The Rise of the NFT Market: The Evolution from Digital Collectibles to DeFi Integration

NFT, as an emerging hotspot in the Crypto Assets field, has recently attracted a lot of follow. Data shows that the average selling price of NFT products in 2019 was mostly under 50 dollars, while by August-September 2020, the daily average price had exceeded 100 dollars. This indicates that users' willingness to pay for digital products has significantly increased, and the NFT market is experiencing a new round of rapid development.

NFT, short for Non-Fungible Token, is characterized by being irreplaceable and indivisible, representing a unique digital asset. Unlike fungible tokens such as Bitcoin, NFTs are more akin to artworks in the real world, like unique pieces such as the "Mona Lisa."

Currently, Ethereum's ERC-721 standard is the most widely used NFT protocol, commonly used for developing rights-confirming tokens. Recently, other public chain platforms have also launched their own NFT development modules, such as Tezos's TZIP-12 and Polkadot's Unique module. An increasing number of developers from well-known smart contract platforms are flocking to the NFT ecosystem. The daily transaction volume of NFT projects in 2020 increased by about 105% compared to the previous year, demonstrating strong market demand.

The development of NFTs can be traced back to the 2016 on-chain card game based on the Bitcoin Counterparty protocol. In early 2018, the Cryptokitties game on Ethereum became very popular, making Ethereum an important platform for NFT development. Subsequently, trading platforms such as OpenSea and Rarible became the main traffic entry points in the NFT field.

The ERC721 standard provides basic functions for tracking and transferring NFTs, including token transfers, balance inquiries, and ownership confirmation. Each NFT token has a unique Token-ID that cannot be changed during the contract's lifecycle.

In addition to ERC721, various NFT protocol designs have emerged to meet different needs. Currently, NFT products on mainstream public chains are mainly focused on decentralized games and digital art collections.

The FA2 (TZIP-12) standard launched by the Tezos public chain supports various types of tokens and applications, simplifying the creation and management process of NFT assets. The advantages of Tezos lie in its high security and the ability to upgrade the network without forks, which helps simplify the development of decentralized applications.

Under the influence of the DeFi boom in 2020, a new generation of NFT products began to merge with DeFi protocols, evolving from simple collectibles into more complex financial instruments. These combined products are referred to as "GameFi," which integrates gaming and financial attributes. They are primarily used for financial certificate rights confirmation and enhancing the utility of NFTs, with functions such as "mining," "bidding," and so forth.

Taking yinsure.finance as an example, this is an NFT insurance project based on Ethereum. Users can generate NFT tokens (yNFT) based on the insurance policy, with each yNFT corresponding to a specific duration and coverage amount, and can be freely traded on the NFT platform. According to reports, the project's trading volume reached 5000 ETH in its first month.

With the increase in DeFi users, the market's demands for the security and efficiency of underlying platforms are constantly rising. The high Gas fees and security issues of Ethereum remain challenges faced by developers. Other PoS public chains, such as Tezos, are showing good development momentum. The DeFi application ecosystem on the Tezos mainnet is gradually thriving, including oracle, decentralized exchanges, and stablecoin protocols.

In the future, we may see a deeper integration between DeFi and NFT. As NFT products gradually transcend the "entertainment collectibles" category, their value continues to rise, and developers' demands for security performance and efficiency also increase. Public chains like Tezos, with high security, low energy consumption, and a rich integration environment, are expected to provide more support for innovative products combining NFT and DeFi.