The Future of Ownership: Mapping the Non-Fungible Token (NFT) Landscape 2021

the NFT Startup Landscape broken down

Non-fungible tokens have been making a lot of headlines this year. It seems that every news organization has been attempting to answer questions like “Why would someone spend money on a jpeg that anyone can take a screenshot of?”. In this article we go below the surface, breaking down the NFT landscape and its latest developments. If you are new to the NFT space and require more background information I’d recommend reading this and this first.

arch 11 inaugurated a new era for digital art and non-fungible tokens. Mike Winkelmann, aka the digital artist Beeple, sold his NFT artwork Everydays for $69 million. That price did not only set a new record for digital-only art but also made Beeple’s piece the third-most-expensive work ever sold by a living artist at auction.

A few weeks later, Twitter CEO Jack Dorsey sold a digitally signed copy of his first-ever tweet from 2006 for nearly $3 million.

Developments such as these have created a strong interest in the NFT space. Even though sales have decreased in recent months, we see more and more founders, artists, celebrities, and investors entering the ecosystem.

And digital art is just the beginning. From punks, kitties, and NBA slam dunks to collateralized loans, virtual sneakers, and digital land in the metaverse: The NFT ecosystem has a lot to offer. Let’s dive right in.

The NFT Market Map

Note 1: Many of the start-ups/projects listed sit across multiple categories. For simplicity reasons, I’ve chosen one for each category.

Note 2: This is not an attempt at including every single start-up/project but rather an overview of the most prominent payers in each category. Criteria for selection were-if applicable- transaction volume (USD), VC funding, and media coverage.

Note 3: I am planning to update the map on a regular basis. If you feel that I’ve missed an important project in this space please reach out on Twitter or Linkedin and I’ll add it to the next version.

the NFT Startup Landscape broken down
The Non-fungible Token Landscape 2021 ©Ole Heine

1) Marketplaces

Digital marketplaces are an integral part of the NFT ecosystem. While the rise of digital crypto art drives the supply side (artists that sell their work as NFTs), a rising number of collectors and investors are entering the space as well.

One of the oldest and well-established marketplaces is OpenSea- a one-stop-shop for users to create and trade NFTs. In March this year, OpenSea raised a $23 million round of funding led by Andreessen Horowitz with participation from angels including Naval Ravikant and Mark Cuban.

Another marketplace is Rarible. The digital art marketplace recently announced their $14.2 million Series A from Venrock Capital, CoinFund, and 01 Advisors. Central to the platform is the platform’s Etherium-based token RARI. By owning RARI tokens, collectors can vote on proposals that affect the platform, moderate creators, and curate featured artwork.

Curated vs open marketplaces

When evaluating marketplaces, one major distinction is curation. While platforms like OpenSea and Rarible are permissionless, other marketplaces including SuperRare, Nifty Gateway, Foundation, Known Origin, and Makersplace require special application procedures.

On Foundation, artists need to get invited by another creator to list their digital work. Other platforms like SuperRare and Nifty Gateway require artists to upload an application video explaining their experience and motivation.

Royalties

The resale royalty is a percentage the creator will earn from secondary sales of their artwork. It is interesting to notice that royalties are handled differently across marketplaces. On SuperRare and MakersPlace artists receive a 10% royalty while artists on Rarible, Foundation, and NiftyGateway can specify the royalty on their own.

Other notable marketplaces are AsyncArt, Mintable, Zora, NFT Showroom, Blockparty, Cargo, Mitable, and ArtBlocks.

2) Digital Collectibles

Digital Collectibles are the second pillar in the NFT ecosystem and include items with little functionality and high emotional value (think baseball or football cards).

Punks, Cats, and LeBron James

The first Ethereum-based NFT experiment was CryptoPunks, which consisted of 10,000 unique collectible punks, each of which has a set of unique characteristics. The most expensive sale was CryptoPunk #7523 which has been sold for $11.8 million in a sale hosted by auction house Sotheby’s.

Cryptopunk
Cryptopunk
CryptoPunk #7523 (Source: Larva Labs)

However, it was CryptoKitties that took NFTs to the mainstream. Created in 2017 at the ETH Waterloo hackathon in Canada, CryptoKitties features a game that allows users to collect, breed, and trade virtual cats. “Generation 0” cats were sold in an auction and new cats could also be re-sold on secondary markets like OpenSea. The most expensive sale was a CryptoKitty called Dragon that went for 600 ETH or $172,000 in 2018.

Another famous project in this space is NBA Top Shot, a trading card platform for basketball moments created by DapperLabs in association with the National Basketball Association. In April an NBA Top Shot moment of LeBron James in which he emulates a famous Kobe Bryant dunk sold for $387,600.

Other collectibles include Sandbox, CryptoStamp, Avegotchi, MLB Champions, Meebits, TokenTrove, Hashmasks, and Avastars.

3) Games

Gaming platforms are an important pillar in the non-fungible token ecosystem because they attract non-crypto users to the NFT ecosystem.

A popular example is Sorare, a Paris-based gaming platform for creating and trading football non-fungible tokens. In the game, players can set up a squad of five cards to go against other Sorare fans and measure their performance based on the footballer’s actual performance during a football game. The winner of the match can earn rewards that can be redeemed for other cards or ETH. Sorare raised €40 million in Series A financing, led by Benchmark, with additional funding from Accel and angels including football players Antoine Griezmann and Rio Ferdinand.

One of the most famous crypto games is Axie Infinity launched in 2018 by Vietnamese developer Sky Masis. The game follows a play-to-earn model where players can battle, raise and trade digital creatures called Axies to build virtual kingdoms. In May this year, the parent company Mavis Sky raised $8.75m in funding from BlackTower Capital and Mark Cuban.

As the Covid-19 pandemic hit the Philippines, some Filipinos who lost their job were able to earn a living playing and trading Axies according to an article by Coindesk.

“With the money earned playing Axie, Filipinos have bought everything from nappies and milk for their babies, to shoes and shirts to wear to job interviews.“

Other notable NFT games are Gods Unchained, F1 Delta Time, Guild of Guardians, Splinterlands, CSC, League of Kingdoms, Lost Relics, ChainZ Arena, Crazy Kings, Evolution Land, and MyCryptoHeroes.

4) Infrastructure

Ethereum dominates the NFT Ecosystem, but there is room for improvement. As of July 2021, 8 out of the top 10 NFT projects ranked by sales are built on Etherium. However, high gas fees (the cost to conduct a transaction on Etherium), network congestion, and unsatisfying user experience remain a problem. This provides market opportunities for new players.

The main distinction has to be made between Layer 1 and Layer 2 solutions. While Layer-1 ‘Base Layers’ refer to the underlying main blockchain architecture, Layer-2 is an overlaying network that exists on top of the underlying blockchain.

Layer 1- Base Layers: Etherium, Flow

Layer 2’s & Sidechains: WAX, Polygon, Enjin, Charged Particles, Tari

4) Finance

Many interesting projects are evolving at the intersection of Decentralized Finance (DeFi) and NFTs:

NFTfi: One of the first platforms for NFT collateralized loans. Users can earn a yield by lending out ETH to users who put up their non-fungible tokens as collateral.

NIFTEX: A platform for fractional ownership of NFTs. It was launched back in May 2020, way before the NFT hype.

Other players include Armor.fi (DeFi Asset Coverage firm) and NFT20 (NFT index fund provider).

5) Domains

While traditional domains are mainly just website addresses, blockchain domains are linked to wallet addresses making it easier to send and receive payments. Domain name NFTs, replace complex cryptocurrency wallet addresses with a simple, human-readable name.

Leading players in this field are Unstoppable Domains, Etherium Name Service(ENS), and Handshake.

6) Tracking/Analytics

Tracking and Analytics platforms play an important role because they bring transparency to the NFT Ecosystem.

Leading databases and analytics platforms are Nonfungible.com, DappRadar, NFTbank, and Upshot.

7) Audio

Audio NFT platforms support musicians in the same way as digital art marketplaces support artists: they open new ways for creatives to turn their work into scares assets.

Audio NFTs remove centralized record labels and will help to produce greater freedom for artists, greater openness and availability for users.

Notable decentralized music streaming services are Audius, Rocki and Opus.

8) DAOs

DAOs “Decentralized Autonomous Organization” are member-owned communities that exist on a set of smart contracts. In the NFT context, DAOs can be used as an investment vehicle for NFT projects. Investors in the DAO are able to vote on proposals based on rules that have been established in smart contracts while each person’s vote is weighted by the number of owned tokens. If a proposed investment receives enough upvotes, the smart contract automatically triggers the transaction.

Flamingo: an NFT focused DAO giving its members the ability to develop and deploy NFT-focused investment strategies.

ArkGallery: a DAO that purchases Cryptopunks.

WHALE: The $WHALE token is a social token, created by WhaleShark, one of the largest individual buyers of NFTs. Owners of the token get a fractional stake in Whale Shark’s NFT collection.

FWB: $FWB is a social token representing a community of NFT artists and creators.

If you want to learn more about the DAO landscape, this article is a great resource.

9) Digital Fashion

NFTs are about collectibles, and so is the fashion world. One of the best-known start-ups in this space is the virtual fashion brand RTFKT, which recently announced an $8 million seed round from Andreessen Horowitz and C Ventures.

A virtual hoodie launched by NFT fashion brand Overpriced sold for $26,000. The owner can ‘wear’ the garment virtually by scanning a VR-code on the smartphone.

Other NFT fashion brands include DressX, Digitalax, and MetaFactory.

10) Showcases

You might be wondering now: ‘What is the point of buying all these NFTs if you cannot show them to the public?’ There are various ways and there is an entirely new industry evolving in that space.

Virtual Galleries: The Museum of Crypto Art, Flawnt and MOCDA are virtual galleries that allow collectors and artists to showcase their NFTs.

Digital Frames: Digital frames/displays from Blackdove, Qonos , Tokenframe allow NFT-owners to showcase their purchased artwork in real life.

Other interesting projects in this space are Showtime (social network) and Infinite Objects (printing service for NFTs).

11) Virtual Worlds

Have you played Minecraft, Fortnite, or Sims? Then virtual worlds are probably for you.

Virtual worlds are computer-simulated worlds where users relate with each other like in the real world.

Decentraland is one of the most famous virtual worlds and offers a new experience: Most everything in Decentraland is an NFT. From virtual land to the art on the walls in virtual galleries- players can buy, collect, and sell assets that exclusively exist in the virtual world. Decentraland is divided into different districts ranging from gambling district Vegas City and shopping district Metajuku to education and business districts where users can meet up and collaborate.

Shopping District Metajuku where users can purchase virtual clothes
Shopping District Metajuku where users can purchase virtual clothes
Shopping District Metajuku where users can purchase virtual clothes (Source: Decentraland)

In June, a patch of virtual land in Decentraland sold for more than $900,000 making it the most lucrative purchase of NFT land ever.

Other players like Somnium Space, Upland, and Cryptovexels (also called the ‘Blockchain Minecraft’ because players build with blocks) are on the same mission. They allow users to buy virtual lands, build objects, and monetize them by trading them on platforms like OpenSea.

Looking ahead

When comparing NFT sales history from May to today, it seems like the NFT bubble has popped. Overall sales plunged from a seven-day peak of $176 million on May 9, to just around $8 million in mid-July according to numbers from Nonfungible.

Many market observers draw parallels to the dot-com bubble in the late ’90s. As growth in the technology sector stabilized after the crisis, Web2 companies like Google, Facebook, and Amazon emerged and have reshaped our day-to-day lives.

Which companies will lead the field in Web3? Maybe they are already on this map. We’ll find out soon.

I hope this article helped to spark your enthusiasm for the world of non-fungible tokens. If you have comments and feedback I’d love to hear from you on Linkedin or Twitter.

Early Stage VC | writing about DeepTech and Web3