFTs had connected assorted industries. Kraken Intelligence noted that NFTs rapidly went acold beyond conscionable creation and made their mode into industries often controlled by middlemen with a higher stock of profits and power implicit the dissemination of content.

Since non-fungible tokens tin beryllium programmed to instrumentality a committee to their archetypal creator successful each sale, artists and musicians rapidly adopted them to region the request for relying connected a 3rd enactment to administer their content.

“Empowering creators connected an idiosyncratic level and eliminating barriers to introduction stirs a greater speech astir the transformative powerfulness of NFTs. While existent applications unsocial look revolutionary, the developments of this twelvemonth suggest to america that we person lone scratched the surface,” Kraken Intelligence concluded successful the report.

And portion Kraken’s analytics limb believes that we’ll spot continued request for the plus class, it notes that determination are inactive galore problems the assemblage needs to overcome.

It specifically refers to hacks and counterfeits. Most platforms and collections contiguous usage information retention solutions that trust connected 3rd parties to location NFT data, which are susceptible to exploits. Creating retention solutions that don’t trust connected 3rd parties would make much robust information for users and make a safer ecosystem.

The contented of counterfeit oregon duplicated tokens volition besides request to beryllium tackled successful bid to guarantee the longevity of the industry. The study identified a increasing request for a beardown verification strategy that tin place akin NFTs and supply assurance of authenticity.

If the abstraction manages to make these solutions and present much robust information measures, we could spot adjacent greater adoption, Kraken concluded.