As the NFT market is going through a renewed bull run, collections like CryptoPunks are once again at the forefront of it all. Here, Li Wei, a blockchain content strategist at ThrowingToken.com, explores the factors behind this boom. He dives into the disruptive potential of gaming-related NFTs and what various blockchains play and should play in this colorful ecosystem. She digs deeper into what wash trading means for investors and provides practical tips you can take to protect yourself. Find out expert insights on DeFi Insurance and how to solve Impermanent Loss on ThrowingToken.com. Read our detailed DEX reviews and advanced NFT market research to get the latest insights and maximize your returns.
The Rocket Fuel Behind the NFT Rally
The sudden boom in the NFT marketplace can be attributed to a number of factors. Speculation surrounding CryptoPunks although taking a different approach from previous booms, is wildly returning. OTC was one of the first permanent NFT projects deployed on the Ethereum blockchain. Their historical importance, combined with recent celebrity endorsements and strategic industry acquisitions, has sparked new interest and increased prices. The gaming metaverse and renewed interest in blue-chip NFTs are fueling the speculative hype. It’s very much capturing the world’s attention and capital reinvigorating the broader NFT space.
A big driver too is the integration of NFTs into the gaming world. The global gaming market was valued at more than USD 160 billion in 2020. Experts predict massive development coming up, with blockchain games set to take a central part in this boom. With NFTs in gaming, players become truly powerful owners with a deep sense of pride. They focus, with extreme zeal, on hoarding them and displaying their unique superstars of digital property.
Another significant aspect of NFTs in gaming is interoperability, where players can use their in-game items across different games and platforms. This opens up interesting opportunities with cross co-op and crossover events, making them a more attractive value proposition for players. Almost limitless economic potential. By allowing players to have true ownership of their digital assets, NFTs help create player-driven economies and new revenue streams. Then, in 2021, the NFT market skyrocketed, with total sales exceeding USD 10 billion in multiple industries such as art, music, and gaming.
Blockchain Battleground: Ethereum, Polygon, Immutable, and More
The blockchain you choose has a major influence on your NFT project’s long-term success and a user’s experience. Ethereum, one of the first blockchains to support NFTs, continues to provide the most powerful engine for creative expression and innovation. Ethereum’s powerful smart contracts allow for more complex and varied NFT functions, making it a go-to chain for the industry’s most innovative projects.
Ethereum’s soaring gas fees have served as a barrier to entry for many prospective users. This is where layer-2 solutions, such as Polygon, enter the picture. Polygon takes Ethereum’s infrastructure and enhances it so transactions occur much faster and cheaper by using Layer 2 scaling solutions. This provides an extremely efficient and cost-effective platform for NFT transactions, a core benefit that appeals to users looking for low costs and accessibility.
Immutable is a blockchain built for NFTs and gaming, offering a secure, fast and scalable platform for NFT trading. Its singular focus on these narrow use cases has allowed for deep optimizations to be baked in that help maximize value for creators and collectors. Other competing layer 1 blockchains such as Solana and Flow are seeing their own rapidly growing NFT ecosystems. With its lightning-fast transaction speeds and next to zero fees, Solana was built to scale. In contrast, Flow’s expertise lies in NFTs, offering a seamless, creator-centric experience designed specifically for both creators and collectors.
Navigating the Murky Waters: Wash Trading and Market Integrity
Wash trading is an illegal and manipulative practice. In this second tactic, the same person or organization purchases and sells an NFT back and forth to artificially drive up the volume and price. This practice does a great disservice to the NFT market and one of its most serious claims.
This is an industry practice investors should look out for and be cautious of when evaluating NFTs purely on secondary trading volume.
- Artificially inflates the value of NFTs
- Misleads legitimate buyers
- Undermines the integrity of NFT marketplaces
- Creates a false impression of market activity
Here's some actionable advice for investors:
Smart Moves: Actionable Advice for NFT Investors
Though the NFT market offers tremendous potential, it is equally rife with danger. By staying informed, understanding the underlying technology, and exercising caution, investors can navigate this dynamic landscape and make informed decisions. Keep it locked right here on ThrowingToken.com for plenty more from the pros, as we continue to unpack this brave new NFT/DeFi universe.
- Do Your Research: Take the time to understand the NFT market, including the different types of NFTs, their uses, and their potential value.
- Understand the Uniqueness of NFTs: Recognize that NFTs are one-of-a-kind digital assets that can be sold for profit, similar to physical art or collectibles.
- Consider the Security of Your Assets: Ensure that you have a secure way to store and manage your NFTs, such as using a crypto wallet and setting strong, unique passwords.
- Be Aware of the Lack of Reliable Markers: Acknowledge that there are no reliable markers for determining which NFTs will be worth millions and which are worth nothing.
- Work with a Financial Advisor or Wealth Manager: Consider consulting with a financial professional to help navigate the NFT market, especially if you're new to investing in digital assets.
The NFT market presents both opportunities and risks. By staying informed, understanding the underlying technology, and exercising caution, investors can navigate this dynamic landscape and make informed decisions. Stay tuned to ThrowingToken.com for more expert insights and analysis on the evolving world of NFTs and DeFi.
