Why the new NFT market can be bigger and reach mass adoption faster than the traditional crypto market?
The exchange of products has been at the core of human society for as long as humanity existed. The human economy is built around this system of exchange to generate value. The concept of a financial market dates back to the 14th century when Venice merchants/moneylenders began selling debt issues. Moneylenders exposed to a high risk, a high-interest loan might choose to exchange it for a low-risk loan. These merchants also sold debts to individuals and profited from the accrued interests on these debts. Also, in the 17th century, the East India Companies issued what we now know today as stocks to expand their fleets and then paid dividends to investors on the proceeds from their voyages. And because East India Company issued these stocks on paper, investors could sell the shares to other investors, giving rise to a secondary market which we call stock exchanges today.
A market is any system that allows for an exchange of tangible or intangible items. Over the years, financial markets have taken many shapes and forms, with different types emerging to fill gaps created by existing systems. Historically, we had just the capital markets encompassing the bond and stock market. Then we had the commodity markets, which facilitated the exchange of commodities like cocoa, coffee, fruits etc., all of which fall under the soft commodity basket, and complex items like gold, silver, oil, and gas. There are also foreign exchange markets that deal with the exchange of currencies, and now with the emergence of tradable digital assets, we have the Crypto markets.
The inefficiency of traditional financial markets
Earlier, we had pointed out that the East India Companies issued the first stocks within the 17th century. Still, in the same period, 1720 to be precise, the first financial crash occurred. The stockholders of one of the companies, the British East India Company, which enjoyed a government-backed monopoly, received huge dividends and sold their shares for astronomical gains. Everyone was willing to pay high prices to get their hands on those shares. Other companies were itching to get in on the action.
The South Seas Company issued their shares, and it sold out before they carried out any voyage expedition. The stock market was hot. On seeing how the South Sea Company’s made huge gains without doing anything, other companies quickly started issuing their shares. These actions spurred rapid growth within the market that ended up as a bubble as many of these companies, including the South Sea Company, promised investors dividends on unrealised proceeds. The result was the inevitable crash of the financial markets as companies began to default on their dividend payments. If this feels familiar even though we are in the 21st century, it’s because the same problem persists today.
Regardless of how advanced the financial market has evolved to be today, it’s still plagued by the “boom and bust” cycles resulting from the many loopholes in the system that appeal to industry experts and institutions due to the ludicrously unsustainable opportunities they present. So-called financial experts are willing tools to take advantage of these loopholes at the expense of individual investors and the economy. The most recent was the 2008 financial collapse which led to a new market.
Crypto — The new financial market
In 2009, bitcoin, the first cryptocurrency, was created. It was an act of defiance — a bold “no’’ to the old systems. A solution to the inefficiencies of the traditional financial systems, and with it came others like it. The problem is, it was perceived to be inapplicable, at least in the form it existed.
The primary reason for this was that no one understood precisely this cryptocurrency. It was touted as the new global currency, a currency that will replace the dollar as the federal reserve, and yet it suffers from massive fluctuations. From one narrative to another, currently portrayed as a store of value, a gold replacement, but holders could face hacks and lose their assets if not careful. And to add to these, this new financial system required some technical know-how to use, making it difficult for public use. Some thought, “how can something so unstable and inefficient replace the existing financial systems?” Analysts and the media were not having it. Bitcoin and even the broader crypto-economy have been brandished a large Ponzi scheme lurking for the next greater fool to prey on. Yet, it never went away. As predicted by many high-level individuals in the financial space, it hasn’t gone to zero. Instead, the underlying technology, blockchain, keeps getting better.
Before introducing decentralized finance — DeFi, the crypto market space was highly driven by speculations. The established use cases were not as practical as one would expect for a system looking to supplant the old. This had many people doubt its potential to replace the traditional market systems. But DeFi ushered a new wave of revolutionary products into the crypto market space. This new dynamic quickly started shaping the crypto market into something that could disrupt the old systems. Crypto market saw rapid growth as a result, but there was the problem of mass adoption.
But astronomical growth doesn’t in any way mean anyone without a fairly sound or technical knowledge could thrive in this space. Much more is required to attract the general public’s interest in the space, from clunky UI to incessant hack incidents and rug pulls.
NFTs — The gateway to mass adoption
In 2017, Cryptokitties became the first mainstream use case of the cryptocurrency market. The emergence of non-fungible tokens (NFTs) — a unique set of transferable data, immune to replication and alteration which can be attached to digital assets creating objects of value led to the development of products that appealed to the general public. In his words, Mack Flavelle, the originator of Cryptokitties said in an interactive session with Carl Reilly on Bankless …
“You do not explain why you’re using cats when you’re building consumer applications; you explain why you’re not using cats when you’re building consumer applications. They’re the gasoline of the Internet. People love them… Before the word ‘viral’ existed, cats had gone viral. If you’re trying to build things for normal people who do not give any F on how the magic works and you want them to care, then you put a cat on that mf”
And he was right. People might not understand what an ICO is, but people understand art and love cats. The result is evident! An exponential rise in the value of these digital cats, avatars like Cryptopunks and Bored Apes, and other collectibles. The NFT market has become a wild gold rush. From 2019, all NFT transactions’ total value increased from $62,862,687 to $250,846,205 in 2020. The growth continued in Q3 of 2021 with 412,578 active wallets getting enlisted while the previous quarter had 203719 with a total of 260489 buyers participating in purchasing NFTs in Q3 2021 an increase from 97658 in the previous quarter, according to data from NonFungible.com. Obviously, tokenization extends beyond digital arts to music, videos, and virtually every asset class.
Twitter CEO Jack Dorsey tokenized his first tweet and sold it for a whopping $2.9 million. In October 2020, the digital artist Beeple sold an NFT collection for over $3.5 million. One of his NFT collections was later resold on Christie’s auction for a whopping $69 million. The NFT market offered appeal and understandability to the general public, and demand skyrocketed as a result. Today, there’s little doubt on the potential of the crypto markets surpassing the traditional markets, and projects like PolkaCipher are doubling down on enhancing the mainstream adoption of NFTs through interoperability.
With the NFT rave currently ongoing, Polkacipher is at the center of providing a unique solution to NFT users. Polkacipher’s unique feature, NFTzie, is providing users with the world’s first NFT bridge. Built with the Metaverse in mind NFTzie is enabled with tools such as a Multichain NFT scan and other data pointers that will enable users to trade single assets from any chain. With NFTzie, users can bridge an NFT from one chain to another with ease cutting out middlemen and excess fees while simultaneously providing security and privacy.
PolkaCipher is a privacy-preserving oracle network on the Polkadot Blockchain focused on bringing the use case of private NFTs to off-chain businesses and be a bridge for seamless integration to on-chain Defi apps.
PolkaCipher’s unique offerings help push the use-case of the NFTs in real-world scenarios while still being connected to a cross-chain network that is fair and accurate. PolkaCipher intends to achieve business goals by helping users transact privately and securely using NFTs as a mode of access to different decentralized apps (Dapps) and real-world business rewards.