Nonfungible.com: NFT game sales hit $5.17B in 2021

Nonfungible tokens (NFTs) took off in 2021, and Nonfungible.com is reporting that NFT game sales hit $5.17 billion during the year.

L’Atelier BNP Paribas and NonFungible.com released a report about the entire NFT market, and they said the larger NFT sales for all markets hit $17.6 billion in 2021, up 200 times from $82 million in 2020.

That means a lot of people believed that NFTs, which use the transparency and security of the digital ledger of blockchain to authenticate unique digital items, are the next big thing. But perhaps an equal number believe that NFTs are full of scams, pump-and-dump schemes, money laundering, and other things that are bad for consumers.

The thing about blockchain is that it’s transparent, and so it’s not hard to do this kind of accounting. L’Atelier BNP Paribas and NonFungible.com found that there are more than 2.5 million digital wallets holding or trading NFTs, up from just 89,000 wallets the year before. If every one of those wallets participated in NFT purchases last year, that means the average purchases of NFTs during the year was $7,040. The actual number of NFT buyers rose from 75,000 in 2020 to 2.3 million in 2021.

“2021 was an incredible year. For many, the explosion that surrounded the Collectibles segment is considered a “bubble,’” said Dan Kelly, CEO of NonFungible.com, in a statement. “On the contrary, we believe that today, every community that was created in 2021 has a digital identity. It is essential that there are strong values carried by strong communities as we start to build a whole new web3 industry.”

Kelly added, “Even if the figures are very encouraging in all segments for 2021, we can anticipate an overall decline in activity in 2022 but which will undoubtedly be more mature.”

I think that means there is a very narrow base of cryptocurrency fans who loved buying NFTs as they became trendy during the year, explaining things like the artist Beeple selling an NFT artwork in March 2021 for $69 million. For whatever reason, buying NFTs became hugely popular in 2021 just like buying Bitcoin. But the market showed that what goes up can also come down, and HODLing, or “holding on for dear life,” wasn’t for the faint of heart.

The report said that during 2021, NFT projects evolved from simple tradable collectibles into more sophisticated virtual assets targeted towards the metaverse.

In a separate report by Quantum Tech Partners, blockchain game companies raised more than $3.3 billion in 2021, up from virtually nothing the year before.

Over $5.4 billion of total profit was generated when buying or reselling NFTs, with 473 wallets each generating over $1 million in profits during 2021.

The most popular category of NFTs were collectibles, which generated $8.4 billion worth of sales. This includes collections like CryptoPunks and Bored Apes.

The fourth annual study by NonFungible.com tracked the rapid growth of a new asset class as the market moved toward the mainstream.

NFTs are digital blockchain-linked assets that, unlike cryptocurrencies, are completely unique and not interchangeable with any other asset. Examples range from programmable art, to ownership records for physical assets, and plots of virtual land in metaverse-like platforms. As each NFT is unique and impossible to replicate, they can bridge the gap between the virtual and the physical economies, offering a potentially huge market of valuable digital goods that can be scaled, collected, and traded, Nonfungible.com said.

Market growth

The metaverse is coming in the form of The Sandbox.
The metaverse is coming in the form of The Sandbox.

The report tracked all on-chain transactions on the Ethereum blockchain using the ERC-721 token standard, as well as other leading NFT blockchains Flow, Ronin and Starkware all gathered using proprietary technology.

The methodology ensured that wash trading, bots and volumes of trading that could not be associated with any specific project, along with additional “noise” on the blockchain that cannot be considered legitimate NFT activity, were not included in total sales for the year, in order to give a more accurate view of the true market.

Market activity also increased significantly. Of the over 71 million active Ethereum addresses, a total number of active wallets transacting NFTs (including buying, selling, holding or using them in a blockchain application) increased from 89,061 in 2020 to more than 2.5 million in 2021 (2,574,302); an increase of 1,822%.

NFT market by segment

Spatial can now show off NFT art in its virtual galleries.
Spatial can now show off NFT art in its virtual galleries.

NFTs have a range of use cases. The report found collectibles were the biggest category with $8.47 billion in sales, driven by the over-speculation on this class of asset and the extremely high value of sales by a small number of big Profile Picture collections such as CryptoPunks and Bored Ape Yacht Club. One of the biggest successes was NBA Top Shot, which captured basketball game highlights in a collaboration of Dapper Labs and the NBA.

Games were next at $5,17 in sales, mostly due to the performance of the blockchain game Axie Infinity, which let players earn money on NFT item sales. There is an impressive volume of active wallets in this segment, likely due to the “scholarship” system in Axie Infinity, which allows people to give other players access to their game accounts and share the income generated, Nonfungible.com said.

NFT art sales topped $2.79 billion. While this category looks small compared to collectibles and gaming, it remains a core feature of the NFT asset class; and as digital artists like Beeple and Pak become recognized names, the category continues to be one of the most stable parts of the ecosystem.

The metaverse category also saw $513.8 million in sales. This segment saw the most growth in the last quarter of 2021, coinciding with Facebook’s decision to rebrand to Meta. This segment is expected to grow in the coming years as consumer brands ramp up investments in Metaverse projects, for example Nike’s acquisition of RTFKT.

And utilities hit $530.8 million in sales in 2021. This is a segment of the market comprising a diverse range of use cases across finance, ticketing, insurance, and communities, such as new social clubs like Maxwell Tribeca that require an NFT ‘passport’ for access. This segment is probably one of the most complex and promising in the market.

The market hit is fever pitch in the summer of 2021 and a peak in August when nearly $400 million in NFTs was traded in a single week. By the end of 2021, NFTs reached the mainstream: ‘NFT’ was named as the Collins Dictionary’s Word of The Year, and NFT artist Beeple appeared as a guest on The Tonight Show and Joe Rogan Experience.

“2021 was a breakthrough year for NFTs in terms of the volume and value of transactions, the interest of mainstream brands, the emergence of new digital communities, and the tens of billions of dollars of funding that went into projects,” said Nadya Ivanova chief operating officer at L’Atelier BNP Paribas. We are, however, yet to see how much of that translates into real products and tangible value for users.”

Ivanova added, “In 2022, I expect that while the NFT market will continue to be volatile, the better projects will also start to mature technologically, socially and commercially. Beyond the focus on NFTs as popular collectibles, there is currently a real need and an opportunity to build infrastructure and utility services for this emerging market and asset class, such as financial and risk management products. The NFT market has barely pushed the boundaries of its underlying technology.”

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