bookmark_borderMilking the cash cow: NFTs seen as investment opportunity by VCs

The NFT sector is growing rapidly, with NFT marketplaces seeing a huge increase in volume. Investors and analysts explain what’s coming next.

According to data from Messari, the NFT marketplace sales volume grew by 2,882% in February. It dwarfed the increase in monthly sales volume in any given month throughout the past three years. The fast growth of the NFT market follows high-profile auctions of nonfungible tokens led by Sotheby’s and other recognizable brands, such as Time Magazine, which is planning to auction three NFTs in the coming month.

The NFT sector has begun to see explosive growth beginning in early February of 2021. NFT marketplaces, such as Rarible and OpenSea, have started to see an uptick in NFT sales as both traditional VC investors and celebrities entered the NFT market.

The impending catalyst of NFTs

Speaking with Cointelegraph, Simon Dedic, managing partner of Moonrock Capital — one of the largest funds in the Polkadot industry and Web 3.0 ecosystem — said the NFT market is significantly different from where it was in 2018 when CryptoKitties saw explosive popularity.

The infrastructure supporting NFTs has rapidly improved, allowing the sector to have full-stack NFT services from marketplaces, minting platforms, trading venues, NFT financialization protocols and more, as Dedic said:

“NFT technology initially caught our interest a few years ago when CryptoKitties famously clogged the Ethereum network and became a huge topic of conversation within the space. The NFT market has now seen significant growth and interest, and there are obvious differences with this recent surge in popularity.”

NFTs are yet to see proper mainstream adoption and observe awareness from casual investors. However, Dedic noted that the improvements in the user interface, accessibility and user experience will be the components that catalyze the next impulse wave of growth for the NFT sector.

He added that “advancements in UI and accessibility are ushering in a new audience of people who may not have entered crypto before via a traditional means,” adding this is what would lead new capital to enter the NFT market.

Moonrock Capital has recently incubated an NFT project for the first time in its history after years of focusing mostly on investments in the Web 3.0 space, indicating the rise in demand for NFTs. 

For instance, Polkamon, a new NFT platform on Polkadot, saw Morningstar Ventures, Ascensive Assets and Divergence Ventures participate in the seed round, funds that typically invest in the Polkadot space and Web 3.0-related DeFi protocols. In recent months, NFT-focused funds have also emerged, indicating serious interest in the NFT market, according to Dedic:

“We are now well-positioned to focus on NFT collectibles with Polkamon, our newest incubation with Morningstar Ventures. People will be able to unpack and collect valuable, high-quality NFTs in a gamified way, restoring the nostalgia from childhood memories and providing valuable use cases for NFTs.”

Mainstream investors are stacking NFTs?

Investors in traditional venture capital, such as Gary Vaynerchuk, have also started to invest in the NFT market. In a recent interview, Vaynerchuk noted that he believes NFTs would play a key role in monetizing the web.

Vaynerchuk said that he foresees all goods, such as music, books, art and collectibles, will be tokenized, likely through NFTs. “It feels like a sea change: the blockchain, the ledgerization [or] digitalization of all goods, the way music is distributed, books, the way art and collectibles are sold, the way season tickets can be sold,” Vaynerchuk said.

NFT’s will be the gateway to access to those you admire

— Gary Vaynerchuk (@garyvee) February 22, 2021

Elvin Cheung, managing director at Cinchblock — a Hong Kong-based crypto investment firm and incubator — similarly said that NFTs will become a staple in both traditional finance and crypto markets. Cheung noted that Binance invested in Binance Smart Chain’s first NFT marketplace, called Refinable, which indicates strong demand from existing dominant players within the crypto space. He told Cointelegraph:

“NFTs are going to pave the future and become a staple in both the traditional and crypto markets. Once products are licensed and expelled of counterfeits on blockchain, all sorts of NFTs will accelerate the growth of the market, whether it be a piece of artwork, music or even real estate.”

Some of the biggest venture capital investors in the technology sector, such as A16z, have also started to lead major investment rounds in the NFT market. Most recently, A16z led a $23-million round in OpenSea, the biggest NFT marketplace since 2017. In a paper explaining its thesis behind its investment, A16z noted that sales volume for top NFT sources grew to $100 million per week. The firm explained:

“Today there are more than 3 million NFTs for sale, and sales volume on the top sources has grown over 400x year over year to more than $100 million per week. NFTs are breaking out to more mainstream audiences, and represent an entirely new economy based on digital ownership.”

What will be the next trend in the NFT market?

In the medium to long term, there is a high probability that some of the most recognizable global brands will directly enter the NFT market to produce NFTs with their intellectual properties. For instance, Gizmodo reported that DC, the company behind DC Comics, is exploring the sale of original DC art through NFTs.

In the foreseeable future, DC said that it is considering the distribution of original digital art “rendered for DC’s comic book publications.” DC’s comic book brands include the likes of Superman, Batman, Arkham Asylum, The Man of Steel, and The Dark Knight Returns. In the letter, DC emphasized that it is not permitted to sell DC’s NFTs featuring DC’s intellectual property without the company’s permission, which indicates the firm’s serious plans of entering into the market:

“As DC examines the complexities of the NFT marketplace, and we work on a reasonable and fair solution for all parties involved, including fans and collectors, please note that the offering for sale of any digital images featuring DC’s intellectual property with or without NFTs, whether rendered for DC’s publications or rendered outside the scope of one’s contractual engagement with DC, is not permitted.”

If the trend of global brands creating their own NFTs and issuing them through marketplaces and third-party distributors kicks off in a big way, this will set a new trend in the NFT market that could take it to actual mainstream adoption.

bookmark_borderGerman federal bank runs successful blockchain system without a CBDC

Executives at the Deutsche Bundesbank are eager to launch a blockchain-based system without the need for a CBDC — and they just might succeed.

Germany’s federal bank, the Deutsche Bundesbank, has run successful tests on a project which bridges the traditional finance infrastructure with blockchain technology.

Despite the current global rush by central banks to familiarise themselves with central bank digital currency technology, the testing carried out by the Bundesbank, in conjunction with the Deutsche Börse Group and the German Finance Agency, required the issuance of no CB, or any tokenized money at all.

The system reportedly relies on two software modules which form a connection between the Bundesbank’s internal system and distributed ledger technology. Instead of creating a token-based system, the bank simply created an interface that initiates a “trigger,” signifying that a transaction has been settled and that money can safely change hands.

Germany has made no secret of the fact that it isn’t too keen on a CBDC. That may be because the Bundesbank’s position as the most powerful member of the European System of Central Banks makes it the organization with the most influence to lose. That’s a sentiment that was echoed by German politician Burkhard Balz himself in 2020.

Following the announcement of the Bundesbank’s recent tests, Balz, who is also a member of the Bundesbank executive board, suggested the entire Eurosystem could adopt the technology in a much quicker fashion than it could launch a CBDC.

“Following successful testing, the Eurosystem should be able to implement such a solution in a relatively short space of time — at least in far less time than it would take to issue central bank digital currency, for instance,” said Balz.

As part of the testing, the German Finance Agency issued a 10-year federal bond via the DLT trigger system, while also testing securities trading on primary and secondary markets. The testing included participants from Citibank, Barclays, Goldman Sachs, Commerzbank, DZ Bank and Société Générale.

bookmark_borderWaves Enterprise expands to Singapore to pursue hybrid blockchain adoption

Asian markets are much friendlier to enterprise blockchain adoption, says Waves’s founder.

Waves Enterprise has onboarded Tokenomika Pte Ltd., a Singapore-based fintech company, as an operator for its hybrid public-private blockchain. Tokenomika will operate the Waves Enterprise public permissioned network, starting in March.

The expansion comes as part of a strategy shift for Waves Enterprise, focusing more on hybrid networks that can interface with public blockchains like Ethereum. In Gartner’s “hype cycle for blockchain” report, the analytical firm predicts that the enterprise world will gradually move away from fully private networks to hybrid or even fully public options. Waves Enterprise is making a bet on this prediction, focusing on creating networks that can interface with the wider blockchain world — especially in the context of tokens. Sasha Ivanov, founder of Waves, told Cointelegraph:

“There are no fully operating corporate or gov blockchain ecosystems yet; I would say that the market is still in search of a minimal viable ecosystem model. But in any case you need to start out with something small, that’s the only way to build a sustainable ecosystem.”

Ivanov noted that there are attempts by companies like Hedera Hashgraph to bring a mixed model, but he sees Waves’s offering as more comprehensive. While the market demand for hybrid solutions is still small, this may change in a three-to-five years perspective, according to Ivanov. In the meantime, the Singapore operator will focus on promoting ready-made products like Waves’s blockchain voting platform.

Singapore provides the perfect jurisdiction to develop Waves’s vision. “Singapore has one one of the most advanced crypto and blockchain regulations in the world,” Sasha Ivanov, founder of Waves, told Cointelegraph. “It offers a neutral regime for the growth of crypto and digital assets transactions. All this made Singapore to emerge as the crypto hub in Asia. Such legal space is crucial for building next-gen ecosystems and disruptive economy models.”

According to Ivanov, Waves Enterprise’s hybrid model occupies a niche that other projects have not populated yet. Its architecture is configurable and can be tailored to local cryptography standards and it features “language agnostic smart contracts.” The ability to implement custom cryptography was used by the Russian government in its recent blockchain e-voting pilot.

Ivanov was somewhat critical of Russia’s new cryptocurrency regulations, noting that “new Russian crypto regulations indeed don’t suppose that corporate cases are based on public blockchain technologies and cryptoeconomics,” which is one of the reasons why Waves Enterprise is now pursuing other jurisdictions. Waves will still pursue the Russian enterprise market though, with Ivanov noting that “private blockchain proved to be a demanded technology for digital transformation here in Russia.”

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bookmark_borderCovalent raises $2M to build a decentralized blockchain data provider

The blockchain data space is getting more and more heated.

A number of notable investors and projects have provided $2 million to Covalent, a project building a decentralized blockchain data provider.

Hashed Ventures led the round with participation from Binance Labs, Coinbase Ventures, Delphi Ventures, Hypersphere Ventures and others. Blockchain projects like Moonbeam, Avalanche, NEAR and Elrond also pitched in the funding round.

Covalent serves data to a number of projects in the DeFi and NFT spaces, including 0x, Zerion and Balancer, and it occupies a similar niche to The Graph (GRT). Ganesh Swami, CEO and co-founder of Covalent, told Cointelegraph that it focuses on a “no-code” approach that distinguishes it from The Graph:

“We do not require developers to write subgraphs or SQL, which means Covalent is more broadly applicable, more mainstream with a bigger addressable market. Covalent is built for the eventual and inevitable merge of DeFi and Fintech.”

The architectural vision for Covalent is that of a decentralized and sharded global database, allowing any kind of granular query into historical blockchain data. Blockchain data projects, in general, can be considered as more advanced and generic blockchain explorers, allowing a much wider selection of data. DuneAnalytics is another project in this field, and it is often used by developers to build custom statistical queries about individual DeFi projects.

The funding obtained by Covalent will be used to decentralize its network, onboarding professional data providers and validators, as well as expanding to more networks. It currently indexes six blockchains, with the team expecting to index a total of 12 blockchains by the end of the year.

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