The nft market - Overall

1.2 The global NFT market

Market size and market capitalization

Estimates of the size of the NFT market vary depending on what is taken into account. Transactions that take place "off-chain" (***), such as NFT art sales at auction houses, are often not included in the data.

At the end of ****, the magazine 'Les Numériques', tells us that NFT sales brought in $** billion in **** . The figures fromDappRadarwhich include several blockchains and off-chain transactions, put the total sales volume for **** at $**.* billion. By way of comparison, in ****, total sales were estimated at $** million. Another company tracking the market,CryptoSlamwhich excludes off-chain sales, puts the figure at $** .* billion, rising to$**.* billion in the third quarter and $**.* billion in the fourth.

**** retrospective of NFT market value, by quarter World, billions of dollars, Q for quarter Source: ****

In ****, the market is experiencing a historic downturn. Liquidity is declining, and prices are being heavily impacted by the falling value of crypto-currencies.

*st quarter **** *nd quarter **** Trading volume $ ** *** *** ***$ * *** *** ***$ -**,**% Sales volume ** *** *** ** *** *** -**,**% Number of buyers * *** *** * *** *** -**,**% Number of resellers *** *** *** *** -**,**% Active portfolios * *** *** * *** *** -**,**% Share of profit on resale * *** *** ***$ * *** *** ***$ -**% Share of losses -* *** *** ***$ * *** *** ***$ +**% Source: Q* **** Global Performance - Non fungible Most indicators are down in Q* ****, which is no great ...

1.3 Covid 19, Bitcoin collapse and Ukraine

Covid-**

being totally dematerialized, NFTs didn't particularly suffer from the Covid-** crisis; on the contrary,they even managed to make the most of it by attracting new artists and new creations. Indeed, while the health crisis has had painful effects on many sectors, such as the business of the famous Japanese tattoo artist Ichi Hatano, renowned for his folk tattoos and very touristy clientele, it has also enabled them to reinvent themselves. For Hatano, the opening up to digital technology forced by the crisis has enabled him to sell his artistic creations in the form of NFTs. His work was one of *** NFTs exhibited at CrypTokyo.

(***)

Ukraine

The graph below illustrates the correlation between the start of the conflict in Ukraine and the volume of NFT searches.

Comparison of "NFT" and "Ukraine" searches between April **** and March **** World, ****-****, Google Trends Source: ****

If it doesn't directly concern NFT, the legalization of crypto-currencies in Ukraine will greatly impact the market. A law approved by the Ukrainian president "creates the conditions for the launch of a legal market for virtual assets in Ukraine". NFTs have also raised funds. In particular, a $***,*** cryptopunk was sent to the Ukrainian government's Ethereum address.

Cryptocurrencies

In ...

2.1 Determinants of demand for NFT

NFT investors as a percentage of the population, by age and gender United States, ****, in Source: ****

NFTs have definitely entered the public consciousness. In a recent study conducted by The Harris Poll on behalf of Adweek, **% of Americans claim to be familiar with NFTs by the end of ****, compared with **% at the start of the year. **% of Americans familiar with crypto tokens say they are an attractive financial investment. [***]

Despite their growing popularity, few Americans overall are actually investing in NFTs at the moment - only **% say they are currently investors as shown in the chart above - but millennials are the most likely to have invested, qu represent **%.

Affluent consumers and millennials are also the most likely to be NFT collectors: half (***) of Americans with an HHI over $***,*** say they are collectors, and **% collect NFTs. In addition, **% of millennials consider themselves collectors, and **% of them collect NFTs.

Typology of major reasons for considering NFT purchases United States, ****, in Source: ****

The reasons why Americans invest in NFTs are diverse, but return on investment is often mentioned, regardless of gender or age. It's worth noting, however, that this argument becomes more prevalent as people age: for example, return on investment was mentioned ...

2.2 Demand by geographic and periodical breakdown

The graphs below represent the proportion of searches for a given term in a given region during a given period, relative to the time when it was most searched for (***).a higher value means that the proportion of that keyword's use in relation to the total number of search queries is higher. This does not mean that the number of occurrences of the keyword in search queries is greater. For example, a small country where **% of queries are for the keyword "NFT" will get twice as many results as a large country where only **% of queries are for the keyword "NFT".

Google search interest for the term "NFT", by country World, ****, in Google Trends index Source: ****

The world of NFT is experiencing phenomenal growth in Southeast Asia, not least because it enables many users to supplement their income. Indeed, in video games powered by the NFT system, for example, players can train and then resell characters to other users for crypto-currencies. According to Gilbert Jalova, a Filipino struggling to make ends meet, playing Axie Infinity for almost * hours a day enables him to earn around $*** at the end of the month, bearing in mind that he earns less in his regular ...

2.3 Demand spread across all population categories

Survey responses: "How likely are you to buy NFTs", by income type United States, ****, in Source: ****

The graph above shows that NFT purchases exist within all income categories, although they may evolve differently depending on the category. Indeed, it turns out that **% of people with an income of less than $**,***/year are likely to buy NFTs at least fairly likely. But this figure is lower for other income categories. This is because the higher the income category, the more people already own NFTs: **% of the population earning over $***,***/year currently own NFTs, compared with **% of those earning less than $**,***/year. Among all these different categories, we note that the most widespread types of NFT are generally songs, digital works of art, videos or even sports-related digital cards. [***]

NFT design typology by user group United States, ****, in Source: ****

It should be added that not all NFT owners understand this market in the same way: as the graph above shows, demand for NFTs differs according to users' expectations. Among investors, nearly **% cite return on financial investment as the reason for their interest in NFTs. Half of these investors also consider NFTs to be a passing fad, meaning that this investment is more likely ...

2.4 Video games and play to earn: heralding new uses?

It's important to note that, while NFTs are often described as images or videos, these are merely uses. NFTs are therefore a technology, with as many possible applications and uses as we can imagine. The use of NFT simply creates scarcity and private property in a digital world. Today, NFTs linked to the Metaverse and video games already account for almost half the market. To sum up, here's how Ryan Selkis, founder of Messari (***), explains the potential of NFTs:

"NFTs are interesting because they represent items of digital property that are rare, portable and verifiably programmable. An NFT can be a share of stock, a virtual sword in an MMORPG, a profile photo on social media, a new piece of digital art, a plot of land in the metaverse, or your data record on Facebook. The potential for NFTs is essentially limitless, as blockchains become global transaction registers for natively virtual goods and physical goods (***)."

- Ryan Selkis, Crypto Theses for ****

Video games:

When we take a closer look at the world of video games, it's very easy to see why the use of NFT makes sense in this context. According to Juniper Research, in ****, worldwide spending on video game ...

2.5 Market volatility over 2 years: an invitation to take a step back

Galaxy Digital's Head of Firmwide Research, Alex Thorn, said that since September ****, NFT sales trading volumes had been falling a little further each day, and were well away from the record level reached at the end of August **** : After September **, NFT transactions didn't even reach $*** million a day, whereas they had reached over $*** million on August **, ****. The floor price of CryptoPunks, for example, fell to less than ** ETH. This trend has continued since the January **** peak, and **** is clearly not the best year for the sector. There is some good news, however, such as the number of people arriving on OpenSea.

So,the high periodicity and instability of the NFT market needs to be taken into account, which may lead to reluctance to invest and thus have an impact on demand.

But even with this clear decline over the past month, NFT assets have already gained a foothold in various industries such as sports, showbiz, music, among others, allowing them to diversify into multiple circles and thusreach a wider audience. The huge "publicity stunts " achieved during major multi-million euro sales, as was the case for the *st tweet from the Twitter platform (***), have in fact piqued the curiosity of many investors ...

3.1 How do I sell an NFT?

To sell an item like NFT, you need to go through an online platform that connects sellers and potential buyers. The process is as follows:

In general, you have to start by paying the platform to "mint" (***) an NFT. On most platforms, this sum is denominated in Ether, the native cryptocurrency of the open source blockchain platform Ethereum.

The value of this currency varies widely. It' s important to understand, therefore, that projecting profits onto precise figures is hardly feasible.

To go all the way, you'll need to own Ether in most cases.

We've summarized the main steps involved in selling NFTs for artists or, failing that, producers:

Create a virtual wallet Hold cryptocurrency Add money from cryptocurrency to this wallet (***) Connect your wallet to the NFT platform (***) Upload your file Organize an auction or any other sales method Describe your NFT Pay taxes inherent in selling on the platform

It's important, however, to be careful about the timing and nature of platform fees: in many cases, the full nature of these fees doesn't become clear until you've already paid money.

3.2 A technology based on blockchain

To ensure that NFT files are tamper-proof, we use the blockchain. The blockchain relies on a decentralized system to ensure the transmission of data, keeping track of all operations carried out in a dated manner. Today, there are several types of blockchain, including :

Proof of Work (***) Proof of Stake (***) Practical Byzantine Fault Tolerant (***) Proof of Authority (***)

Here's a table summarizing the different types of blockchain.

Source: ****

Market share of major marketplaces World, September ****, % (***) Source: ****

The Ethereum platform clearly dominates what is known as Total Value Locked (***). In ****, this will no longer necessarily be the case, with Terra and Solana making strong headway.

Market share of leading blockchains World, June ****, % of total Source: ****

3.3 The environmental impact of NFT

An objectively harmful impact:

As NFT transactions are essentially based on the Ethereum blockchain, it seems relevant to take into account the evolution of the number of transactions on this platform to realize the reality of market volume.

Number of Ethereum transactions per day World, ****-****, thousands of transactions Source: ****

We're seeing a fairly high number of transactions, around one million per month. The problem? The energy required to mine ethereum. As the graph below shows, energy consumption is very high.

Ethereum electricity consumption World, ****-****, TWh per year Source: ****

Looking at these two graphs, we can see that the energy consumption of transactions on the Ethereum blockchain is growing faster than the number of transactions, so there must necessarily be a determining factor explaining this growth speed differential. But the group is looking into its consumption. In fact, it could reduce the energy consumption of its blockchain by **. **%. The changeover should take place in ****.

Average Ethereum mining difficulty World, ****-****, TH Source: ****

In line with what we said above, we realize that the difficulty of Ethereum mining has increased considerably over the period ****-****. Firstly, in ****, the difficulty of mining increased **-fold. Another dramatic change in Ethereum mining difficulty was ...

3.4 A still very risky market

While many investors turned to NFTs because they thought it was a simple opportunity to make a quick profit, this is far from the truth. According to Chainalysis, only **.*% of NFTs bought during the minting process and then resold on the platform generated a profit. The success rate on the secondary market is **.*%. A closer look at the profiles and practices of those who made a profit reveals a number of recurring practices:

Whitelisting:

Before launching a project, founders try to get the word out to as many people as possible, creating communities on Discord, Telegram, and Twitter. The most active community members can be rewarded by being put on a "whitelist", enabling them to buy NFTs at prices well below those at which others will buy during the minting. According to Chainalysis, whitelisted investors make a profit **% of the time, compared with just **% for non-whitelisted investors. **% of non-whitelist purchases even result in a loss of at least **% of initial capital

Flipping:

Flipping refers to buying NFTs on the secondary market in the hope of reselling them later. This practice generates profits **% of the time, but is concentrated around a few NFT collections: over *,*** individual NFT collections on OpenSea have been ...

3.5 The new ETHEREUM protocol in 2022

From September **, the Ethereum platform will be undergoing a major transition. Dubbed "the Merge", and repeatedly postponed due to technical difficulties, it involves switching the platform and its associated cryptocurrencyfrom a proof-of-work protocol to one based on proof-of-stake.[***]

With bitcoin, the production of blocks integrating transactions is carried out by 'miners' - computers whose resources are dedicated to securing the network. To produce a block and maintain the continuity of the chain, calculations are required. The first successful miner is rewarded with bitcoins. The more participants in the network, the more complex the calculations.

As we have seen, the method is therefore energy-intensive. This was the intention of its creator in order to curb the ardor of malicious actors: compromising the integrity of the network implies spending phenomenal resources. In the case of bitcoin, the computing power required by the network is such that a manoeuvre of this type, according to estimates by the Crypto** and GoBitcoin websites, would cost between **.* and **million euros per day in electricity costs, to which must be added the hardware costs of the mining computers, estimated at between ** and ** billion euros.

In the case of Ethereum, the code requires ** ethers to be escrowed in order ...

4.1 Where to buy NFT?

NFTs are goods that can be bought, sold, exchanged and created online or on specific marketplaces. Generally speaking, the creator or owner chooses a specific price. NFTs are also traded at auctions. Here are some examples of marketplaces where NFTs are traded.

Foundationis a community-created marketplace based on a sponsorship system: each creator must be invited by other creators who are already members of the platform.

Nifty Gatewayis an art-focused marketplace that works with renowned brands, athletes and designers.

OpenSea is one of the first and largest NFT marketplaces where you can find a wide range of collectibles.

Rarible offers a range of NFTs with a focus on art. This platform uses its own cryptocurrency, RARI, to reward its members.

SuperRare is a marketplace focused on curating and offering digital art.

The registration process often varies depending on the platform used. NFT prices are often denominated in cryptocurrencies, such as ether, the price can also be denominated in dollars. Each transaction is accompanied by specific fees that vary according to the platform and the amount of NFT purchased .

Number of traders on the various NFT marketplaces World, ****, ETH Source: ****

As we've seen, each platform has its own specific features, depending on ...

4.2 NFT's offering in 2022 and results (2nd quarter 2022)

Breakdown of sales by segment

Number of NFT sales by segment, *nd quarter **** World, ****, number of sales Source: ****

Volume of dollars traded

Breakdown of NFT offering value in ****, by segment World, ****, % (***) Source: ****

4.3 Link between primary and secondary markets

As the NFT market is fairly recent, it cannot yet be considered a mature market and, as such, is highly speculative. As we saw in *.*, **% of **-** year-old buyers and **% of **-** year -old buyers are investors in the original sense of the term : they buy in the hope of realizing a capital gain in the more or less short term.

Transactions involving NFTs on the art market over the previous ** days World, ****, thousands of transactions Source: ****

In the first quarter of ****, the secondary market tends to shrink from **% to just under **% between the first and second quarters of ****. Similarly, the secondary market, which accounted for **% of transactions in the first quarter, has returned to equilibrium and now represents just **% of sales transactions in the second quarter.

Trading volume and dollar value on the primary and secondary markets in Q* **** World, Q* ****, billions of dollars, millions of units Source: ****

The primary market has shrunk considerably and now represents only a tiny fraction of weekly volume. Itseems pretty clear that, given the context, NFT buyers are no longer willing to take big risks when purchasing their assets on the primary market. Sales volume, although declining, remains relatively high, peaking at over ***,*** sales ...

4.4 Focus on the art market

This sub-segment of the art market is perhaps the best known, or at least the one that most often makes the headlines when it comes to NFTs. NFTs are helping to boost art market sales, especially for contemporary art. Coupled with the consequences of the current health crisis, the NFT boom has made possible the massive online migration of auction sales.

Number of visits to the superrare.com digital marketplace between September **** and May **** World, ****-****, in millions of visits Source: ****

In ****, these will reach $*.* billion (***). While the entire market has yet to be addressed, it's worth observing the multiple possibilities that will open up for artists, including traditional artists who will have a new area of expression.

Share of NFT in art World, ****, % (***) Source: ****

The democratization of NFTs is shaking up the contemporary art market, opening up new outlets and giving artists a new visibility. Today, for example, more than **,*** street artists find their way into auction houses, compared with just *** in the early ****s.

Banksy, the hottest artist of the moment, achieved sales of $*** million in the first half of ****, ranking in the top * of sales on the global art market behind Picasso, Basquiat, Warhol and Monet, according to ...

5.1 NFT regulations in France

Current regulations in France

At present, there is still no legal framework for NFTs, which varies according to the rights assigned to them by the issuer.

However, there is a certain segmentation depending on the type of NFT used or sold:

When it comes to acquiring rights that are enforceable against third parties (***) define a utility token as "any intangible asset representing, in digital form, one or more rights that can be issued, registered, retained or transferred". registered, stored or transferred by means of a shared electronic recording device enabling the owner of the asset to be identified, directly or indirectly". When it comes to the acquisition of financial rights, the NFT characterizes a financial instrument and is qualified as a security token, according to articles L***-* and D***-* A of the CMF. When the purchase of an NFT can constitute an investment, as ownership of an object that can be resold, it can fall within the definition of miscellaneous goods covered by the regime of intermediation in miscellaneous goods under articles L***-* et seq. of the CMF.

The artist or issuer is in fact free to decide which intellectual property rights he or she does or does ...

6.1 Segmentation

• OpenSea
• Axie Infinity
• Sorare
• CryptoPunks - Larva Labs
• Dapper Labs - NBA Top Shot
• Rarible
• Foundation
• Nifty Gateway
• SuperRare
• Ethereum
• Bitcoin
• Binance
• Coinbase
• Arianee
• Kinetix