The Value and Development Status of NFT — Cipholio Ventures

NFT, known as Non-Fungible Token (NFT), is a cryptocurrency with characteristics such as indivisibility and scarcity. 2021 has seen unprecedented interests and growths in NFT. As shown in the chart below, the amount and number of transactions in the NFT market rose significantly from the beginning of 2021 compared to 2020, with a total transaction amount of $18.6 billion for the year. It is no exaggeration to say that the growth of NFT has played a great role in boosting the overall cryptocurrency market.

Image 1: NFT’s Trading Volume and Number of Transactions (Source: CryptoSlam)

I. Overview of NFT ecosystem

The NFT ecosystem can be broadly divided into infrastructure, application and service platforms.

(i) Infrastructure

NFT is a crypto asset created on the blockchain, and the casting, trading and other applications of NFT have to be supported by the infrastructure. The infrastructure of NFT includes the underlying public chain, storage, identity system, development tools, and so on.

The fundamental public chain layer is responsible for the NFT ecosystem’s security and scalability, and the development of upper-layer application projects is constrained by the infrastructure’s performance. Ethereum is the primary ecosystem for NFT development, and mature and widely used NFT protocol standards such as ECR721 and ECR1155 already exist.

To address Ethereum’s performance and gas fee issues, numerous projects have launched various solutions:

  • Firstly, to establish a new public chain that is more conducive to NFT development, such as Flow.
  • Secondly, to build a Layer 2 that is more performant within the ETH ecosystem, such as Immutable X.
  • Thirdly, to establish a side chain, typically represented by Ronin.

Storage plays a critical role in the NFT infrastructure. Currently, the majority of NFT projects only record ownership data on the chain, but data such as images, music, or gaming components that reflect the exact form of NFT are stored off-chain.

It is to ensure that ownership is not tampered with while keeping storage costs low. Off-chain storage typically takes the form of centralized cloud storage or decentralized storage, such as IPFS. Due to the popularity of NFT, there is a high need for storage and the room for development is huge.

A critical component of the NFT ecosystem is the decentralized identification system (DID). DID adheres to Web3’s primary principle by enabling users to own and manage their digital identities. Decentralized Identity has no transaction attribute and is more about utility value.

(ii) Proposals for applications

In general, there are numerous types of NFT projects, for instance, images, audio, videos, and other forms of media. NFT may be classified into two types based on the production dimension: those that are mapped to tangible assets and those that are native to the blockchain.

  1. NFT mapping to physical asset

Physical asset mapping NFT is a kind of NFT that has a direct mapping relationship with the real world, such as making real estate, famous paintings, into a one-to-one corresponding NFT on the blockchain. Some anti-counterfeiting and traceability blockchain projects will map physical assets to the chain in the form of NFT, so that physical assets can be tracked.

However, there are many problems in the implementation of the NFT of physical asset mapping. The type of NFT that simply anchors to a physical asset has the possibility of being copied, modified and deleted, and may be plagiarized and pirated by evil doers.

Meanwhile, the problem of on-chain and off-chain synergy is difficult to solve, and the lack of clear definition of NFT statement ownership by holders means that the value of NFT is unclear. Moreover, IP disputes and legal conflicts may arise with physical assets, which may also bring asset losses to NFT holders.

2. Native NFTs on the blockchain

Another form of NFT is native assets on the blockchain, which are created, sold, and destroyed on the chain. These assets include, but are not limited to, collectibles, artworks, and gaming assets. Compared to non-native NFTs, Native blockchain-based NFTs are more extensively utilized, more open, and easier to deploy. Almost all virtual assets and personal identities in the blockchain world could be realized as NFTs. In terms of development trend, NFT native to the blockchain avoids issues such as on-chain and off-chain synergy or copyright conflicts, and will eventually become the mainstream of the NFT industry.

Collectibles are the mainstream NFT asset class at the moment, and their scarcity attracts a large number of investors and collectors. Bored Ape Yacht Club (BYAC) is a set of 10,000 ape NFT collectibles. Apart from collecting, BYAC includes a social attribute. Gaming assets are NFTs that can be minted, utilized, traded in any blockchain game (e.g. virtual lands, weaponry). In addition, NFTs that are applicable in DeFi liquidity mining, SocialFi, DAO have already existed in the market.

3. Service platform

Service platforms are NFT trading platforms and data platforms derived from NFT projects. At present, some well-known NFT trading platforms are led by giants like OpenSea and LooksRare. In addition to trading functions, these platforms also provide NFT minting and issuance services. The main functions of the data platform include NFT information search and query, transaction records, minting and transfer record display and so on.

II. Directions for Future NFT Development

1. Improvement of infrastructure

The public chain, layer 2 and side chain have different advantages and downsides. The application project needs to make trade-offs and choices according to the actual situation. After Axie Infinity successfully launched Ronin, it is expected that more and more NFT projects will choose to develop their own infrastructure to meet special customization requirements.

Meanwhile, the interoperability between different NFT projects and ecosystems is also an issue to be solved. NFT’s infrastructure still has a lot of room for improvement. More developers and users will be attracted to join the ecosystem when the infrastructure is more compatible with NFT projects.

2. DID system

DID system is the entrance of all businesses run in Web3.0 and Metaverse, with that in mind, DID system is also a very promising NFT application direction. On the one hand, Decentralized Identity can record the historical behavior of users, and then build an online credit system to provide data support for other applications. On the other hand, with the help of NFT, different identity permissions can be set for different users, so as to meet special compliance and access requirements.

3. NFT lending

The combination of NFT and DeFi is very attractive, such as decentralized NFT lending. As a non-standard asset, the classification and pricing of NFT assets are very difficult. How to make the price of NFT more fair is a key problem that needs solving. Price discovery contributes significantly in all lending systems. NFT price discovery is currently categorized into lender pricing, auction pricing, centralized platform pricing and Oracle pricing. At the same time, the risk control mechanism design of NFT lending needs to be more reasonable and comprehensive, especially when the market is on a downward trend.

4. NFT data platform

Data platform is a very important source of information for users. For example, Etherscan plays an important role in the Ethereum ecosystem. With the increase of users and activities on the chain, data analysis of NFT becomes increasingly significant.

The data platform comprehensively analyzes the source data of NFT, and then provides users with search query, rarity query, whale tracking and new project dynamics. Through the data platform, users can timely obtain information such as NFT price change, rarity and on-chain transactions as a guidance for NFT investment.

5. Creator economy

Blockchain and NFT provide a new exploration direction for the creator economy. As the market has given more recognition to the creator economy, there will be more NFT creators in the future. Creator economy that integrates with NFTs will bring out a revolution in the production relationship, meanwhile the communication and collaborative efficiency between people will improve, as well. On top of that, the working form and income distribution model will also have a significant change.

III. Representative projects


NFTSCAN is an NFT asset browser. Its core functions mainly include: NFT asset information search and query, transaction record, NFT real-time minting and transfer record display, as well as transaction records of wallet addresses. NFTSCAN is an early API project for NFT. It has a layout for B-side users and C-side users. For B-end users, it mainly provides developers an API interface for data query and display, and market influence set-up; For C-end users, it is mainly data analysis services. It is expected to form a closed-loop ecosystem in NFT minting, retrieval, trading and sharing.

Recently, NFTSCAN has completed a thorough NFT data analysis of BSC ecology, and will release an NFT API and browser based on BSC ecology. Meanwhile, an authentication function for NFT developer’s signatures and a Web3 wallet login function for users have been launched, equipping this project with social attributes and functions.


NFT3 is a decentralized identity system. Compared with other DID projects, NFT3 owns an on-chain credit system. The NFT3 project team visualizes DID via NFT, so that users can use NFT as a representation of identity. NFT3 also gives credit rating through on-chain transaction history to provide data reference for subsequent DeFi lending and other activities. NFT3 plans to integrate and be compatible with other ecological standards, realize multi-chain ecological interoperability, and provide DID services in Ethereum, Polkadot, Cosmos and other ecosystems. At present, NFT3 is developing its MVP product.

IV. The Current Market situation of NFT

Since 2021, the transaction volume and transaction amount of the NFT market have increased rapidly. The wealth creating effect and celebrity effect have attracted more and more participants into the market, making NFT excel in the blockchain world. Celebrities, influencers and grassroots have launched their own NFT.

Diversity of NFT Participants

  1. Celebrities

Many NBA stars have cooperated with NBA Top Shot, including NBA players LeBron James, Shaquille O’Neal, Allen Iverson, etc. to release personal highlights NFT and obtain additional income through NFT sales.

Image 2: NBA Top Shot Poster (Source: Official Website)

In China, celebrities from Hong Kong and Taiwan are active groups in the Chinese entertainment industry who have openly participated in NFT. It is expected that more and more Hong Kong and Taiwan stars will launch NFTs that link with themselves in the future, becoming a great force of NFT in Asia and the Chinese region.

In January 2022, Ezek, the NFT platform, cooperated with PHANTACi, the clothing brand of Jay Chou, and released PhantaBear series NFTs, which will issue 10000 NFTs in total. Ezek is a new generation ​​decentralized entertainment platform incubated by Starvision Entertainment Ltd. (s.e.l) based on blockchain technology. Its founders WillL and MarkG have cooperated with Jay Chou to launch many movies. The price performance of PhantaBear is good, and the holders of PhantaBear can also obtain the physical store’s clothes and other peripheral products.

Image 3: PhantaBear NFT Price (Source: OpenSea)

Celebrities have great influence themselves and can empower NFT through popularity. The narrative of NFT is far greater than the fundamentals. The key narrative of celebrity NFTs lies in the influence of the star itself, the binding degree and additional interests between the star and the NFT. The famous celebrities’ NFTs will be popular in the early stage, but the sustainability of the market heat depends on the continuous construction of community and the design of rights and interests.

2. Online Influencers

Irenezhao, an Internet Idol/influencer, casts NFT with her photos and various meme words has grabbed the attention from many NFT investors, with a total trading volume of more than 2500 ETH.

Image 4: IreneDAO’s screenshot (Source: OpenSea)

Influencers’ NFT projects will have certain talk-points and first-mover advantage in the initial stage, but the heat and sustainability are more uncertain than those projects of celebrities. Influencers’ NFT projects depend on the size of KOL’s fan group and the unique selling point and differentiation of the NFT itself.

3. Grassroots

The representative of grassroots NFT is an Indonesian young man named Ghozali Ghozalu, who has taken selfies since 2017 and made his photos into NFT. This dowdy young man from a small town in Southeast Asia has released more than 900 NFTs of selfies.

Image 5: Ghozali Everyday’s screenshot (Source: OpenSea)

Many people believe that Grassroots NFTs fulfill the spirit of Web3.0, and such spirit itself is a breaking point. Grassroots narrative NFT is also a creator economy. It should be noted that compared with some luxury NFTs (rare collections, limited edition of top star NFTs, etc.), the risk of devaluation of grassroots NFTs is greater after a reduction in attention.

The Value of NFT

Participants in the cryptocurrency market have different views on the rapid rise of NFT. Some people believe that NFT represents the future for blockchain development and has very high value and development potential. On the other hand, some think that the current NFT market heat is entirely the result of overspeculation, and there is a big bubble risk.

The term “value” refers to the benefit relationship established by the object’s ability to meet the subject’s demand. From this point, an object’s value is determined by its ability to satisfy a subject’s subjective wants. Due to the fact that NFT represents a variety of distinct asset classes with varying values, the source of value for NFT varies according to the asset class it represents.

If the NFT represents real estate, famous paintings and other tangible assets, then the value of such NFT is related to the value of physical assets. The NFT mapped by physical assets can represent the real ownership of a physical asset or the usage right on a blockchain. Additionally, the value of NFT varies significantly between designs.

The native blockchain-based NFT is not supported by physical assets, so there is no reference for its intrinsic value. The value of such assets depends more on the empowerment from the project team, market consensus and supply-demand relationship.

1. Utility/ Use Value

Utility is the most extensive value generator for NFT. In order to make NFTs valuable and sustainable, the project needs to continuously empower these NFTs to have practical use scenarios in the ecosystem. For example, NFT can be used as a ticket to participate in a game, or you can participate in a lottery and get airdrops from time to time. The size of the scenario plays a great impact on the usage value of NFT. If a NFT can be used in many different scenarios, even cross platforms and cross ecosystems, the usage value of NFT will be extremely high. With the development of the market, NFT has become a way for some people to show their identity and wealth, which is also an embodiment of NFT’s utility.

2. Collection value

In the early stage, most NFT projects started as digital collectibles for NFT believers and investors. Due to the scarcity of NFT, many investors highly recognize the collection value of NFT. With the development of the NFT market, more and more investors begin to pay attention to and participate in the NFT market. With growing demand for NFT, the scarcity of high-quality NFT will be emphasized, and so the collection value of such NFT will be higher.

3. Historical value

Unlike the BTC equivalent tokens, the issuer and holder of each NFT can be clearly recorded on the blockchain. The historical value of NFT depends on the identity of the NFT issuer and holder. If an NFT has been owned by celebrities, the historical value of the NFT will be a lot higher.

4. Future value

Future value is the future earnings that NFT holders can get. For example, a musician publishes his/her NFTs and agrees that the holder of NFT can participate in the share of his/her future income. Blockchain and NFTs provide a new direction for exploration to this kind of creator economy. Creators can issue NFTs to loyal fans and investors, and share future benefits with fans or investors while improving user stickiness. Moreover, through this model, they can get rid of the restriction of centralized platforms.

Demands of participating in NFT Market

NFT is a critical link and catalyst for the creator economy’s development. With the market’s greater recognition of the creator economy, there will be more and more NFT creators in the future. However, the increase in numbers will exacerbate the difficulties of one’s success, as it will confront bigger challenges in terms of market heat and sustainability.

NFT’s buying demands are mainly driven from the following three categories.

  1. Speculation in the NFT market. Participants who believe that the NFTs will appreciate in value.
  2. Idol support. Fans who want to show their support to the celebrities.
  3. Fondness of the concept and design of NFT.

A high-quality NFT project should be able to meet all the above-mentioned conditions, yet such projects are hard to find.

Projects that meet Condition 1 often need to have a good NFT narrative, and the project is unique in terms of its rarity, degree of consensus, and business model. NFT projects that meet Condition 2 are more dependent on the connection between NFT and the representation of support, and community management, and celebrities and projects with greater influence are more likely to be sought after. In general, NFT projects that only meet Condition 3 have limited potential to develop, and participant demands are usually lower.

V. Summary

There is certainly speculation, hype and bubbles rampanting in the development of the NFT market. However, it cannot be denied that NFT has usage value, historical value, collection value and future value, and more and more participants recognize these values for a reason. In the long run, the value of these NFTs depends on their specific use scenarios and benefits. Brand binding with NFT will become more prevalent, and the influence of one’s brand could help create public-recognized NFTs. It should be noted that the majority of NFT projects begin with fans in social media. From a long-term perspective, project parties are recommended to constantly empower their NFTs.

Compared with physical asset mapping NFT, the native blockchain-based NFT is an NFT with wider application, higher flexibility and easier implementation, and will become the mainstream of the NFT market in the future. However, the legal supervision of both types of NFTs is still missing. Once intellectual property and investment interests are involved, it will be very difficult for users to defend their rights.

NFT has lots of room for future development. Basic infrastructure is an important factor that determines the survival and development of an ecosystem. The underlying infrastructure of NFT requires additional security and performance enhancement. Additionally, as infrastructure improves, NFT will attract more investors and developers. The realization of NFT interoperability, the combination of NFT and Dao for governance, and the combination of NFT and DeFi for investment return are directions with huge potential.

When discussing with various NFT project teams, they have all emphasized on the value of talents. According to their responses, the technical issues encountered during the development process are minor, however assembling the right team members is more challenging. As with projects in other fields, recruiting talents with common goal values is a typical issue in the blockchain world.

Disclosure: Cipholio Ventures is an investor of NFTSCAN and NFT3.



Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store