Market Report

NFT Infrastructure Report

The NFT Infrastructure Report is part of a series that web3 Studios is publishing on the current state of the NFT infrastructure - with a focus on institutional use cases. While the main report provides an overview of the key segments and players, upcoming deep-dive articles will focus on key developments in specific sub-sectors, innovation, fundraising, and consolidation. For this edition, we have worked together with selected leaders in the space to analyze the current state of the market and develop a framework to define general market structures.

The key takeaway for us is that while the market is still nascent certain projects represent opportunities that are of truly institutional grade quality. We are observing parallels to the early days of the internet where strong network effects accrue to ‘established’ players, especially as more and more utility is being added. Furthermore, the market structure as we see it shaping out is similar to traditional markets, eventually addressing end-users basic needs: “Where can I trade my NFTs?” — Marketplaces; “Where is the data stored?” — Storage; “Where can I track/analyze NFT activity?” — Data and Analytics; “How can I make use of my NFTs?” — NFTs as Financial Assets.

The overall NFT market is growing at a significant pace resulting in large overall transaction volumes and an ever-increasing number of individual NFT buyers, while still relatively small. Another characteristic is its truly global set-up with a dispersion of activity around the globe. Within these segments, we see varying degrees of maturity. Marketplaces typically develop early maturity as they are solving core customer needs and their growth is fueled by strong network effects (like in web2). In web3 these dynamics have led them to be one of the most advanced verticals to date. Similarly, with more and more data being produced, storage has been one of the major topics for Big Tech over the last decades so people have started to focus on solutions rather early. In the specific case of NFTs, storage of NFT metadata has not yet reached the appropriate level of importance in the space with many philosophical questions about where data should be stored remaining to be discussed. When it comes to NFT data and analytics, there is a mix of established crypto data analytics providers and more specialized NFT players in the market — while more and more data points and tools become available, we have not met a single person active in the space who feels satisfied with the tool kit currently available. Another nascent sub-vertical is the use of NFTs as financial assets, as utility beyond collecting and displaying is still limited. We have started to see a lot of engagement around the implementation of basic financial services (e.g. lending, fractionalization) in the NFT context and expect a lot more activity at the intersection of Decentralised Finance (‘DeFi’) and NFTs going forward. Not so prevalent yet, but moving closer to an extended reality we believe people are also going to ask “What role do NFTs play in the metaverse?” and it will be important to have a sophisticated view of how ‘the metaverse’ will evolve. While it is hard to foresee exactly what form it will take, we strongly believe NFTs will play an integral role in that transition and there are a couple of infrastructure pillars we think are universally applicable.

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