End of support, survival of the fittest, the battle of NFT exchanges

NFT exchanges face end of support, survival of the fittest battle

Low-threshold NFTs are rising, with individual values being relatively small but attracting a wider audience, thus affecting the overall market indicators.

Author | Jessica

Editor | Hao Fangzhou

On August 19, after weighing the pros and cons, OpenSea announced the discontinuation of support for the BNB Chain due to the support costs exceeding the returns.

This decision was made as OpenSea added support for L2s such as Base and Zora, leading some to speculate that BNB Chain is in trouble. But in fact, it is not BNB Chain that is in trouble, but OpenSea, which relies on NFTs for its livelihood.

From a data perspective, the cryptocurrency market is currently in a deep bear market, and NFTs are experiencing even broader decline.

According to DappRader data, in August, NFT trading volume decreased by 16% to $559 million, and the number of transactions decreased by 13% to 3.2 million.

Next, let’s take a look at OpenSea’s revenue situation, which mainly comes from a 2.5% transaction fee. In January 2022, it reached its peak with a monthly trading volume of $4.8 billion, bringing OpenSea a monthly gross profit of $120 million. In February 2023, the monthly trading volume shrank to $657 million, and the gross profit also dropped to $16.43 million per month. But in August 2023, the monthly trading volume was only $105 million, and the gross profit also dropped to $2.63 million per month.

NFT trading volume has dropped significantly, and to make matters worse, OpenSea’s market share is also decreasing.

With the significant decrease in revenue and market share, it is indeed difficult to support more NFTs on the ecosystem. In addition, it is also related to the decrease in OpenSea’s share of the BNB Chain.

From the statistical data from 2022 to July 2023, Ethereum almost occupies the majority of the trading volume on OpenSea, while the peak share of BNB Chain (November 2022) is only 0.8%.

On August 18, OpenSea announced a change to the creator royalties, canceling perpetual royalties and adding optional royalties of 2.5% – 10% for secondary sales. Some community users believe that this undermines the artists’ ongoing income. Yuga Labs announced that, given OpenSea’s announcement of the discontinuation of mandatory royalties, it will implement an optional creator royalties plan for all NFT secondary sales starting from February 2024. Yuga Labs will gradually stop supporting all upgradable contracts and new series on OpenSea SeaPort, with plans to complete this by February 2024.

The cancellation of royalties also reflects OpenSea’s predicament, as Blur is replacing it as the leader, leading OpenSea to make efforts to reduce licensing fees to maintain competitiveness.

On the other hand, Devin Finzer, CEO of OpenSea, stated that this change is a step towards enhancing innovation and adaptability. He also acknowledged the limitations of the previous model and encouraged creators to explore alternative strategies. This viewpoint is committed to nurturing diverse sources of income and creative possibilities.

In addition, this move has stimulated the emergence of creator-centric platforms and ecosystems that establish their own markets to protect the rights of creators.

A typical example is Art Blocks, which is the cornerstone of NFT generative art and launched its own secondary market as early as March of this year. After OpenSea announced this news, Art Blocks reiterated its commitment to protecting the rights of creators through its own NFT market.

Unlike Yuga Labs’ collections, which primarily trade on Blur, most Art Blocks collectors continue to trade on OpenSea. As of August 21st, Art Blocks’ 30-day trading volume reached $5.32 million, with a significant portion occurring on OpenSea. Therefore, the possibility of Art Blocks leaving OpenSea could indeed impact the platform’s revenue. Given the increasing popularity of NFT generative art, this effect becomes particularly significant.

OpenSea’s decision to cancel royalties as a mandatory measure means losing another major NFT market that advocates for creators. This change may trigger a trend of more projects choosing to create their own markets. After Yuga Labs announced its exit, it is not difficult to imagine that they may soon initiate the process of launching their own market.

This also indicates that some subtle changes have occurred in the NFT market, with the rise of “low-threshold” NFTs, which have smaller individual values but can attract a wider audience, potentially affecting the overall indicators of the market.

OpenSea does not support the BNB Chain, but the BNB Chain remains active and holds a leading position. In the past month, it had 500,456 dUAW (daily unique active addresses), accounting for 24% of the market share.

Among the active DApps on the BNB Chain in the past month, the top three are TinyTap, LifeForm, and LianGuaincakeSwap. The first two are social-related, which also indicates that social and game-related assets are growing in the NFT market.

In addition, BNB Chain itself has a native NFT exchange, such as Binance NFT Marketplace. Binance Labs has also strategically invested in NFTrade, Tabi (formerly TreasurLand), and Tofu, which once held the top spot in BNB Chain’s NFT exchange for a period of time. OpenSea doesn’t stand much of a chance.

Another small detail is that Binance NFT will no longer support the Polygon network starting from September 26th. After the streamlining process, it will focus on supporting BNB Chain, Ethereum, and Bitcoin.

This move will provide opportunities for native NFT exchanges in the Polygon ecosystem.

Some people believe that the current situation of “discontinuation of support” for NFTs indicates that the NFT market is “dying”. After all, the cryptocurrency market itself is already small, and when the underlying technology is striving for interoperability, NFTs are building barriers and causing difficulties for traders. However, others hold a different view, suggesting that the NFT market is gradually becoming more segmented, as different chains of NFTs do not have a need or significance for “cross-chain” transactions.

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