Nft art token-A look at three unobtrusive NFT product trends for 2022.
1. Vertical specific NFT market
OpenSea is clearly the biggest winner in our portfolio. While it will continue to be a period company and dominate the secondary NFT market, I believe that vertical specific markets will open up niches due to better UI/UX and search and discovery capabilities.
SuperRare is a successful example of high-end 1/1 crypto art, but there are other categories such as photography (e.g. Sloika), meta-universe land (e.g. Metahood) and music (e.g. Catalog).
1confirmation Partners Predicts Hot Spots for 2022: Vertical NFT Markets, Cross-Chain Bridges, Investing in DAOs
Craigslist infographic split, which web2 VCs like to use to guide their thinking.
I'll highlight music NFT in particular. unlike other categories like fine art, collectibles and games, music NFT has surprisingly not yet exploded in growth, but I think collectors' tastes are changing rapidly. Catalog, the leading music NFT marketplace, had a breakout month in October, and the volume chart easily reminds me of what I saw at SuperRare in the early 2020s before the crypto art explosion. For music, it's a matter of "when" not "if.
2. Trust-minimizing cross-chain bridges
Almost all cross-chain bridges are now variants of trusted multi-signatures. In particular, the Ethereum to Avalanche bridge is an External Ether Address Account (EOA) whose private key is dispersed among four trusted Intel SGX signatories, and it holds over $6 billion in user funds.
1confirmation Partners predicts hotspots for 2022: vertical NFT markets, cross-chain bridges, investment DAOs.
These bridges are huge honeypots, and I predict cross-chain bridge hacks will be the new CEX and DeFi hacks. the $611 million Poly Network hack is just the tip of the iceberg of what's to come.
Fortunately, more trust-minimizing bridging products are entering the market. hop is currently the leading trust-minimizing bridging product that uses bonders and stablecoin swap AMMs to rebalance funds on both sides of the bridge.
While the focus of bridging so far has been on token transfers, the holy grail and an active area of research now is how to perform cross-chain messaging in a trustless manner. This cross-chain composability will enable a plethora of new use cases. A DeFi project smart contract on Ether L1 will be able to invoke smart contract functionality on L2 or sidechains.
3. Investing in DAOs
I like to think of investing in DAOs as segmenting collectors rather than artwork. The problem I see with segmenting NFTs is that fragmented tokens (ERC-20s) do not trade based on the underlying NFTs (ERC-721s or ERC-1155s) because there is no way to arbitrage if their prices deviate significantly. Therefore, it does not make sense to hold fragmented tokens as cheap index exposure to specific blue chip NFTs such as CryptoPunks.
FlamingoDAO is by far the most successful investment DAO, and we are also seeing DAOs starting to be used for large group purchases such as the US Constitution and Ross Ulbricht's artwork. Today's process involves deploying Gnosis Safe, but I would like to see better tools, such as Koop, facilitate easier group purchases of expensive NFTs.
It's an open secret that 99% of NFTs will not retain their value over time, while expensive blue chip NFTs (CryptoPunks, Bored Apes, etc.) will hold their best value. Investing in DAOs is the cleanest way to give the public better access to high-end NFTs.
Before I make my three predictions for 2022, let's review my performance.
1. The Art of Encryption.Conclusion: Correct.
While a lot has been written about NFT and crypto art this year, this chart sums up that aspect perfectly.
1confirmation partner predicts hot spots for 2022: vertical NFT market, cross-chain bridges, investment DAO.I will review two sentences I wrote in my 2021 prediction.
"DeFi maximalists currently see NFT as a toy, which is reminiscent of BTC maximalists' dismissal of dApps back in 2018." -- Those DeFi Twitter influencers who were openly very bearish on NFT a year ago suddenly did a 180 and started marketing and hyping PFP and even raising NFT funds. "There are currently three artists whose work has a combined value of over $1 million and 43 artists whose work has a combined value of over $100,000. I expect to see far more than that by the end of 2021." -- Today, there are four artists with a total artwork value of over $100 million, 46 with over $10 million, 268 with over $1 million and 1,283 with over $100,000.
2. Prediction markets (Prediction markets).Conclusion: Unclear.
Between the 2020 U.S. presidential election and the inauguration, Polymarket saw a surge in trading volume in January. Trump supporters who believe in #stopthesteal continue to buy Trump stock at 10 cents on the dollar, giving those who believe otherwise a 10% "arb (arbitrage)" opportunity. But except for one-off events like major real-world politics, prediction markets have a hard time maintaining trading volume. I see prediction markets and decentralized social networks as two killer use cases for cryptocurrencies, but the time for product markets is still further away than I initially thought.
3. DeFi Derivatives.Conclusion: Correct.
I tweeted my popular opinion that 2021 DeFi has reached the point of adding functional improvements (e.g. better stablecoins instead of the original stablecoin) or replicating the work done on Ether to other L1s.
The few 0-to-1 innovations we saw at DeFi this year centered on derivatives. index Coop and Ribbon built structured products that offer exposure to index and income strategies. notional launched fixed rate lending. But more importantly, DeFi's two big innovations this year, Uniswap v3 and Primitive.
Uniswap v3 redefined what it means to be a liquidity provider, reconsidered capital efficiency rather than total value lock-in as a KPI for DeFi programs, and launched an ecosystem of structured products, such as Gamma building market-making strategies on top of Uniswap. From the v3 release, Uniswap's DEX market share increased from 45% to 75% (and Sushi decreased from 24% to 12%) as trading volumes converged to the best executed AMM.
Primitive was also the first program to implement replicated market makers. Given the expected return of a specific financial derivative (e.g., option, swap), a binding curve function can be constructed to replicate that derivative in the AMM spot market. This is a big deal for DeFi options because options are the last category in DeFi without a clear market leader - it is difficult to replicate tradfi options on the chain for reasons such as gas and liquidity dispersion. Going forward, I believe Primitive will revamp existing options programs like Uniswap did with previous orderbook DEXs like EtherDelta and Radar Relay.
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