AI & Machine Learning

Web3 Development

NFT & Metaverse

Blockchain Development

Blockchain Solutions

Products

Get in Touch
arrow-left Back to ‘Today at Nextrope Blog’

Top NFT trends in 2022

Maciej Zieliński

05 Apr 2022
Top NFT trends in 2022

NFTs - 2021 was their year. The world went crazy searching for new NFT projects to generate record secondary sales revenue. What will 2022 bring? This article summarizes everything you need to know about the upcoming NFT trends.

Table of Contents

NFT boom 

Surprisingly, NFT tokens are older than many would expect. It was in 2014 when the first NFT token - rainbow Bitcoin was created. The project didn't get even a fraction of the attention gained by its fungible cousin. ERC-721, a non-fungible token's standard on Ethereum, initially suffered the same fate. While fungible ERC-20 quickly became a fundament of the DeFi industry, ERC-721 remained relatively unknown, without any significant use-cases on a horizon. 

Things began to change with an inconspicuous collectible game - CryptoKitties. Created by DapperLabs, the game was the first commercial use of ERC-721 tokens and NFT in general. Essentially,  it allows players to buy, collect, and sell virtual kitties. The game is based on a simple collectible game pattern, yet with a blockchain technology twist. All the collectibles are stored as non-fungible tokens; moreover, exchanges and transactions in-game are facilitated on a blockchain. The game quickly gained tremendous popularity in the crypto community, bringing DapperLabs revenue of 200 million in just a few months. 

How NFT ownership became a thing in 2021

The game was a breakthrough for NFTs that accelerated processes that later resulted in worldwide usage and mainstream popularity of this technology. Yet, the true boom in the non-fungible assets market began only in 2021. NBA’s opening their NFT marketplace, digital artist Beeple on Sotheby's auctions, or astronomic values of virtual land plots in Axie's Infinity - those events got an immersive coverage in conventional media and attracted the public attention to NFT for good. 

Suddenly, underrated non-fungible tokens became the most discussed element of the blockchain world. Masses of people who had never been interested in Blockchain started searching for new collections, buying tokens, and discussing the most efficient strategies. 

With such a boom in popularity, NFT ventures flourished. Dozens of new collections were created every day. Crypto punks, Bored apes yacht club, Axie Infinity- to name a few - with the highest sales volume. NFT digital art started being displayed in museums all over the world. At some point, NFT collectibles crossed with gaming resulting in exciting NFT gaming projects and redefining the play-to-earn concept. Moreover, Ethereum blockchain more and more often began to be replaced by more efficient solutions, such as Polygon or Solana. 

With such dynamic development in 2021, one question became inevitable: what will 2022 bring? What will be the hottest NFT trends in 2022? 

1. The growing share of Solana 

Solana is a third-generation blockchain that, unlike other blockchains, uses a hybrid consensus algorithm. To be more precise, it combines proof-of-history (PoH) with proof-of-stake (PoS). Due to that, it can process over 50,000 transactions per second. To compare, Ethereum can't handle more than 30 at the same time. 

Launched in 2020 by the Solana foundation, Solana Blockchain aims to solve scaling problems that struggle with most current blockchain protocols. Its main objective is to support DeFi ecosystem growth by fitting in the so-called blockchain trilemma: decentralization, security, and scalability.

Combining those three factors seems to be the holy grail of the blockchain world. Many projects succeed in supporting one or even two of the factors but fail when it comes to others. Solana engineers believe that they have implemented all three. 

Solana NFTs 

OK, so we have a fast, very promising blockchain with quickly increasing popularity. Why shouldn't we use it for NFT minting? Many recently emerged NFT ventures prove that it might be a fantastic idea. 

What new possibilities can the Solana ecosystem bring to the world of NFTs? Think about 3D NFT or whole NFT-based games with mechanics primarily performed on-chain. Because of high gas prices, it would never be possible on Ethereum. The low fees and high speed that Solana offers may open entirely new doors for NFT development. 

Ethereum pushed aside

Ethereum is still the leading Blockchain among NFT ventures. Yet, according to many analyses, including the one done by JPMorgan, it's substantially losing its share. 

According to the bank's report, in 2021, Ethereum's market share of NFTs has dropped from about 95% to around 80%. The same publication stated that the Solana blockchain captured most of the lost volume share. 

2. Fractionalized NFT art

Offering fractionalized NTFs of real-world artworks is one of the most prominent trends on the NFT market that might fill the gap between traditional art and its new redefined form that NFTs initially proposed. For centuries the art market was associated with lucrative investment opportunities. Yet, what has been stopping ordinary investors were high entry barriers. Investing in Picasso or Rothko can generate vast profits, but thinking realistically, how many people would be able to afford them? What fractionalized NFTs offer is the democratization of high art investment. 

Filling the gap between real-life's and digital art

Notwithstanding how futuristic it may sound, the trend already has its beginning with STO's boom and tokenization project backed by art. For example, in 2021, Switzerland-based digital asset bank - Sygnum and art investment business - Artemundi teamed up to mint 4,000 security tokens backed in Picasso's Fillette au béret. Each could be bought for a fraction of the full artwork value. However, if we wanted to distinguish the beginning of art's tokenization, we'd have to go back to 2017 when Maecenas tokenized Andy Warhol's 14 Little Electric Chairs.

Essentially, those projects didn't differ substantially from other tokenization of unconventional assets, such as cars or precious metals. Furthermore, it is notable that in both cases, fungible tokens were used, which means that every single one of them has an equal value and can be traded directly for another. At the same time, none of them represent a particular part of an artwork. But this matter can be changed by applying NFTs.

What NFTs bring to the art world

What differentiates NFT's art tokenization and the one facilitated by fungible tokens is the fact that the first one involves "dividing" an artwork into pieces and minting tokens that represent them. Here every token is unique and represents different parts of an artwork. NFTs give that extra layer of uniqueness that previous forms of fractionalized art ownership were missing. 

The relationship between pop art and NFTs is rather obvious; therefore, it shouldn't be surprising that one of the first artworks tokenized was the one created by a true contemporary pop art icon - Banksy. In 2020, Exposed Wall extracted his mural, Gorilla in a Pink Mask, from one of the buildings in Bristol and tokenized it into 10,000 fractionalized NFTs. Each was sold for $750, which made an ordinary consumer buy their unique part of a piece created by one of the most influential artists of our time.

3. Big brands start to use NFTs

It's quite a common pattern for new technology solutions that the success of smaller projects eventually attracts the greatest of this world. NFTs, for sure, aren't an exception.

Currently, more and more brands are starting to explore opportunities that NFTs can bring them. So far, leading industries are fashion and, surprisingly, food. Companies such as Gucci, Louis Vuitton, and even McDonald's or Taco Bell have already released their limited digital collectibles. For big brands, minting NFTs allows them to build stronger brand awareness and increase customer engagement. 

What's important, such projects stimulated the significant interest of NFT holders. A great example of that is Pringles, which created a limited collection of NFT crisps with "virtual flavor." Limited to just 50 versions, tokens were sold by the company for the price of the normal pack of crisps - $2. But today, their price hovers around 4 ETH on OpenSeaand Rarible.

The music industry is another branch where we're likely to see more and more applications of NFTs coming this year. Artists all over the world started to notice and use the potential of this technology, which allows them not only to embrace their relationship with fans but also creates new revenue streams. 

American band Kings of Leon was one of the first to leverage this technology in the industry. Their eighth studio album, When You See Yourself, was released in March 2021 as an NFT token. The sale of NFTs, in which the company Yellow Heart was represented, ended on March 19, generating over $2 million in revenue. 

The NFT tokens released by the band in many ways resemble the typical merch of artists: they guarantee access to future concerts, covers, or a limited vinyl edition. The applied technology makes NFT tokens unique. Because NFT tokens use smart contracts, a set of rules may be taken into account by their creator to determine what should happen when an NFT is used or changes hands. It is precisely this aspect of NFT tokens that is the most valuable for the music industry.

Thanks to NFT tokens, musicians can retain direct ownership of the rights to the song and collect royalties for playback and sales without the intervention of intermediaries.

NFT music market flourishes

Kings of Leon were quickly followed by other prominent artists who decided to release their own NFT collections or even whole albums saved as non-fungible-tokens. In 2022 this trend will be even more visible as today artists don't have to launch their own page to sell NFTs; instead, they can use one of the already created NFT marketplaces. 

Band Royalty NFTs is an excellent example of such a venture. This music NFT marketplace not only enables musicians to release their music in the form of NFT, but also allows them to earn a share of income every time their song is played.

5. Personality NFT 

Apps that enable artists to perform as an NFT personality could be the next big thing in 2022. "I think this year [2022] we'll definitely start seeing more of these personalities that are NFTs," says Jace Kay, Bored Ape Yacht Club and Stereoheadz founder. 

Substituting your real-life personality with digital isn't something new for musicians and other stage performers. Yet, what was started by Gorillaz in 1998, is now being taken to a new level in NFT space. 

6. Playable NFTs

NFT games might be the hottest trend in the gaming industry right now. As we mentioned before, the current NFT boom started with a game. Therefore the link between non-fungible tokens and the gaming industry seems almost natural. 

The gaming industry is a powerful branch fueled by its consumers' passion. When gamers launch their favorite title, they immerse themselves in a new, alternative world. A quick look at the most popular games of the last decade, like League of Legends, Fortnite, or Counter-Strike, should be enough to see how modern gamers care about their characters, skins, and other in-game items. They treat them as an extension of their creative self. And what's important, they can pay a lot for it.

The games have shown us how far beyond the real world urge to build a collection of unique items can go. But do the purchased gaming collectibles become their property? Do these items differ somehow from the ones possessed by others? What is the actual value of an asset? Often, the answer is not so simple. In 2021, NFTs showed us that they might change that. 

Everywhere where users collect and trade in-game assets, NFTs can highly improve their experience. Essentially, they assure players about the authenticity and scarcity of gaming assets allowing them to keep full ownership of the purchased assets. 

Collectible games seem to be a perfect environment for NFTs. That's why we have seen a rapid growth of projects of such type during the last year. Yet, the potential of NFT gaming solutions goes far beyond them. Just think about online board games or PVP battle games. 

Currently, the NFT market is the fastest developing branch of the DeFi world. Since 2021, we've been observing an actual boom in the NFT space. Thanks to blockchain technology, new possibilities are constantly emerging, and we can expect even more groundbreaking implementations in 2022.

Last years’ experience shows that even the most prominent companies are not afraid to stray from the path, and introduce innovations. NFT can become one of them. Obviously, in some industries, a more expansive use is only a song of the future, but all signs point to it happening quicker than we may anticipate.

Are you thinking about your own NFT project? In the industry, there is still a lot of space for development, so this may be the perfect moment. Consult our experts at Nextrope for free. Contact us at contact@nextrope.com.

Tagi

Most viewed

Never miss a story

Stay updated about Nextrope news as it happens.

You are subscribed

Token Engineering Process

Kajetan Olas

13 Apr 2024
Token Engineering Process

Token Engineering is an emerging field that addresses the systematic design and engineering of blockchain-based tokens. It applies rigorous mathematical methods from the Complex Systems Engineering discipline to tokenomics design.

In this article, we will walk through the Token Engineering Process and break it down into three key stages. Discovery Phase, Design Phase, and Deployment Phase.

Table of Contents

Discovery Phase of Token Engineering Process

The first stage of the token engineering process is the Discovery Phase. It focuses on constructing high-level business plans, defining objectives, and identifying problems to be solved. That phase is also the time when token engineers first define key stakeholders in the project.

Defining the Problem

This may seem counterintuitive. Why would we start with the problem when designing tokenomics? Shouldn’t we start with more down-to-earth matters like token supply? The answer is No. Tokens are a medium for creating and exchanging value within a project’s ecosystem. Since crypto projects draw their value from solving problems that can’t be solved through TradFi mechanisms, their tokenomics should reflect that. 

The industry standard, developed by McKinsey & Co. and adapted to token engineering purposes by Outlier Ventures, is structuring the problem through a logic tree, following MECE.
MECE stands for Mutually Exclusive, Collectively Exhaustive. Mutually Exclusive means that problems in the tree should not overlap. Collectively Exhaustive means that the tree should cover all issues.

In practice, the “Problem” should be replaced by a whole problem statement worksheet. The same will hold for some of the boxes.
A commonly used tool for designing these kinds of diagrams is the Miro whiteboard.

Identifying Stakeholders and Value Flows in Token Engineering

This part is about identifying all relevant actors in the ecosystem and how value flows between them. To illustrate what we mean let’s consider an example of NFT marketplace. In its case, relevant actors might be sellers, buyers, NFT creators, and a marketplace owner. Possible value flow when conducting a transaction might be: buyer gets rid of his tokens, seller gets some of them, marketplace owner gets some of them as fees, and NFT creators get some of them as royalties.

Incentive Mechanisms Canvas

The last part of what we consider to be in the Discovery Phase is filling the Incentive Mechanisms Canvas. After successfully identifying value flows in the previous stage, token engineers search for frictions to desired behaviors and point out the undesired behaviors. For example, friction to activity on an NFT marketplace might be respecting royalty fees by marketplace owners since it reduces value flowing to the seller.

source: https://www.canva.com/design/DAFDTNKsIJs/8Ky9EoJJI7p98qKLIu2XNw/view#7

Design Phase of Token Engineering Process

The second stage of the Token Engineering Process is the Design Phase in which you make use of high-level descriptions from the previous step to come up with a specific design of the project. This will include everything that can be usually found in crypto whitepapers (e.g. governance mechanisms, incentive mechanisms, token supply, etc). After finishing the design, token engineers should represent the whole value flow and transactional logic on detailed visual diagrams. These diagrams will be a basis for creating mathematical models in the Deployment Phase. 

Token Engineering Artonomous Design Diagram
Artonomous design diagram, source: Artonomous GitHub

Objective Function

Every crypto project has some objective. The objective can consist of many goals, such as decentralization or token price. The objective function is a mathematical function assigning weights to different factors that influence the main objective in the order of their importance. This function will be a reference for machine learning algorithms in the next steps. They will try to find quantitative parameters (e.g. network fees) that maximize the output of this function.
Modified Metcalfe’s Law can serve as an inspiration during that step. It’s a framework for valuing crypto projects, but we believe that after adjustments it can also be used in this context.

Deployment Phase of Token Engineering Process

The Deployment Phase is final, but also the most demanding step in the process. It involves the implementation of machine learning algorithms that test our assumptions and optimize quantitative parameters. Token Engineering draws from Nassim Taleb’s concept of Antifragility and extensively uses feedback loops to make a system that gains from arising shocks.

Agent-based Modelling 

In agent-based modeling, we describe a set of behaviors and goals displayed by each agent participating in the system (this is why previous steps focused so much on describing stakeholders). Each agent is controlled by an autonomous AI and continuously optimizes his strategy. He learns from his experience and can mimic the behavior of other agents if he finds it effective (Reinforced Learning). This approach allows for mimicking real users, who adapt their strategies with time. An example adaptive agent would be a cryptocurrency trader, who changes his trading strategy in response to experiencing a loss of money.

Monte Carlo Simulations

Token Engineers use the Monte Carlo method to simulate the consequences of various possible interactions while taking into account the probability of their occurrence. By running a large number of simulations it’s possible to stress-test the project in multiple scenarios and identify emergent risks.

Testnet Deployment

If possible, it's highly beneficial for projects to extend the testing phase even further by letting real users use the network. Idea is the same as in agent-based testing - continuous optimization based on provided metrics. Furthermore, in case the project considers airdropping its tokens, giving them to early users is a great strategy. Even though part of the activity will be disingenuine and airdrop-oriented, such strategy still works better than most.

Time Duration

Token engineering process may take from as little as 2 weeks to as much as 5 months. It depends on the project category (Layer 1 protocol will require more time, than a simple DApp), and security requirements. For example, a bank issuing its digital token will have a very low risk tolerance.

Required Skills for Token Engineering

Token engineering is a multidisciplinary field and requires a great amount of specialized knowledge. Key knowledge areas are:

  • Systems Engineering
  • Machine Learning
  • Market Research
  • Capital Markets
  • Current trends in Web3
  • Blockchain Engineering
  • Statistics

Summary

The token engineering process consists of 3 steps: Discovery Phase, Design Phase, and Deployment Phase. It’s utilized mostly by established blockchain projects, and financial institutions like the International Monetary Fund. Even though it’s a very resource-consuming process, we believe it’s worth it. Projects that went through scrupulous design and testing before launch are much more likely to receive VC funding and be in the 10% of crypto projects that survive the bear market. Going through that process also has a symbolic meaning - it shows that the project is long-term oriented.

If you're looking to create a robust tokenomics model and go through institutional-grade testing please reach out to contact@nextrope.com. Our team is ready to help you with the token engineering process and ensure your project’s resilience in the long term.

FAQ

What does token engineering process look like?

  • Token engineering process is conducted in a 3-step methodical fashion. This includes Discovery Phase, Design Phase, and Deployment Phase. Each of these stages should be tailored to the specific needs of a project.

Is token engineering meant only for big projects?

  • We recommend that even small projects go through a simplified design and optimization process. This increases community's trust and makes sure that the tokenomics doesn't have any obvious flaws.

How long does the token engineering process take?

  • It depends on the project and may range from 2 weeks to 5 months.

Tagi

What is Berachain? 🐻 ⛓️ + Proof-of-Liquidity Explained

Karolina

18 Mar 2024
What is Berachain? 🐻 ⛓️ + Proof-of-Liquidity Explained

Enter Berachain: a high-performance, EVM-compatible blockchain that is set to redefine the landscape of decentralized applications (dApps) and blockchain services. Built on the innovative Proof-of-Liquidity consensus and leveraging the robust Polaris framework alongside the CometBFT consensus engine, Berachain is poised to offer an unprecedented blend of efficiency, security, and user-centric benefits. Let's dive into what makes it a groundbreaking development in the blockchain ecosystem.

Table of Contents

What is Berachain?

Overview

Berachain is an EVM-compatible Layer 1 (L1) blockchain that stands out through its adoption of the Proof-of-Liquidity (PoL) consensus mechanism. Designed to address the critical challenges faced by decentralized networks. It introduces a cutting-edge approach to blockchain governance and operations.

Key Features

  • High-performance Capabilities. Berachain is engineered for speed and scalability, catering to the growing demand for efficient blockchain solutions.
  • EVM Compatibility. It supports all Ethereum tooling, operations, and smart contract languages, making it a seamless transition for developers and projects from the Ethereum ecosystem.
  • Proof-of-Liquidity.This novel consensus mechanism focuses on building liquidity, decentralizing stake, and aligning the interests of validators and protocol developers.

MUST READ: Docs

EVM-Compatible vs EVM-Equivalent

EVM-Compatible

EVM compatibility means a blockchain can interact with Ethereum's ecosystem to some extent. It can interact supporting its smart contracts and tools but not replicating the entire EVM environment.

EVM-Equivalent

An EVM-equivalent blockchain, on the other hand, aims to fully replicate Ethereum's environment. It ensures complete compatibility and a smooth transition for developers and users alike.

Berachain's Position

Berachain can be considered an "EVM-equivalent-plus" blockchain. It supports all Ethereum operations, tooling, and additional functionalities that optimize for its unique Proof-of-Liquidity and abstracted use cases.

Berachain Modular First Approach

At the heart of Berachain's development philosophy is the Polaris EVM framework. It's a testament to the blockchain's commitment to modularity and flexibility. This approach allows for the easy separation of the EVM runtime layer, ensuring that Berachain can adapt and evolve without compromising on performance or security.

Proof Of Liquidity Overview

High-Level Model Objectives

  • Systemically Build Liquidity. By enhancing trading efficiency, price stability, and network growth, Berachain aims to foster a thriving ecosystem of decentralized applications.
  • Solve Stake Centralization. The PoL consensus works to distribute stake more evenly across the network, preventing monopolization and ensuring a decentralized, secure blockchain.
  • Align Protocols and Validators. Berachain encourages a symbiotic relationship between validators and the broader protocol ecosystem.

Proof-of-Liquidity vs Proof-of-Stake

Unlike traditional Proof of Stake (PoS), which often leads to stake centralization and reduced liquidity, Proof of Liquidity (PoL) introduces mechanisms to incentivize liquidity provision and ensure a fairer, more decentralized network. Berachain separates the governance token (BGT) from the chain's gas token (BERA) and incentives liquidity through BEX pools. Berachain's PoL aims to overcome the limitations of PoS, fostering a more secure and user-centric blockchain.

Berachain EVM and Modular Approach

Polaris EVM

Polaris EVM is the cornerstone of Berachain's EVM compatibility, offering developers an enhanced environment for smart contract execution that includes stateful precompiles and custom modules. This framework ensures that Berachain not only meets but exceeds the capabilities of the traditional Ethereum Virtual Machine.

CometBFT

The CometBFT consensus engine underpins Berachain's network, providing a secure and efficient mechanism for transaction verification and block production. By leveraging the principles of Byzantine fault tolerance (BFT), CometBFT ensures the integrity and resilience of the Berachain blockchain.

Conclusion

Berachain represents a significant leap forward in blockchain technology, combining the best of Ethereum's ecosystem with innovative consensus mechanisms and a modular development approach. As the blockchain landscape continues to evolve, Berachain stands out as a promising platform for developers, users, and validators alike, offering a scalable, efficient, and inclusive environment for decentralized applications and services.

Resources

For those interested in exploring further, a wealth of resources is available, including the Berachain documentation, GitHub repository, and community forums. It offers a compelling vision for the future of blockchain technology, marked by efficiency, security, and community-driven innovation.

FAQ

How is Berachain different?

  • It integrates Proof-of-Liquidity to address stake centralization and enhance liquidity, setting it apart from other blockchains.

Is Berachain EVM-compatible?

  • Yes, it supports Ethereum's tooling and smart contract languages, facilitating easy migration of dApps.

Can it handle high transaction volumes?

  • Yes, thanks to the Polaris framework and CometBFT consensus engine, it's built for scalability and high throughput.

Tagi