CoinEx丨An Insight into NFT That Is Booming in Its Inroad into Other Industries

By: CoinEx Institution

Recently, the non-fungible token (NFT) has frequently come to the spotlight of many industries. It has gained popularity both at home and abroad. To be specific, eBay announced its plan to allow users to trade NFT on its platform, a skull painting by Jean-Michel Basquiat fetched as much as nearly 600 million NFT at Christie’s, and RIMOWA even rolled out NFT digital art outside its traditional business… What turns this blockchain technology into a new financial product that swept through the whole financial market overnight? NFT is like an interface between investors and the “Pandora” box of an open world.

While breaking boundaries of industries, NFT has heralded a new future

NFT, short for Non-Fungible Token, is indivisible, irreplaceable, and unique.

On the blockchain, digital cryptocurrencies are divided into two categories: coins and tokens. The former, such as BTC and ETH, have their own mainchain and use transactions on the chain to maintain ledger data; tokens are attached to the existing blockchain and use smart contracts to record the ledger, such as those developed on Ethereum. Among the tokens, there are fungible tokens and non-fungible tokens.

The fungible token, or FT, can replace each other and can be infinitely split. For example, there is essentially no difference between the BTC you have and the BTC I have, because BTC is a fungible token. Fungible tokens are easy to use, but things with actual value in real life are irreplaceable, such as a contract, house property rights, works of art, and birth certificates. Then non-fungible tokens came as a response.

The non-fungible token, or NFT, is unique and indivisible. Its uniqueness usually links it to specific assets in the real world and can be used to prove the ownership of digital items (such as game skins) and even the ownership of physical assets.

The two underlying protocol standards of NFTs

ERC-721 Standard

It was created and published by Dieter Shirley, CTO of CryptoKitties. Compared with the ERC-20, the ERC-721 protocol boasts more functions and more advanced technology. This protocol is the first standard of Ethereum for NFT digital assets, and it is applied to projects such as CryptoKitties and Decentraland.

Although ERC-721 has fewer use cases than ERC-20 and its functions are still under exploration, it is advantageous in the ability to secure the ownership of assets (such as paintings, bonds, houses, or cars), make the transfer of the ownership convenient, and keep the ownership history tamper-resistant and transparent. In addition, ERC-721 can also facilitate the tracking, trading and management of real assets. With the increasing popularity of in-game virtual assets as well as 5G and VR technologies, the ERC-721 protocol, equipped with blockchain technology, would definitely embrace a bright future.

ERC-1155 Standard

ERC-1155 is a new token standard released by Enjin, a game development service provider. It aims to help game developers save capital and promote atomic swaps to improve the trading efficiency between tokens. The biggest improvement lies in that it can integrate different tokens for packaging and processing.

In the current token systems of ERC20 and ERC721, users need to go through four independent steps for swaps, which is cumbersome and time-consuming. But with the ERC-1155 Standard, users can bundle all the tokens they want to swap in one contract, which requires only one step of approval. In addition, single or multiple tokens can also be sent to single or multiple receiving addresses in one go, thus saving a lot of gas fees and improving efficiency.

Comparison of the Two Major NFT Standards

Here is a simple example. When you shopped on Taobao in the past, you had to pay every time you bought something. But now you have ERC-1155, which serves as a shopping cart in Taobao, you just put whatever you want in it and then pay once. Isn’t it easy and time-saving?

Yet still, it takes some time before we can assess the application of this young standard.

NFT Applications and Good Practices

There is a popular saying recently: “Anything could be owned through an NFT,” a vivid evidence of the extensive application of NFT.

As we know, most assets in the real world are non-fungible assets. To list these assets on the chain, or to find their corresponding digital form, NFT will be the most suitable standard. So we firmly believe that this will be the second largest application scenario of the blockchain beyond finance.

NFT can be applied to scenarios such as digital artworks, collectibles, in-game items, virtual worlds, sports competitions, fashion entertainment, identity verification, insurance, infrastructure such as domain names, digitization of physical assets, and electronic tickets or coupons. Simply put, it is mainly applied in games and digital art.

NFT based on blockchain technology can record a player’s status and achievements in the game, and in-game items such as weapons, equipment, and characters can all become NFTs. NFT can verify the ownership of in-game items and their authenticity. It is now applied in games such as CryptoKitties, Axie Infinity and Aavegotchi.

Digital art is another mainstream application of NFT. Each artwork can be presented in the form of NFT, which guarantees artists’ copyright and the authenticity of the artwork for buyers. In addition, without middlemen, artists or encryption art can earn more income. SuperRare, OpenSea and MakersPlace are all NFT art platforms.

Good Practices


Axie Infinity (AXS) is an NFT game similar to Pokemon that collects and raises all kinds of creatures. Players can earn tokens for profit through the game.

F1 Delta Time (REVV) is a blockchain game licensed by Formula 1®. All its cars are officially licensed by Formula 1®. The NFT in the game includes unique cars, drivers, car parts, and driver equipment or tires.

Illuvium (ILV) is a decentralized NFT collection and automatic battle game built on the Ethereum network.

Collectible artworks

As a leader in the collectibles, NBA Top Shot, developed on FLOW, has fetched a historical turnover of over US$320 million within only half a year since its official launch, far exceeding the last nine in the ranking list combined. It has become the fastest-growing NFT project.

CryptoPunks is the first-ever experimental NFT application on Ethereum. There are 10,000 NFTs in total, and each is unique. Larva Labs, the development team of CryptoPunksd, gave away 10,000 NFTs for free at the earliest, which pushed this project to a climax at that moment. Yet without sufficient trading methods and a wallet plug-in compatible with Web 3 explorer applications, CryptoPunks was left idle. These days, however, CryptoPunks seems to embrace a boom. Up to now, it has created a historical turnover of US$98.848 million and served 10,286 buyers, with the average selling price approaching US$54,000.

Hashmasks is a digital art collectibles project created by more than 70 artists around the world. It has a total of 16,384 NFTs, and each is a unique personal portrait. Users can purchase these portraits and name them. At the same time, each work has 5 scarce elements, with different degrees of scarcity, which will be extracted at random by Hashmasks on the chain. Hashmasks even adopts a special way of auction — blind boxes, and the auction price follows the bonding curve model.

NFT trading platforms

Opensea (no tokens listed yet), known as the “eBay of blockchain games”, is undoubtedly the leader in the trading market, and currently supports more than 13 million projects. In the world’s largest NFT comprehensive trading market, users can trade encrypted artworks, collectibles, in-game items, and other digital assets based on Ethereum ERC-721 and ERC-1155 Standards, by means of direct trading, Dutch auction, English auction, and OTC trading. Opensea will charge 2.5% of the sale price as a commission after the transaction, and some game developers will also charge a transaction fee of 7.5% of the transaction amount.

Rarible (RARI) is a creator-focused marketplace and issuance platform for NFTs where users can create and sell digital collectibles without coding skills. In July 2020, Rarible listed its native governance token RARI, which is allocated according to users’ weekly purchases and sales. Users can spend these tokens on buying and selling NFTs. The most active creators and collectors can even enjoy governance rights by holding RARI to vote for the upgrade of any platform and participate in the management and review.

SuperRare (no tokens listed yet), established in 2017, is undoubtedly the most “disruptive” in the entire NFT trading industry. Based on the Ethereum ERC721 Standard, SuperRare sets a high threshold for artists. All works must be original, and artists will be reviewed once a week, which, to a large extent, guarantees the high quality of the encrypted artworks. At the same time, SuperRare’s special incentive mechanism is one of the important reasons for its continuous inflow of a large number of artists: artists can get 85% of income after selling their works for the first time and even 10% of the sales volume in the secondary market permanently.

SuperRare has grown with leaps and bounds, with both user base and transaction volume on a rapid rise. It has fetched a total transaction volume of over US$20 million and sold over 17,000 artworks, the average transaction price of each artwork being US$1,460.45.


Audius (AUDIO), a decentralized music sharing and streaming protocol, is designed to promote direct transactions between listeners and creators, so that everyone can freely distribute, commercialize and stream any audio content. Founded in 2018, Audius is now home to over 3 million monthly active users (MAUs) with over two million streams across more than 100,000 tracks, and has cooperated with artists such as deadmau5, 3LAU, and RAC.

Social Tokens

Whale (WHALE), created by the NFT giant WhaleShark in May 2020, is indirectly underpinned by all of NFTs in the crypto market. Players can stake valuable NFT as collateral to obtain WHALE. These NFTs will be stored in The Vault of WHALE and are managed by Whale DAO. WHALE holders can also purchase or rent NFT works in The Vault.

Virtual Worlds

Decentraland is a virtual world based on the Ethereum blockchain. It is similar to virtual world games such as “Second Life” in terms of design and operation. Decentraland allows users to create and run all items and assets and profit from them. Users can buy “LAND” (by means of Dutch auctions) and record the transaction history of this “LAND” on the chain. At the same time, Decentraland also has three types of applications, i.e. art galleries, virtual parties and virtual meetings.

Its token MANA can be used to purchase real estate and other items in the virtual world, such as artworks. MANA is also among the new currencies invested by Grayscale.

The Sandbox is a decentralized virtual world game built on the Ethereum blockchain, where creators can make 3D VOXEL assets and monetize them through non-fungible tokens. In the future, The Sandbox may allow users to import a scan of real-world objects into it.

The Sandbox is one of the star projects of the current NFT ecosystem. Its total transaction volume in the first public sale of 1,200 plots of LAND this year reached US$74.9 billion. In the recent second sale of another 2,302 plots of LAND, 1,078 plots were sold in less than 1 minute.

Domain Names

Ethereum Name Service is a distributed, open and extensible naming system based on the Ethereum blockchain. Just like DNS resolves domain names into IP addresses, ENS resolves Ethereum names into Ethereum addresses. Once you acquire an ENS domain, you can point it to any kind of funds you want, as well as create subdomains, similar to Internet domain names.

Unstoppable Domains is a scalable, distributed and open naming system based on the Ethereum blockchain. It has been backed by Draper Associates and Boost VC, and has received funding from the Ethereum Foundation and Zilliqa Foundation.


Enjin is an established blockchain game development platform. Its CTO has developed ERC-1155, a new standard for Ethereum, which makes it easy to develop games. The ERC-1155 Standard can even be applied to all the other industries. Amid its constant moves in the first year of the NFT era, Enjin has cooperated with the established game manufacturer Atari, and then Enjin Coin (ENJ) has been approved by the Japan Virtual Currency Exchange Association (JVCEA), the Japanese cryptocurrency exchange regulatory body. For the time being, Enjin is about to launch the interoperable bridge network JumpNet (similar to Polygon) and Efinity, which is Enjin’s public chain, in an attempt to “redefine the NFT market”. These two blockchain solutions will promote the support of NFT and completely eliminate the high gas fee of Ethereum.

FLOW is the hottest NFT public chain for the time being. Dapper Labs, its creator, has developed the sensational CryptoKitties, and its CTO has developed the ERC-721 Standard, laying a foundation for the NFT. With a pipeline architecture, FLOW can divide the jobs usually completed by a single node into five different node types, thereby significantly reducing redundant work and improving efficiency. A cryptographic technology called “Security Proof-of-Concept Keystone” (SPoCK) will be adopted to better meet the needs of decentralized game applications. This method allows developers to safely and easily build on each other’s code, creating new products and services at a faster rate. At present, many NFT art platforms and games are developed on FLOW. NBA Top Shot, which has the largest NFT transaction volume, is currently running on FLOW.

Immutable X (no tokens listed yet) is a dedicated L2 solution for scaling NFTs on Ethereum built by the creator of Gods Unchained. It allows users to trade their NFTs without paying gas fees using what is known as a Zero-Knowledge (ZK) Rollup. Aside from just the savings in gas fees, this provides a variety of benefits, including:

  1. Immutable X boasts self-custody of NFTs with the same level of security as mainchain Ethereum, something not seen in alternative scaling solutions.
    Transactions are instant, and moving back to mainchain Ethereum is trustless and verifiable.
  2. Unlike other Layer 2 solutions, users do not need to own a unique L2 token to trade NFTs.
  3. Immutable X will provide turing-complete general computation thanks to Cairo, technology developed by their partners over at StarkWare.
  4. Concentrated liquidity means that game assets are immediately available on all IMX-supported exchanges.

Immutable X has a strong lineup of investors: Naspers, Galaxy Digital, Coinbase, Continue Capital, etc.

In addition, there are Phantasma (SOUL), FORTE (no tokens listed yet),

Unique network (no tokens listed yet), and NFT chains based on Polkadot and Kusama for games.

NFT becomes a new carrier of value, with insight into the future of blockchain technology

At present, the blockchain technology centering on NFT is injecting vitality into various fields. However, there remain many bottlenecks in the current ecological environment.

Compared with the popular DeFi ecosystem previously, the NFT ecosystem still needs to be improved at this stage. Unlike the segments in the DeFi fields that share similar business and investment logic, the niche market of the NFT is clearly differentiated, with projects varying a lot from each other, and only a small part of segments are fully fledged and worthy of investment. That has resulted in insufficient synergy between NFT projects and the segments and thus limited influence.

Many users shrink back at the sight of complex terms such as private keys, wallets, and mnemonics involved in NFT. In addition, the emerging niche market of the NFT has poorer liquidity than DeFi projects. Without prudent consideration, you may find it hard to sell the NFT of some items.

With a regulatory vacuum across the world, NFT is developing wildly. Tied to physical items, NFT may be used by criminals to launder money or trade things illegal. In addition, as the value of NFT mounts and the ecosystem gradually expands, it may become a new target for hackers after DeFi, and its network security vulnerabilities seem to be another potential risks as well.

NFT, like DeFi last year, breaks the boundary of industries once again, empowering multiple industries such as art, games, and cultural creation. Besides, the true significance of NFT is to provide a channel through which real-world items can be listed on the chain, as a bridge linking the physical world with the blockchain world. Apart from the existing in-game items, art collectibles and other applications, there will be more real assets, such as real estate and copyrights, that can be listed on the chain in the form of NFT, giving rise to ever more diverse applications.

The emergence of NFT has brought brand-new changes to the ecosystem and business model of the entire industry, and high-quality assets will keep improving market liquidity. First of all, it is expected that more high-quality comprehensive trading platforms will appear in the NFT field, providing users from all over the world with a place to mint or trade NFT.

Commercial bills such as bonds and insurance policies need to carry a large amount of information in circulation and transactions in the financial market, and, therefore, they are unique. NFT is tied to different physical objects, and the information of bills can be tracked. That means NFT can empower the financial industry, giving itself a bigger play in this field in the future.

Moreover, DeFi can provide liquidity for NFT. High-quality and widely recognized NFT assets can be staked in the DeFi contract so that users can purchase new assets after staking their NFTs. Therefore, high-quality NFT assets will improve market liquidity.

Predictably, the coming three to five years will see a market reshuffle in the NFT field. The winners will acquire and integrate NFT-related companies to expand the user base and the business scale.



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