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Beeple’s $69M Christie’s auction shows the potential of NFTs

Posted by
Ilya Abugov

Week in Review | Week #10, 2021

The market recovered from the turbulence of the previous week, with an upswing that saw BTC and ETH spend time above $57K and $1800K respectively. Excitement over NFTs continues to grow, and it now seems to be eclipsing conversation about DeFi. With new artists and celebrities giving minting NFTs a try, awareness increases. However, not everyone is happy about NFTs. The critics are becoming louder, which may force the space to better articulate its ideas and features.

Another week another hack

The fact that DeFi may currently be overshadowed by NFTs, may serve the sector well in the long run. The regularity with which dapps are being exploited is troubling and the industry does not seem to have an answer for the issue at the moment.

This time around, Dodo was exploited for around $3.8M. The project’s TVL has fluctuated between $39M-$50M in March, so the exploit accounted for around 7%-9% of the TVL. For smaller projects the damage is relatively manageable, but what would happen if one of the top 10 was to come under attack? The industry’s auditing capabilities appear to be very limited, and the insurance segment is still developing.

Source: https://defillama.com/protocol/dodo

Ethereum looks to L2s and 2.0

The threat of exploits is an industry-wide problem, but Ethereum has plenty of its own issues stemming from high gas costs and scalability limitations. Those looking to stay with the Ethereum ecosystem are forced to consider L2s. Some, including Vitalik Buterin, see rollups as a potential solution. The community is anticipating a release from the Optimism team, while Polygon is looking to aggregate all solutions under one SDK.

Source: PolygonTech

Polygon is an evolution of the Matic Network, which started out as a Plasma implementation of L2 solution. Now the project is trying to offer various scaling options under one roof and position itself as the go-to scaling platform in the Ethereum ecosystem.

Meanwhile, StakeWise announced a $2M raise for its product that should help facilitate staking for Ethereum 2.0. While a fully functional Ethereum 2.0 remains some way away, it is an object of hope and anticipation for the community.

Regulators trying to catch up to the space

“Bill 38” recently passed in the Wyoming Senate Committee, offering some optimism that regulators are looking to understand the realities of the blockchain industry and incorporate it into the existing legal structure in a functional way.

If it is made into law, it will enable DAOs to obtain legal company status marking a major step into incorporating decentralized entities into the current legal framework.

With greater understanding also come greater enforcement capabilities. The IRS is looking to train agents to look at blockchains in order to detect tax evasion, as part “Operation Hidden Treasure”. With the blockchain industry doing well and gains from various activities such as yield farming being rather extraordinary it is no surprise that regulators will be looking closely at taxes.

Source: CoinGecko

NFTs are gaining momentum

NFTs have attracted celebrities from all sorts of traditional industries including art, music, and sports. The impressive sales numbers are capturing headlines and generating even more interest. 

Recent noteworthy events include the $1.85M “Heroines” drop from José Delbo and Hackatao, and Christie’s auction of Beeple’s Everydays: The First 5000 Days, which has now sold for almost $70 million dollars at the time of writing.  

Beeple has become a key figure in the crypto art space, as his work has both attracted mainstream attention and become a focus for experimentation with things like the B.20 token. With price discovery arguably still in the beginning stages, Christie’s auction might be an important milestone for the sector.

Traditional firms are also trying to leverage the power of NFTs. For instance, Taco Bell has released its own NFTs on Rarible, which have sold out. Nevertheless, not everyone appreciated the approach, hinting that there may be more to getting into the space than just minting another NFT.

Source: DappRadar

Both OpenSea and Rarible are among the top 5 marketplaces in terms of active unique wallets and volume, and the space looks to try to continue to expand. Not surprisingly, Ethereum is seeing competition in the NFT space as well. While Flow and Wax have already established themselves in that regard, newcomers like BSC and Tezos are also trying to attract creators and collectors. Now, Solana will be welcoming Solible into its ecosystem.

AnRKey X, pronounced Anarchy X, recently became the #1 selling NFT product on the NFT marketplace Rarible. Their NFTs that originally sold for $343 have now traded for prices up to $47,000. Their upcoming gaming product combines NFTs with DeFi, and next Monday they will drop new NFTs onto the market.

Growing criticism of crypto art

While there is a lot of excitement about crypto art there are also concerns being voiced. Some are worried about the hyped nature of the sector, but another area of criticism is the environmental impact of minting NFTs.

Source: CryptoArt

Most recently, ArtStation was forced to halt its NFT plans because of the negative feedback from its users. The carbon footprint of PoW chains like Ethereum has been a much-debated topic and has now reached the crypto art segment.

However, given that energy consumption differs between various chains, and there are alternatives to PoW chains with NFT capabilities like Near Protocol, the argument may be exacerbated by a lack of understanding.

Artists have embraced NFTs because they have enabled them to monetize and distribute their work in an easier way, giving them greater reach, awareness, and financial stability. For those worried about environmental impact, it may be more productive to look deeper into the facts and also study platform alternatives, instead of waging a campaign against all NFT-based art.

The Axie universe may be growing

Sky Mavis, is setting up an investment platform to fund new blockchain games. While it is unclear whether new projects will integrate with Axie Infinity it would make a lot of sense.

Sky Mavis has launched its own chain Ronin to achieve needed scalability for Axie Infinity and it may serve as the base infrastructure for a larger gaming ecosystem. Sky Mavis, along with Dapper Labs, has shown the viability of launching chains outside of Ethereum to support targeted gaming and collectibles use cases. Dapper Labs has already started building out its ecosystem, it will be interesting to see if Sky Mavis is able to do the same.

The information provided here is for informational purposes only. This is not investment advice and should not be treated as such. Strategic Round Capital and/or the author of this article holds a position in BTC, ETH, Axie Infinity NFTs, SLP.

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