Published
Jan 4, 2022

Exchanges at the Gate of the NFT Market

Exchanges at the Gate of the NFT Market  

As the NFT market has inflated throughout 2021, the ecosystem of tools built to  service traders has followed suit. Chief among the platforms most integral to the  workflow of NFT investors are marketplaces such as OpenSea and SuperRare. However, as with any growing segment, these incumbent marketplaces have not been  safe from larger-scale and better-capitalized companies in adjacent markets. This  inherent vulnerability has been exemplified during the second half of 2021, as major  cryptocurrency exchanges have begun to launch their own NFT trading platforms. 

This article will provide an overview of the NFT offerings from the major crypto exchanges and an exploration of how these structural industry shifts will disrupt the  status quo. In particular, the following subjects will be covered: 

1. A Roundup of Major Launches 

2. What This Means for NFTs and Marketplaces 

A Roundup of Major Launches  

Publicly revealed on October 12th, 2021, Coinbase NFT is  

slated for a late-2021 mass launch. Waitlist signups are currently open for US-based users, with plans for further geographic  expansion down the line. Early access to the platform is being rolled  out to waitlisted users on a first-come-first-served basis, with the  keenest users being able to advance their position on the waitlist by  sharing their referral link and spreading the Coinbase NFT gospel. The platform is  launching with support for ERC-721 and ERC-1155 tokens, with multi-chain support  being introduced later on the roadmap. In much the same way that the Coinbase  exchange enabled users to make their first forays into cryptocurrency investing,  Coinbase NFT is being touted as a gateway for crypto-novices to enter the NFT world.  Key features to make this possible will include an intuitive user interface, social  features to boost engagement, as well as artist control and transparency. At the time  of writing, Coinbase NFT has upwards of 2M waitlist signups. 

Introduced on June 23rd, 2021, Binance NFT was launched as  an ancillary offering of the largest cryptocurrency exchange by  volume. The marketplace is unique in being based on the Binance  Smart Chain, which is compatible with the Ethereum Virtual  Machine and allows for cross-chain functionality. Transactions in  the marketplace are subject to a fixed 1% royalty fee received by the  original minter of the NFT, with a phased rollout of minting capabilities beginning  with select creators and culminating with all users on the platform. Binance NFT is  also adopting the Nifty Gateway model of periodic artist ‘drops’, rebranding the  concept as ‘Events’. Other features are being piloted by Binance NFT to distinguish the platform from comparable marketplaces. For instance, users on the Binance NFT  platform will be able to purchase fixed-price mystery boxes, all of which have varying  probabilities once opened of returning different rarity NFTs from popular collections.  Mystery box owners can also resell their holdings before opening them. Unveiled first on September 6th, 2021, the FTX NFT marketplace was launched as a cross-chain platform for minting  and trading NFTs. The platform launched with support for Solana  NFTs only, but plans are in place to support the more popular  Ethereum-based tokens as well. The platform is especially notable among the major marketplaces for its support of blue-chip Solana  NFT projects, a burgeoning ecosystem around which has begun to take shape. FTX  NFT aims to liaise directly with Solana NFT creators to ensure the authenticity of  tokens listed on the platform, supporting any NFTs which conform to the Metaplex standard. The marketplace will offer inexpensive fees and will allow users to fund  their accounts through cryptocurrencies or traditional methods such as credit cards. 

What This Means for NFTs and Marketplaces  

The entry of major cryptocurrency exchanges into the NFT marketplace sector has cataclysmic implications on the asset class. To preface the assessment of how  these structural shifts in the industry will ultimately affect NFT adoption and  mainstream mindshare, it may prove fruitful to begin with an examination of key  data and growth trends from the aforementioned exchanges. Beginning first with the  userbases of these major platforms, it becomes immediately clear that all of the  exchanges have experienced significant uptake over their lifetimes. As the first  publicly-listed cryptocurrency exchange and arguably the most recognizable brand in  crypto, Coinbase leads the market with just shy of 70M registered users. Binance and  FTX have also gradually enshrined themselves in the mainstream consciousness,  touting 30M and 10M users, respectively. Contrast these mammoth userbases to that  of OpenSea, which is far and way the most popular pure-play NFT marketplace.  While the number of registered OpenSea users has enjoyed a noteworthy uplift over  the course of 2021, that figure still stands at a relatively meager 590K.  A similar story emerges when considering the total transaction volumes on  each of the aforementioned exchanges relative to OpenSea. Binance is by a large  margin the market leader, sitting at close to USD$8T in traded volume thus far in  2021. FTX and Coinbase also facilitate volumes in the realm of multi-trillions of  dollars. In contrast, OpenSea’s volume in 2021 – a landmark year for NFT activity  and innovation – has fallen short of the USD$10B mark as of the time of publication. Naturally, these comparisons are inherently flawed; volumes across Binance, FTX,  and Coinbase are based on the trading of cryptocurrencies and derivatives, assets  which are far more liquid and actively-traded than high-priced NFTs. Regardless, the comparison can be taken as a rough benchmarking of activity and liquidity across the  platforms. On this basis, one might conjecture that the NFT trading volume on the  major exchanges might supersede that on OpenSea. 

  

  

Source: Business of Apps, CB Insights, Dune Analytics query by @rchen8

 Taken together, these observations paint a fairly stark image of how the major  crypto exchanges are positioned to displace their pure-play NFT marketplace rivals.  On one hand, the existing userbases of these exchanges necessarily means that there  is already a critical mass in-place for launching an NFT offering. Existing users  invested in cryptocurrency will be much easier to onboard to an integrated NFT  marketplace than users who are not yet registered with the platform. Crucially, this  introduction of NFT trading to established userbases will open the floodgates to much  wider adoption of the asset class.  Related to the matter of having a seamless on-ramp by which cryptocurrency  exchange traders can enter the NFT world, there is no doubt a valuable element of  convenience in having a single account for all digital asset trading. Further, the established userbases will inject additional liquidity in the exchanges’ NFT markets,  making a notoriously illiquid asset class less so. Finally, the sheer exposure and  visibility that CryptoArtists can enjoy in being active on these high-traffic platforms  will be another significant draw over the smaller-scale incumbent marketplaces. 

Closing Remarks  

The benefits that the major crypto exchanges could offer NFT creators and  investors are undeniable, so much so that they likely transcend the first-to-market  advantages of pure-play marketplaces. It would certainly be pre-emptive to project a  sudden collapse of incumbent marketplaces, especially given that the Binance and  FTX platforms have already launched yet OpenSea has continued to enjoy  exponential user growth and respectable – albeit declining – monthly transaction  volumes. That said, there is little doubt that incumbents will cede substantial market  share to the crypto exchanges, and further consolidation of NFT marketplaces is  likely on the horizon. 

 

References  

Binance. (2021, June 23). Introducing Binance NFT Marketplace. Retrieved from  Binance:  

https://www.binance.com/en/support/faq/f2d24d2faf1c4c878acf40df5481086f 

CB Insights. (2021, October 19). Coinbase Strategy Teardown: How Coinbase Grew  Into The King Midas Of Crypto. Retrieved from CB Insights:  

https://www.cbinsights.com/research/report/coinbase-strategy-teardown/ 

Coinbase. (2021, October 12). Coinbase NFT is coming soon: join the waitlist today  for early access. Retrieved from Coinbase: https://blog.coinbase.com/coinbase nft-is-coming-soon-join-the-waitlist-today-for-early-access-cc7bac29fd72 

Curry, D. (2021, October 22). Binance Revenue and Usage Statistics (2021).  Retrieved from Business of Apps:  

https://www.businessofapps.com/data/binance-statistics/ 

Curry, D. (2021, October 13). Coinbase Revenue and Usage Statistics (2021).  Retrieved from Business of Apps:  

https://www.businessofapps.com/data/coinbase-statistics/ 

Curry, D. (2021, October 22). FTX Revenue and Usage Statistics (2021). Retrieved  from Business of Apps: https://www.businessofapps.com/data/ftx-statistics/ 

Dickens, S. (2021, September 6). FTX to launch NFT marketplace with cross-chain  trading between Ethereum and Solana. Retrieved from CoinRivet:  https://coinrivet.com/ftx-to-launch-nft-marketplace-with-cross-chain-trading between-ethereum-and-solana/ 

FTX. (2021, August 3). FTX in 2021H1 Review. Retrieved from FTX:  https://blog.ftx.com/blog/mid_year_review_2021/ 

FTX US. (2021, October 11). FTX US Launches FTX NFTs. Retrieved from PR  Newswire: https://www.prnewswire.com/news-releases/ftx-us-launches-ftx nfts-301397216.html 

Katje, C. (2021, October 12). Coinbase Passes 2 Million Registrations For NFT  Platform, Company Shares Plans For Launch. Retrieved from Benzinga:  https://www.benzinga.com/markets/cryptocurrency/21/10/23471861/coinbase passes-2-million-registrations-for-nft-platform-company-shares-plans-for launch


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