1. Introduction

1.1 Background and Purpose

In recent years, with the rapid development of blockchain technology, NFT Crypto (Non-Fungible Token Crypto, non-fungible token encryption assets) as an emerging form of digital assets, has set off a craze worldwide. From its initial niche concept to its widespread application in art, gaming, music, sports, and other fields, NFT Crypto is profoundly changing people’s understanding and methods of transactions for digital assets.

The rise of NFT Crypto is not accidental, it is the inevitable product of the development of the digital economy to a certain stage. In the traditional Internet environment, digital assets are easy to copy and propagate, making it difficult to determine their uniqueness and ownership, which limits the value realization and circulation of digital assets. The emergence of blockchain technology provides a solution to these problems. NFT, based on blockchain technology, endows each digital asset with a unique identifier through smart contracts, achieving ownership confirmation and transaction traceability of digital assets, thereby giving true value to digital assets.

Since the birth of the first NFT project CryptoPunks in 2017, the NFT market has been continuously expanding. 2021 was called the ‘NFT Year’, during which the NFT market saw explosive growth with a total transaction volume reaching an astonishing $25 billion. Numerous celebrities, artists, and brands joined in, making NFTs the focus of global attention. Despite experiencing some adjustments in 2022 against the backdrop of the overall downturn in the cryptocurrency market, the NFT market has still maintained active trading and innovative development trends.

2. Basic Concepts of NFT Crypto

2.1 NFT (Non-Fungible Token)

2.1.1 Definition and Characteristics of NFT

NFT, i.e. Non-Fungible Token, is a unique digital asset based on blockchain technology. Unlike homogeneous cryptocurrencies such as Bitcoin and Ethereum, NFTs have significant features such as uniqueness, indivisibility, and verifiability.

• Uniqueness: Each NFT has a unique identifier, which gives them a unique identity in the digital world. Take CryptoPunks as an example, this is a collection of 10,000 unique pixelated characters in an NFT project. Each CryptoPunk has its own unique appearance features such as hairstyle, clothing, accessories, etc. These features combine to form the unique identity of each CryptoPunk, giving them unique value in the market.

• Indivisibility: NFTs cannot be divided into smaller units for trading like traditional currencies or fungible tokens. For example, you cannot split an NFT representing digital artwork into parts and sell them separately; it can only be transferred or traded as a whole, ensuring the integrity and uniqueness of the digital asset.

• Verifiability: Based on the decentralized and tamper-proof nature of blockchain, the ownership and transaction history of NFT are fully recorded on the blockchain, and anyone can query and verify them through a blockchain browser. This ensures the authenticity and ownership of NFTs are reliably guaranteed, effectively preventing fraud and piracy. For example, on NFT trading platforms like OpenSea, users can easily view the creator, previous owners, and all transaction records of a specific NFT, ensuring transparent and trustworthy transactions.

In addition, NFT also has characteristics such as traceability and programmability. Traceability allows the entire lifecycle of NFT to be clearly traced, with every link from creation, issuance to transaction circulation being traceable; programmability allows developers to add various custom rules and functions to NFT, further expanding the application scenarios and value of NFT.

2.1.2 NFT Technology Principles

NFT is built on blockchain technology, with core technologies including smart contracts, Token standards, etc.

• Smart Contract: A smart contract is an automatically executed contract deployed in code form on the blockchain. In the creation and transaction process of NFTs, smart contracts play a crucial role. When creating an NFT, developers define the attributes, rules, and behaviors of the NFT by writing smart contracts, such as ownership, transferability, and transfer conditions. When the preset conditions in the smart contract are met, the corresponding operations will be automatically executed without the intervention of a third party. For example, in an NFT artwork transaction, a smart contract can be set to automatically transfer the ownership of the NFT from the seller to the buyer and transfer the funds to the seller’s account once the buyer has paid the agreed price. The entire process is efficient, secure, and transparent.

• Token Standards: In order to ensure the interoperability of NFTs across different applications and platforms, the industry has established a series of Token standards. Currently, the most commonly used NFT standards on Ethereum are ERC-721 and ERC-1155. The ERC-721 standard is used to create completely unique NFTs, each with a unique tokenId that can accurately identify and track each NFT. ERC-1155 is more flexible, allowing the creation of multiple types of NFTs within a single smart contract and supporting batch operations, such as transferring multiple different types of NFTs at once, which has a wide range of applications in scenarios like game items. For example, in some blockchain games, players can own various types of NFT items such as weapons, equipment, pets, etc., which can be created and managed based on the ERC-1155 standard, making it convenient for players to trade and use them.

In addition to smart contracts and token standards, NFT also involves aspects such as metadata and content storage. Metadata is used to describe detailed information about NFT, such as name, description, creator, attributes, etc. These information is usually stored in JSON format off-chain and associated with NFT through URI (Uniform Resource Identifier). Content storage refers to the storage method of the actual digital content represented by NFT (such as images, audio, video, etc.). Due to the limited storage capacity and high cost of blockchain, these digital contents are usually stored in off-chain distributed storage systems (such as IPFS, InterPlanetary File System), and the actual digital content can be accessed through the links in the metadata.

2.2 Crypto (Cryptocurrency)

2.2.1 Common Cryptocurrency Introduction

Cryptocurrency is a type of digital currency issued and traded using decentralized blockchain technology based on cryptographic principles. Since the birth of Bitcoin in 2009, the cryptocurrency market has rapidly developed, with many different types and functions of cryptocurrencies emerging. Here are several common cryptocurrencies:

• Bitcoin: Bitcoin is the first decentralized cryptocurrency proposed and created by Satoshi Nakamoto in 2009. It is based on blockchain technology and is generated through ‘mining’, with a total supply capped at 21 million. The main features of Bitcoin are decentralization, anonymity, global circulation, and limited supply. It is widely regarded as a digital gold, commonly used for value storage and investment. For example, many investors see Bitcoin as a tool to hedge against risks in traditional financial markets, and during periods of economic instability, the price of Bitcoin often experiences significant fluctuations.

• Ethereum: Ethereum is an open-source public blockchain platform with smart contract functionality, and its native cryptocurrency is Ether (ETH). Ethereum not only supports digital currency transactions but also allows developers to create and deploy smart contracts on its platform and develop various decentralized applications (DApps). Ethereum’s smart contract functionality provides an important technical foundation for the development of NFTs, decentralized finance (DeFi), and other fields. For example, the vast majority of NFT projects are built on the Ethereum blockchain, enabling the creation, trading, and management of NFTs through Ethereum’s smart contracts.

• Litecoin (Litecoin): Litecoin is a fork of Bitcoin, which is similar to Bitcoin in technology but has some improvements. Litecoin has faster transaction confirmation speeds and shorter block generation times, and is generally considered a complement to Bitcoin in the field of small payments. Its total supply is 84 million, four times that of Bitcoin. Litecoin has a relatively lower price and cheaper transaction fees, making it suitable for daily small transactions.

• Dogecoin: Dogecoin was originally created as a joke cryptocurrency, with the image of a Shiba Inu as its logo, and it has gained widespread popularity on social media. Despite its entertaining origins, Dogecoin has gradually gained a place in the cryptocurrency market due to its strong community influence and wide dissemination. Dogecoin is often used for small payments, tips, and other scenarios, and it is loved by some users for its low transaction fees and fast transaction speed.

These common cryptocurrencies have different positions and use cases in the market, enriching the ecosystem of digital currencies and providing users with more choices.

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2.2.2 The Relationship Between Crypto and NFT

Crypto plays a crucial role in NFT trading, mainly reflected in the following aspects:

• Trading Medium: In the NFT market, cryptocurrency is the primary trading medium. Buyers typically need to use cryptocurrencies such as Bitcoin, Ethereum, etc., to purchase NFTs. For example, on well-known NFT trading platforms like OpenSea, Rarible, users can use cryptocurrencies like ETH to bid, purchase, and trade desired NFTs. This method of using cryptocurrency as the trading medium enables NFT transactions to be conducted quickly and conveniently on a global scale, breaking the geographical and time limitations of traditional financial transactions.

• Value storage: The value storage function of cryptocurrencies provides support for the value of NFTs. As the value of NFTs is relatively subjective and fluctuates greatly, cryptocurrencies, as assets with a certain value stability, can serve as a reference standard for measuring the value of NFTs. At the same time, investors holding cryptocurrencies can also achieve diversified asset allocation by purchasing NFTs, storing the value of digital assets in different forms of assets, and reducing investment risks.

• Incentive Mechanism: In some NFT projects, cryptocurrencies are used as an incentive mechanism to encourage users to participate in the construction and promotion of the project. For example, the project party may distribute a certain amount of native cryptocurrency or governance tokens to early participants, which can be used for participating in project governance decisions, obtaining project revenue dividends, etc. This incentive mechanism helps attract more user attention and participation in NFT projects, promoting the development and growth of the project.

• Liquidity provision: The liquidity of the cryptocurrency market provides guarantees for NFT transactions. Due to the high liquidity of cryptocurrency trading on a global scale, both buyers and sellers of NFTs can more conveniently convert their held cryptocurrencies into fiat currency or other assets, thereby improving the efficiency and flexibility of NFT transactions. At the same time, some decentralized finance (DeFi) projects also provide financial services such as lending and collateral for NFTs, further enhancing the liquidity of NFTs.

3. the current market situation of NFT Crypto

3.1 Market Size and Growth Trends

3.1.1 Global NFT Market Size

In recent years, the global NFT market has shown explosive growth. According toNonFungible.comData shows that the global NFT market was only $41 million in 2018. By 2021, this number skyrocketed to $25 billion, an increase of about 610 times in three years. 2021 is widely regarded as the “NFT Year,” a year that witnessed unprecedented prosperity in the NFT market. Various factors contributed to the rapid expansion of the market. On the one hand, breakthroughs were made in NFT projects in the digital art field, such as digital artist Beeple’s work “Everydays: The First 5000 Days,” which was sold at Christie’s auction house for a high price of $69.346 million. This event garnered widespread media attention globally, greatly enhancing the visibility and acceptance of NFTs, attracting a large number of investors and collectors to enter the market. On the other hand, various industries such as gaming, sports, and music have ventured into NFTs, launching various types of NFT projects, further enriching the NFT market ecosystem and expanding the market size.

Although the NFT market in 2022 experienced some adjustments against the backdrop of the overall downturn in the cryptocurrency market, it still maintained active trading. The total global NFT market transaction volume reached $16 billion in 2022, although it decreased compared to 2021, the market activity remained high. In this year, the NFT market continued to innovate in multiple areas, such as the development of virtual land market, represented by Decentraland and The Sandbox, virtual world platforms where users can purchase, develop, and trade NFTs of virtual land. The application scenarios of these virtual lands continue to expand, including hosting virtual concerts, establishing virtual business centers, etc., attracting the participation of numerous users and companies.

As we enter 2023, the NFT market continues to show signs of development. According to the latest data, the global NFT market transaction volume reached 8 billion US dollars in the first half of 2023, demonstrating that the market still possesses strong vitality and development potential after undergoing adjustments. During this period, some emerging NFT application scenarios continue to emerge, such as NFT certificates in the field of education. Enterprises issue NFT certificates to prove students’ learning achievements and skills, providing a new way for educational certification; in the field of supply chain management, NFTs are used to track the origin and circulation information of goods, enhancing the transparency and traceability of the supply chain.

Overall, the global NFT market has experienced rapid growth in the past few years, despite certain volatility in the market. With the continuous development of technology and the ongoing expansion of application scenarios, the NFT market is expected to maintain a good development trend in the future, and its market size will continue to expand.

3.1.2 Impact of Crypto Market on NFT

The crypto market is closely related to the NFT market, and the fluctuations in the crypto market have had various significant impacts on the NFT market.

• Price Fluctuations: The trading of NFT is mainly conducted using cryptocurrencies as a medium, so the fluctuations in cryptocurrency prices directly impact the prices of NFT. When mainstream cryptocurrencies like Bitcoin, Ethereum, etc., experience price increases, the value of investors’ cryptocurrency assets rises, and they may allocate more funds into the NFT market, thereby driving up NFT prices. Conversely, when cryptocurrency prices decline, investors’ assets shrink, leading to potential reduction in NFT purchases or even selling off NFT holdings to recoup funds, resulting in a drop in NFT prices. For example, during the bull market in the cryptocurrency market in 2021, Ethereum prices surged significantly, leading to a substantial increase in both trading volume and prices in the NFT market during the same period; however, in the bear market of the cryptocurrency market in 2022, Ethereum prices plummeted by over 70%, negatively impacting the NFT market, with many popular NFT projects experiencing significant price corrections, such as the floor price of CryptoPunks (referring to the lowest-priced NFT in a project) dropping from around 110 ETH at its peak in 2022 to approximately 40 ETH.

• Changes in investment enthusiasm: The overall investment atmosphere and enthusiasm in the crypto market have a significant impact on the investment enthusiasm in the NFT market. During the boom in the crypto market, investors’ confidence in encrypted assets increases, and they are more willing to explore the emerging NFT investment field. The attention and influx of funds in the NFT market will significantly increase. Many investors view NFTs as a highly potential investment target, hoping to achieve high returns through NFT investment. However, when the crypto market encounters a bear market or major negative events, investors’ risk aversion decreases, and their investment in the NFT market becomes more cautious. For example, in May 2022, the cryptocurrency market experienced a severe collapse, and the unpegging of the TerraUSD stablecoin triggered panic selling in the market, causing the entire crypto market to slump. As a result, the investment enthusiasm in the NFT market also sharply declined, with a significant drop in trading volume on major NFT trading platforms such as OpenSea, and newly launched NFT projects facing greater market pressure and promotional difficulties.

• Market Liquidity: The liquidity of the crypto market also has a significant impact on the trading liquidity of the NFT market. The high liquidity of the cryptocurrency market allows investors to more easily convert cryptocurrencies into fiat currency or other assets. When the liquidity of the crypto market is sufficient, the trading in the NFT market is more active, and buyers and sellers can more easily reach transactions. Conversely, when the liquidity of the crypto market is tight, both buyers and sellers of NFTs may face difficulties in capital turnover and transaction delays, leading to a decrease in the liquidity of the NFT market. For example, in the event of extreme market conditions in the cryptocurrency market, cryptocurrency exchanges may become congested, and users’ transaction requests may not be processed in a timely manner, which can affect the smooth operation of NFT transactions, restricting the liquidity of the NFT market.

In conclusion, the fluctuations in the Crypto market have significant impacts on the prices, investment enthusiasm, and market liquidity of the NFT market, and there is a close interdependent relationship between the two.

3.2 Main Application Areas

3.2.1 Digital Art

NFT has the most extensive and in-depth application in the field of digital art, bringing revolutionary changes to the creation, transaction, and collection of digital art. In the traditional digital art market, digital works are easy to replicate and disseminate, making it difficult to determine their uniqueness and ownership, which limits the value realization and circulation of digital art. With the emergence of NFT technology, through the immutable and decentralized nature of blockchain, digital art works are endowed with a unique identity and proof of ownership, allowing them to be authenticated, traded, and collected like traditional art pieces.

In terms of creation, NFT provides digital artists with more creative freedom and possibilities. Artists can transform their digital works, such as paintings, photography, music, videos, etc., into NFTs through smart contracts to achieve on-chain and rights confirmation. This not only protects the artists’ intellectual property rights but also provides them with a new source of income. Some digital artists have attracted attention from many collectors and investors by issuing limited edition NFT works, gaining substantial profits. For example, digital artist Pak’s NFT project ‘The Merge,’ which combines multiple NFTs into a divisible digital asset, attracted over 28,000 buyers with total sales reaching $91.8 million, becoming a classic case in the NFT art field.

In terms of trading, the NFT digital art market is thriving. Many NFT trading platforms such as OpenSea, SuperRare, and Nifty Gateway provide convenient channels for the trading of digital artworks. These platforms gather digital artworks from around the world, allowing users to browse, purchase, and sell their favorite digital artworks. Compared to the traditional art market, NFT digital art trading offers higher transparency, lower transaction costs, and faster transaction speeds. At the same time, the application of smart contracts has automated and decentralized transactions, reducing intermediaries, and improving transaction efficiency and security. For example, on the OpenSea platform, a large number of digital artworks are traded every day, with transaction amounts reaching millions, covering a variety of styles and types of digital artworks.

In terms of collecting, NFT digital artworks are attracting more and more collectors and investors. Owning unique NFT digital artworks has become a symbol of identity and taste, as well as having potential investment value. Some well-known NFT digital artworks, such as CryptoPunks, Bored Ape Yacht Club, etc., have seen their value continuously rise in the market. Take Bored Ape Yacht Club as an example, the project consists of 10,000 unique ape avatar NFTs, each with different features and attributes. Since its launch, Bored Ape Yacht Club has been highly sought after in the NFT market, with its floor price once exceeding 100ETH. Many celebrities and stars have purchased them, further increasing their popularity and value. Some early investors who bought Bored Ape Yacht Club NFTs have seen their asset value increase several times or even tens of times in a short period of time.

3.2.2 Game

NFT has also made significant progress in the gaming field, bringing a new economic model and user experience to the gaming industry. In traditional games, items and assets are usually controlled by game developers, and players only have the right to use them, unable to truly own these assets and difficult to trade them outside the game. With the introduction of NFT technology, game items, characters, virtual land, and other assets can exist in the form of NFTs, allowing players to truly own these assets and freely trade and transfer them inside and outside the game.

In the aspect of game props, NFT endows game props with unique value and scarcity. Players can obtain NFT game props through purchase, synthesis, lottery, etc. These props are unique and non-replicable, with different attributes and values. For example, in the blockchain game Axie Infinity, players can collect and cultivate various cute Axie creatures, each of which is an NFT with different genes, attributes, and skills. Players can increase the value of Axie through battles, breeding, etc., and can also sell their own Axie on the market to make profits. The success of Axie Infinity has attracted the attention of many players and developers, driving the development of the NFT game props market.

In the virtual land sector, NFT virtual land provides players with a new gaming experience and economic model. Players can purchase NFT virtual land to build their own virtual buildings, conduct commercial activities, and hold social gatherings. Virtual world platforms represented by Decentraland and The Sandbox have a large number of virtual land NFTs available for players to purchase and develop. In Decentraland, virtual land is divided into individual parcels, each of which is an NFT that players can purchase through auction. Some well-known brands and companies have also made layouts on virtual land, such as Adidas purchasing virtual land in The Sandbox to establish their brand experience center, hosting virtual fashion shows and other activities, attracting a large number of players to participate.

In terms of the game economy system, the application of NFT makes the in-game economy system more open and diverse. Players can obtain cryptocurrency or NFT by participating in games, completing tasks, or selling assets. These assets can be used in the game or traded on external markets. This open economic system provides players with more opportunities to make money and attracts more players to participate in the game. At the same time, NFT games can further enrich the game’s economic gameplay and increase player participation and income by introducing concepts of decentralized finance (DeFi), such as lending, staking, and liquidity mining. For example, some NFT games allow players to stake their NFT assets on the platform to earn a certain interest income; and some games provide liquidity mining functionality, allowing players to earn additional rewards by providing liquidity.

3.2.3 Music and Film

In the music field, NFT brings new development opportunities and business models to the music industry. In the traditional music industry, the copyright ownership of music works is complex, and creators’ earnings are often eroded by layers of intermediaries. The application of NFT technology allows music works to be issued and traded in the form of NFTs, enabling creators to directly connect with fans and earn more revenue. At the same time, NFTs also give music works unique collectible value and social attributes, allowing fans to express support and love for creators by purchasing NFT music works while owning unique digital music assets.

Some music artists have started to experiment with releasing NFT music works. For example, the famous American rapper 3LAU released his first NFT album “Ultraviolet” in March 2021, which includes 33 unique NFTs. Each NFT comes with exclusive music content, behind-the-scenes footage, opportunities to interact with the artist, etc. The album sold over $11.6 million in just 24 hours, setting a record for music NFT sales. In addition, many independent musicians are releasing their music works through NFT platforms such as Audius, Royal, etc., providing a direct sales channel to fans and reducing intermediaries, thus increasing musicians’ income.

In the field of film and television, NFT is also gradually emerging, bringing new ideas and directions to the development of the film and television industry. On the one hand, NFT can be used for the trading of digital assets in film and television, such as movie posters, stills, character images, etc., all of which can be made into NFTs for sale. For example, Disney has launched a series of NFTs themed around its classic animated characters, including Mickey Mouse, Donald Duck, etc., and these NFTs have been enthusiastically sought after in the market by fans. On the other hand, NFTs can also be used for the trading and management of film and television copyrights. By dividing film and television copyrights into multiple NFTs, different investors can purchase different proportions of copyright shares and share in the profits of film and television projects. This method provides a new way for the financing of film and television projects, while also lowering the investment threshold, allowing more people to participate in the film and television industry.

In addition, some film and television companies are also starting to try to combine NFT with film and television content to create a brand new viewing experience. For example, some movies, at the time of release, may simultaneously launch NFTs related to the movie, these NFTs may include exclusive behind-the-scenes videos of the movie, signatures of directors and actors, opportunities to participate in the movie premiere, etc. After purchasing these NFTs, the audience can not only obtain unique digital assets, but also exclusive experiences related to the movie, enhancing the interaction and stickiness between the audience and the movie.

3.3 Mainstream Trading Platforms

3.3.1 OpenSea

OpenSea was founded in 2017 and is one of the largest NFT trading platforms globally, holding an important position in the NFT market. It supports various types of NFT transactions, including digital artworks, game items, virtual land, collectibles, etc., covering almost all categories in the NFT field. OpenSea’s user interface is simple and user-friendly, making it easy to use for both beginners and experienced users. The platform offers rich filtering and search functions, allowing users to filter and search for NFTs based on their needs, such as price, category, popularity, etc., quickly finding their desired items.

In terms of market share, OpenSea has long been in a leading position. According to DappRadar’s data, in 2021 and 2022, OpenSea’s share of the NFT trading market once exceeded 90%. Although its market share has declined in 2023 with the rise of other competitors, it still remains above 50%, making it the dominant platform in the NFT trading market. In terms of trading data, OpenSea’s trading volume and transaction value have been maintained at a high level. In 2021, OpenSea’s total transaction volume exceeded 30 billion U.S. dollars. Although the overall market experienced a downturn in 2022, OpenSea’s transaction volume still reached 12 billion U.S. dollars. In the first half of 2023, OpenSea’s transaction volume reached 5 billion U.S. dollars, with an average daily transaction volume of over 100,000 transactions.

OpenSea’s tremendous success is mainly due to several advantages: first, its first-mover advantage. As one of the earliest NFT trading platforms, OpenSea accumulated a large number of users and project resources in the early market, establishing good brand awareness and user reputation. Second, its rich categories and a large number of NFT projects. OpenSea brings together NFT creators and projects from all over the world, providing a diverse range of NFT options to meet the needs of different users. Third, its strong technical support and security. OpenSea adopts advanced blockchain technology and smart contracts to ensure the security and transparency of transactions, while providing various security measures such as multi-signature and encrypted storage to protect users’ assets. Fourth, its open platform policy. OpenSea has relatively loose review policies for creators and project parties, reducing the threshold for project launches, encouraging innovation and diversity, and attracting many new projects and creators to join.

3.3.2 Blur

Blur is an emerging NFT trading platform that has quickly gained prominence in the NFT market since its launch at the end of 2022, thanks to its unique features and innovative model, becoming a strong competitor to established platforms like OpenSea. Blur’s main feature lies in its focus on fast trading and liquidity enhancement for NFTs, providing users with a more efficient and convenient trading experience.

In terms of trading functions, Blur supports batch trading and lightning trading, allowing users to buy or sell multiple NFTs at once, greatly improving trading efficiency. At the same time, Blur also introduces an order book mechanism, where users can place their buy and sell orders on the order book, matching trades with other users, making trading more flexible and transparent. Additionally, Blur provides real-time market data and analysis tools to help users better understand market conditions and make wiser trading decisions.

In terms of incentive mechanisms, Blur has launched a unique token economic model. The platform has issued its native token BLUR, and users can receive BLUR token rewards for trading and providing liquidity on Blur. This incentive mechanism has attracted a large number of users and project parties, increasing the platform’s activity and liquidity. At the same time, BLUR tokens can also be used for platform governance, and users holding BLUR tokens can participate in platform decision-making and rule-making, enhancing users’ sense of belonging and loyalty to the platform.

In terms of market performance, Blur’s development momentum is strong. According to the latest data, Blur’s market share has grown from 0 to around 20% in just a few months, making it the second-ranked platform in the NFT trading market. In terms of trading volume, Blur’s daily trading volume has exceeded 20,000 transactions, and the transaction amount is also continuously increasing. In the first half of 2023, Blur’s total transaction amount reached 20 billion US dollars, demonstrating its strong market competitiveness.

3.3.3 Magic Eden

Magic Eden is an NFT trading platform based on the Solana blockchain, which occupies an important position in the Solana ecosystem, especially with significant advantages in the NFT trading field on the Solana chain. Compared to other NFT trading platforms based on Ethereum, Magic Eden leverages the high performance and low transaction fee characteristics of the Solana blockchain to provide users with a fast and low-cost NFT trading experience.

Solana blockchain adopts a unique Proof of History (PoH) consensus mechanism, which can achieve high throughput and low latency transaction processing. Its TPS (transactions per second) can reach thousands, far exceeding Ethereum’s TPS. This allows Magic Eden to quickly confirm transactions and reduce user waiting time when processing NFT transactions. At the same time, Solana blockchain has very low transaction fees, usually only a few cents or even lower, while Ethereum’s transaction fees during peak periods can be as high as tens of dollars, greatly reducing the cost for users to trade NFTs on Magic Eden.

In terms of market share, Magic Eden dominates the NFT trading market on the Solana chain. According to DappRadar’s data, Magic Eden has consistently held over 70% market share in the Solana chain’s NFT trading market, making it the most popular NFT trading platform in the Solana ecosystem. In terms of trading data, Magic Eden’s performance is also outstanding. In the first half of 2023, Magic Eden’s total trading volume reached 15 billion US dollars, with an average daily trading volume exceeding 15,000.

4. The challenges facing NFT Crypto

4.1 Market Volatility and Investment Risks

4.1.1 Price fluctuations are severe

The price fluctuations in the NFT Crypto market are extremely volatile, which is mainly caused by various factors. On the one hand, changes in the market supply and demand relationship have a direct and significant impact on the price of NFT Crypto. The supply of NFTs is usually determined by the project party or creators, and the quantity is relatively limited, especially for some NFTs with unique attributes or limited editions, such as CryptoPunks with only 10,000 and Bored Ape Yacht Club with only 10,000 ape avatar NFTs. When there is strong demand for a particular NFT project in the market, but the supply cannot increase rapidly, it will lead to a situation of supply shortage, thereby driving prices significantly higher. For example, at the early stage of the Bored Ape Yacht Club project launch, due to its unique creativity and celebrity effect, it attracted a lot of investors’ attention and purchases, and its floor price quickly soared from a low level to over a hundred ethers in a short period of time. Conversely, when market demand decreases, or the project party suddenly issues a large number of NFTs, causing a sharp increase in supply, prices may plummet. For example, some niche NFT projects, after the hype subsides, market demand decreases, holders sell off, and there are few new buyers, causing the prices of these NFTs to plummet, or even become unsalable.

On the other hand, the impact of market sentiment and investor confidence on the price of NFT Crypto cannot be ignored. As an emerging market, the NFT Crypto market has a relatively young and adventurous investor base, whose investment decisions are often influenced by market sentiment. During periods of market prosperity, investors generally have full confidence in the prospects of NFT Crypto, leading to a surge of funds entering the market, driving prices continuously upward, and forming a market bubble. At this time, some investors may blindly follow the trend without considering the actual value of NFTs themselves. For example, during the boom of the NFT market in 2021, many investors were caught up in the frenzy of the market, rushing to purchase various types of NFTs, and even some NFTs with no real value were hyped up to high prices. However, once negative news hits the market, such as a well-known NFT project being exposed for fraudulent behavior, or a significant downturn in the entire cryptocurrency market, investor confidence takes a severe hit, market sentiment quickly turns pessimistic, and a large number of investors begin to sell off their NFTs, causing prices to plummet. In 2022, as the cryptocurrency market as a whole enters a bear market, the NFT market also suffers significant losses, with prices of many NFT projects experiencing substantial pullbacks, leaving some investors with significant losses.

The sharp price fluctuations have had various impacts on the NFT Crypto market. For investors, these price fluctuations bring huge investment risks. Rapid price increases may attract a large number of investors to enter the market, but once prices fall, investors may face the risk of substantial asset shrinkage. Especially for some inexperienced investors, after buying NFT at market highs, they may not be able to bear the losses when prices fall and be forced to cut losses and exit. At the same time, price fluctuations also increase the difficulty of investment decisions, making it difficult for investors to accurately assess the true value and market trends of NFT, easily leading to investment dilemmas. For NFT project teams and creators, price fluctuations may affect the development and reputation of the project. If the price of the project’s NFT experiences a significant decline, it may lead users to lose confidence in the project, affecting the project’s subsequent operations and promotions. In addition, price fluctuations may also trigger market instability, increase the difficulty of market supervision, and not be conducive to the healthy development of the NFT Crypto market.

4.1.2 Investment Risk Factors

The NFT Crypto market has many investment risk factors, among which market uncertainty is an important aspect. As an emerging market, the development of the NFT Crypto market is influenced by various factors, including technological innovation, changes in market demand, regulatory adjustments, etc., making the market full of uncertainty. Technological innovation is an important driving force for the development of the NFT Crypto market, but the application of new technologies may also bring new problems and risks. For example, with the continuous development of blockchain technology, new consensus mechanisms, smart contract technologies, etc., emerge constantly. If NFT projects cannot keep up with and adapt to these technological changes in a timely manner, it may lead to a decline in the competitiveness of the project, and even face the risk of being eliminated. At the same time, changes in market demand are also difficult to predict. The demand in the NFT Crypto market is influenced by factors such as consumer preferences, market hotspots, etc., and these factors may change at any time. For example, at a certain period, the market may have a strong demand for digital art NFTs, but with the shift of market hotspots, consumers may show greater interest in game NFTs or other types of NFTs, leading to a decrease in market demand and price reduction for digital art NFTs.

The quality of the project is also a key factor affecting the risk of NFT Crypto investment. In the NFT Crypto market, the quality of projects varies, and some projects may have technical vulnerabilities, poor operations, lack of creativity, and other issues. Technical vulnerabilities can threaten the security of NFTs, such as smart contract vulnerabilities that can be exploited by hackers, leading to the theft of investors’ assets. In 2022, the NFT project Ronin Network fell victim to a hacker attack, where hackers exploited smart contract vulnerabilities to steal NFTs and cryptocurrencies worth hundreds of millions of dollars, resulting in significant losses for investors. Poor operations can hinder the promotion and development of projects, making it difficult to attract enough users and funds. Some NFT projects, due to a lack of effective operational strategies, have low user activity and limited trading volume after launch, ultimately leading to project failure. Projects with insufficient creativity struggle to stand out in the competitive market and their NFTs struggle to gain market recognition. Many homogeneous NFT projects, lacking unique creativity and value, go unnoticed in the market, and investors often face the risk of asset depreciation after purchase.

In addition, market manipulation is also a risk factor in the NFT Crypto market. Due to the relatively small size of the NFT market, some large investors or institutions may manipulate certain NFT projects by concentrating their financial advantage, artificially raising or lowering prices to profit from it. They may create market illusions and mislead other investors through false trades, collusion, and other means. This kind of market manipulation not only undermines the fairness and transparency of the market but also increases the investment risks for ordinary investors, threatening the stability of the market.

4.2 Technical Limitations

4.2.1 Blockchain Performance Bottleneck

The performance bottleneck of blockchain has imposed significant limitations on the development of NFT Crypto. Currently, most NFT projects are built on blockchain platforms such as Ethereum, which, however, suffer from various performance issues. Ethereum employs the Proof of Work (PoW) consensus mechanism, which ensures decentralization and security but falls short in transaction processing efficiency. Ethereum’s average transaction processing speed (TPS, Transactions Per Second) is only 15-20 transactions per second, a stark contrast to traditional payment systems like Visa (with TPS reaching thousands). During peak NFT trading periods, such as the release of popular NFT projects or large-scale NFT auctions, a large influx of transaction requests overwhelms the Ethereum network, causing severe congestion. User-submitted transactions often need to wait for hours or even days to be confirmed, with transaction fees skyrocketing, sometimes reaching tens of US dollars. This deters many users, severely affecting the NFT trading experience and efficiency, impeding the widespread adoption and application of the NFT market.

In addition to the slow transaction processing speed, the scalability of the blockchain is also a pressing issue. As the NFT market continues to expand, the amount of data stored on the blockchain is rapidly increasing. However, the storage space of the blockchain is limited and it is difficult to accommodate such a large amount of data. This will not only reduce the operational efficiency of the blockchain but may also lead to issues such as rising data storage costs. For example, some blockchains may need to continuously increase the storage capacity of nodes to cope with data growth, which is a significant expense for node operators. At the same time, the rising data storage costs may also be passed on to NFT projects and users, further increasing the costs of NFT transactions and constraining the development of the NFT market.

In addition, the energy consumption issue of blockchain cannot be ignored. The PoW consensus mechanism represented by Bitcoin and Ethereum consumes a large amount of energy during the mining process. According to statistics, the energy consumption of the Bitcoin network exceeds the annual energy consumption of some countries. This high energy consumption not only has a negative impact on the environment, but also runs counter to the current global advocacy of sustainable development. With the continuous increase in environmental awareness, the energy consumption issue of blockchain may receive more attention and restrictions, which will also have a detrimental impact on the development of NFT Crypto based on blockchain.

4.2.2 Smart Contract Security Issues

Smart contracts, as one of the core technologies of NFT Crypto, provide convenience for the creation, trade, and management of NFTs, but also have many security vulnerabilities and risks. Reentrancy attack is a common smart contract security vulnerability, where the external contract can re-invoke the current contract’s function when called, leading to multiple modifications of the contract state and causing financial loss. In the famous The DAO incident, hackers exploited the smart contract’s reentrancy vulnerability to repeatedly call the withdrawal function, stealing nearly $60 million worth of ether from The DAO project. This event not only caused huge losses to investors but also sparked a high level of concern in the entire blockchain industry regarding smart contract security issues.

Integer overflow and underflow are also common security issues in smart contracts. In the early stages of smart contract development, due to flaws in the Solidity language, some contracts may experience overflow or underflow when performing integer operations. When an integer overflow occurs, the value of the variable exceeds its maximum representable value, leading to incorrect results; whereas integer underflow occurs when the value of the variable is less than its minimum representable value. Attackers can exploit these vulnerabilities to alter the behavior of the contract and gain illegal benefits through carefully crafted transactions. For example, attackers can use integer underflow vulnerabilities to set the asset balance in the contract to a negative value, thereby achieving the goal of obtaining assets for free.

Permission management issues should not be ignored. If smart contracts do not establish a sound permission management mechanism, malicious users or attackers may obtain unauthorized permissions, perform sensitive operations such as withdrawals, data modifications, etc. In some NFT projects, due to improper permission management, attackers can easily tamper with the ownership information of NFTs, taking possession of others’ NFTs; or extract project funds without authorization, causing damage to the interests of the project party and investors.

In addition, smart contracts may also have security risks such as logic errors, code vulnerabilities, random number generation issues, denial of service attacks, etc. Logic errors may lead to the execution results of the contract not matching the expectations, affecting the normal trading and use of NFTs; code vulnerabilities may be exploited by attackers to carry out various malicious operations; issues with random number generation may allow attackers to predict the generation or distribution results of NFTs, disrupting the fairness of the game; denial of service attacks may cause smart contracts to fail to operate normally, affecting users’ experience and rights.

4.3 Regulatory Uncertainty

4.3.1 Global Regulatory Status

Currently, there are significant differences in the regulatory policies for NFT Crypto among different countries and regions globally. In the United States, the regulation of NFT Crypto is in a relatively vague state, with no unified regulations specifically for NFTs. The Securities and Exchange Commission (SEC) in the US typically determines whether an NFT falls under the category of securities based on its specific characteristics and use cases. If an NFT is classified as a security, it would need to comply with relevant securities laws, including registration and disclosure requirements. For example, NFT projects with investment return characteristics may be subject to strict regulation by the SEC. However, for most ordinary NFTs such as digital artworks, in-game items, etc., their regulation is still in the exploratory stage. In terms of taxation, the US considers NFTs as digital assets, and investors may be required to pay capital gains tax when selling NFTs.

The EU is actively advancing the regulatory framework for NFT Crypto. In September 2020, the EU proposed the Markets in Crypto-Assets Regulation (MiCA) to comprehensively regulate crypto-assets, including NFTs. According to MiCA’s classification, NFTs are generally classified as ‘crypto-assets that are not covered by other investment services or electronic money tokens.’ In this category, although whitepapers are not required for the issuance of NFTs, compliance with MiCA’s rules on marketing, communication, and information disclosure is necessary. Crypto-asset service providers (CASP) offering NFT services need to be authorized by the EU regulatory authority and comply with MiCA’s operational compliance requirements. However, depending on the nature of NFTs, they may also be classified as utility tokens or security tokens, which require whitepapers for issuance and are subject to stricter regulation.

In the Asian region, Japan has relatively lenient regulations on NFTs. The Financial Services Agency (FSA) of Japan views NFTs as digital assets, and as long as NFT projects comply with relevant regulations such as anti-money laundering and counter-terrorism financing, they can operate legally. Singapore, on the other hand, has adopted a more flexible regulatory policy. The Monetary Authority of Singapore (MAS) categorizes and regulates NFTs based on their specific purposes and risk levels. NFTs with payment functions are subject to stricter regulations, while those used for non-payment purposes such as digital artworks and collectibles are relatively loosely regulated.

China’s attitude towards the regulation of NFT Crypto is relatively clear. China prohibits speculative trading activities of virtual currencies. Although NFT is not a virtual currency, it is closely related to blockchain technology, and some NFT projects involve speculation and money laundering risks, thus subject to strict regulation. China mainly regulates NFT from the aspects of preventing financial risks, protecting intellectual property rights, and maintaining market order. For example, some local governments have issued policies requiring NFT platforms to strengthen project review to prevent illegal fundraising, fraud, and other illegal activities. At the same time, they emphasize that NFT platforms should protect the intellectual property rights of creators and avoid infringement.

4.3.2 The Impact of Regulation on the Market

Regulatory policies have a complex impact on the development of the NFT Crypto market, both promoting and limiting it. From a promotional perspective, reasonable regulatory policies help regulate market order. Clear regulatory rules can reduce fraud, manipulation, and other improper behaviors in the market, protecting the legitimate rights and interests of investors. For example, requiring NFT projects to disclose information enables investors to have a more comprehensive understanding of the project’s background, operations, and risk factors, thus making wiser investment decisions. At the same time, regulatory policies can guide the NFT Crypto market towards healthy and sustainable development. By regulating and guiding the industry, encouraging a combination of innovation and compliance, promoting the reasonable application of NFT technology in various fields, and facilitating the long-term stable development of the market. For example, regulatory agencies supporting and encouraging the application of NFT in digital art, cultural heritage protection, and other areas help unleash the value of NFT and drive the development of related industries.

However, regulatory policies may also impose certain restrictions on the NFT Crypto market. Excessive regulatory requirements may increase the operating costs and compliance difficulties of projects. For example, cumbersome registration procedures, high compliance costs, and strict disclosure requirements may make it difficult for some small NFT projects to bear, thereby hindering market innovation and development. Some nascent NFT projects may be forced to abandon or delay the launch of their projects due to the inability to meet complex regulatory requirements, impacting market vitality. In addition, the uncertainty of regulatory policies can also bring certain troubles to the market. The differences in regulatory policies among different countries and regions challenge the operation of NFT projects on a global scale. Project parties need to spend a considerable amount of time and effort to understand and adapt to regulatory requirements in different regions, increasing operational risks and uncertainties for projects. At the same time, frequent adjustments to regulatory policies can leave market participants at a loss, affecting market stability and investor confidence.

5. the development opportunities of NFT Crypto

5.1 Integration with Traditional Industries

5.1.1 Fashion and Luxury Industry

In the fashion and luxury industry, NFT Crypto has shown great potential for application and innovative vitality. Taking the collaboration between Tiffany and CryptoPunks as an example, this collaboration can be regarded as a classic case of the integration of traditional luxury brands and the NFT Crypto field. Tiffany, as a globally renowned luxury jewelry brand, has always been known for its exquisite craftsmanship and high-end brand image. Meanwhile, CryptoPunks is one of the most representative and influential projects in the NFT market, and its unique pixel art style and scarcity are deeply loved by collectors and investors.

Tiffany’s ‘NFTiff’ project, designed and created exclusively for CryptoPunks digital art collectors, introduces a limited edition ‘NFTiff Pass’. Holders of this pass not only have the opportunity to customize a Tiffany pendant, but also own the NFT digital rendering and identity certificate of the pendant. This project combines the digital asset characteristics of NFTs with Tiffany’s physical jewelry products, creating a new hybrid virtual-physical consumer experience. In terms of design, Tiffany designers meticulously analyzed the 87 features and 159 colors found in the 10,000 CryptoPunks digital art collection, then matched them with the most suitable gemstone or enamel colors. Each custom pendant is set with at least 30 gemstones or diamonds individually or in combination, striving to present the unique style of CryptoPunks with the highest fidelity.

The success of this collaboration reflects the application value of NFT in the fashion and luxury goods industry from multiple perspectives. From the perspective of brand marketing, Tiffany has successfully attracted the attention of a large number of young and innovative consumers through its collaboration with CryptoPunks. These consumers have a strong interest in emerging digital assets and trend culture. This move has significantly increased the brand’s visibility and influence among young people, achieving the brand’s rejuvenation and fashion transformation. From the perspective of product innovation, the ‘NFTiff’ project has broken the single form of traditional jewelry products by integrating digital assets, providing consumers with a unique product experience. Consumers not only have a precious physical jewelry, but also the corresponding digital assets, satisfying their pursuit of personalization and uniqueness. From the perspective of market expansion, Tiffany has successfully entered the NFT field and opened up new market space, creating more possibilities for the brand’s future development with the influence of CryptoPunks in the NFT market.

This case study also provides valuable reference experience for other fashion and luxury brands. More and more fashion brands are beginning to realize the potential of NFT Crypto, launching their own NFT projects. For example, Balenciaga collaborated with crypto artist Pak to release a limited edition NFT series, presenting Balenciaga’s fashion items in digital form and endowing them with unique NFT attributes. After purchasing the NFT, consumers can obtain virtual fashion items and participate in the brand’s exclusive activities. The practices of these brands demonstrate that the integration of NFT Crypto with the fashion luxury industry can not only bring new marketing and profit models to brands but also provide consumers with a completely new shopping experience, driving innovation and development across the entire industry.

5.1.2 Sports and Collectibles Industry

In the sports and collectibles industries, NFT Crypto also shows broad application prospects. NFT brings new development opportunities to sports memorabilia and collectibles, accelerating their digital transformation process. Traditional sports memorabilia and collectibles, such as signed jerseys by star players, used equipment from matches, etc., although having certain collectible value, face challenges like difficult authentication, susceptibility to damage, and poor liquidity. The emergence of NFT technology provides effective solutions to these issues.

Taking NBA Top Shot as an example, this is an NBA officially authorized digital collectibles platform based on blockchain technology. The NFT digital collectibles on the platform are themed around exciting moments in NBA games, presenting players’ highlights in the form of short video NFTs. Each NFT has a unique identifier, recording detailed information about the moment, such as the game time, player, and event. These NFT digital collectibles not only have collection value, but can also be traded on the platform. Fans can express their support for teams and players by purchasing NFTs of their favorite players or game moments, while also owning a unique digital asset. Compared to traditional sports memorabilia, NBA Top Shot’s NFT digital collectibles have higher authenticity and verifiability. Through blockchain technology, their origin and ownership information are permanently recorded, preventing tampering and effectively addressing the authentication challenges of traditional collectibles. Additionally, digital collectibles are not susceptible to damage or loss, making them easy to preserve and circulate, greatly enhancing the convenience and security of collecting.

In addition to the exciting moments of NFTs in sports events, personal exclusive NFTs of sports stars have also attracted attention. Many sports stars have launched their own NFT projects, integrating elements such as their signatures, photos, videos, etc., attracting a large number of fans to make purchases. For example, football superstar Messi has released his own NFT series, including wonderful goal moments in matches, personal life photos, and digitally signed certificates. These NFTs are not only precious collectibles for fans but also bring new sources of income to Messi himself, enhancing interaction and connection between him and his fans.

In sports events, NFT can also be used for the digitalization of tickets and event rights. After purchasing NFT tickets, the audience not only gains the right to enter and watch the game but also owns digital assets related to the event, such as exclusive viewing rights to exciting event replays and opportunities to interact with players. This digitalized ticket and event rights not only enhance the audience’s viewing experience but also provide event organizers with new marketing and revenue models. For example, some music festivals and concerts have also begun to experiment with NFT tickets, providing audiences with unique digital experiences and exclusive rights, which have been warmly welcomed by young audiences.

5.2 Drive of Emerging Technologies

5.2.1 Metaverse and NFT

The metaverse, as a highly integrated digital space between virtual and reality, has generated a strong driving force for the demand for NFTs. In the metaverse, the ownership and uniqueness of virtual assets are crucial, and NFTs happen to possess these characteristics, making them an indispensable and important component of the metaverse economy.

From the perspective of asset ownership, NFT provides clear ownership proof for virtual assets in the metaverse. In the metaverse, various virtual items such as virtual land, virtual buildings, virtual clothing, virtual props, etc., can be identified and confirmed through NFT. Each NFT represents a unique virtual asset, and its ownership information is recorded on the blockchain, which cannot be tampered with or forged, allowing users to truly own and control their assets in the metaverse. For example, in metaverse platforms like Decentraland and The Sandbox, users can purchase NFTs for virtual land, which give users complete ownership of the land. Users can freely develop and build on their land, as well as transfer the land to other users. The entire process is recorded and verified through the blockchain, ensuring the security and legitimacy of the assets.

From the perspective of social interaction and personalized expression, NFT enriches the social experience and personalized display of users in the Metaverse. In the Metaverse, users can showcase their personalities and identities by owning unique NFTs. For example, some limited edition virtual clothing NFTs are only owned by a few users, making these NFTs a unique identifier for users in the Metaverse, showcasing their taste and status. At the same time, NFTs can also serve as a medium for social interaction, allowing users to showcase, exchange, and gift NFTs to each other, enhancing the fun and value of social interaction. For instance, on social platforms in the Metaverse, users can gift precious NFTs they own to friends as a unique gift, which not only holds commemorative significance but also reflects the special relationship between the two parties.

From the perspective of the economic system, NFT has built a complete economic cycle system for the metaverse. In the metaverse, NFT can be traded as commodities, forming a vibrant virtual asset trading market. Users can earn profits by creating, buying, and selling NFTs, which incentivizes more users to participate in the economic activities of the metaverse. At the same time, NFT can also be combined with decentralized finance (DeFi) to achieve financial functions such as borrowing, staking, and liquidity mining, further enriching the economic ecosystem of the metaverse. For example, users can stake their owned NFTs on DeFi platforms in the metaverse to earn interest income; or participate in liquidity mining to provide liquidity for the NFT trading market, thereby receiving corresponding rewards.

5.2.2 The Combination of AI and NFT

The combination of AI technology and NFT has brought new development opportunities and innovative models to the creation and trading of NFTs. In terms of creation, AI technology provides unlimited creativity and possibilities for NFT art creation. Traditional NFT art creation mainly relies on manual creation by artists, which is time-consuming and limited by the artist’s personal style and ability. The intervention of AI technology makes NFT art creation more efficient and diverse. Through machine learning and deep learning algorithms, AI can generate unique art pieces with a variety of styles and forms, even surpassing the imagination of human artists. For example, some AI-generated paintings have unique artistic charm in terms of color, composition, and presentation, attracting wide attention and appreciation in the NFT market. At the same time, AI can assist artists in their creation, providing creative inspiration and technical support. Artists can use AI tools to quickly generate sketches, adjust colors and layouts, greatly improving the efficiency and quality of their work.

In terms of trading, AI technology brings more accurate market analysis and trading decision support to the NFT market. AI can analyze massive data in the NFT market, including transaction prices, trading volume, market trends, user behavior, etc., providing accurate market forecasts and investment advice for investors and collectors. For example, through the analysis of historical transaction data, AI can predict the future price trends of a certain NFT project, helping investors seize investment opportunities; through the analysis of user behavior data, AI can understand user preferences and needs, providing targeted strategies for the promotion and marketing of NFT projects. In addition, AI can also be used for the pricing and valuation of NFTs. Due to the uniqueness and non-standardization of NFTs, pricing has always been a challenge in the market. AI can comprehensively analyze factors such as the attributes, scarcity, and market demand of NFTs to provide reasonable pricing references, thereby improving the efficiency and fairness of market transactions.

The combination of AI and NFT is constantly expanding into new application scenarios. For example, in terms of copyright protection, AI can quickly identify infringement by analyzing the characteristics of NFT works, protecting the intellectual property rights of creators; in terms of virtual identity authentication, AI can use NFT as a digital identity carrier, combined with biometric technology, to achieve more secure and convenient identity authentication.

5.3 Growth in Market Demand

5.3.1 Increase in demand for digital assets

With the rapid development of the digital economy and the popularization of people’s digital lifestyle, there is a significant upward trend in the demand for digital assets. The formation of this trend is mainly due to several key factors. First, digital assets provide users with unique collectible value and personalized experiences. In the digital age, the pursuit of individuality and uniqueness is increasingly strong, and digital assets meet this demand perfectly. Taking NFT digital artworks as an example, each NFT artwork is unique, and owners can showcase their taste and personality by owning these unique digital assets. At the same time, the collection of digital assets is not limited by space and time. Users can appreciate and manage their collections anytime, anywhere, which is unmatched by traditional physical collections. For example, some digital art enthusiasts can buy NFT digital artworks and appreciate art masterpieces from around the world at home through digital devices, without worrying about the preservation and transportation of artworks.

Secondly, the investment value of digital assets is gradually being recognized by the market. With the continuous development and maturity of the NFT market, the prices of some digital assets have shown significant increases, bringing lucrative returns to investors. For example, the values of well-known NFT projects such as CryptoPunks and Bored Ape Yacht Club have been steadily rising in the market, providing early investors with huge profits. These successful investment cases have attracted more investors to pay attention to the field of digital assets, viewing them as an emerging investment target, hoping to achieve asset appreciation through investing in digital assets. At the same time, the liquidity of the digital asset market is continuously increasing, with the continuous improvement of trading platforms and financial services, allowing investors to more conveniently buy and sell digital assets and trade, further promoting the growth of demand for digital asset investments.

Furthermore, the application scenarios of digital assets in the digital economy continue to expand. With the development of blockchain technology, digital assets have been widely used in various fields such as supply chain management, financial services, gaming and entertainment, and identity authentication. For example, in supply chain management, full traceability of product information and increased transparency and security of the supply chain can be achieved through the use of NFTs; in the financial services field, digital assets can be used as collateral for lending, providing new financing channels for enterprises and individuals; in gaming and entertainment, digital assets provide players with true ownership and economic benefits, stimulating their enthusiasm for participation. These diverse application scenarios not only further demonstrate the value of digital assets but also drive more enterprises and individuals to have a demand for digital assets.

5.3.2 Influx of New User Groups

The influx of new user groups has brought new vitality and development opportunities to the NFT Crypto market. As the popularity of NFT Crypto continues to rise, more and more traditional investors are starting to pay attention to and get involved in this field. These traditional investors have rich investment experience and strong financial strength, and their participation brings a large amount of funds and resources to the NFT Crypto market. Traditional investors usually have keen insights into market trends, and their investment decisions often have a significant impact on the market. When traditional investors are optimistic about the development prospects of the NFT Crypto market, they will invest a large amount of funds in the market, driving market prosperity. For example, some large investment institutions have begun to allocate NFT Crypto assets. They inject new funds into the market by purchasing shares of well-known NFT projects or directly investing in NFT projects. The participation of these institutional investors not only increases the liquidity of the market but also enhances the overall valuation of the market, attracting more investors to enter the market.

Young consumers are also an important new user group in the NFT Crypto market. The younger generation has grown up in the digital age, naturally embracing and identifying with emerging technologies and digital culture. They seek personalized and fashionable consumption experiences, and NFT Crypto meets their needs perfectly. Young consumers are enthusiastic about collecting unique digital assets to showcase their personalities and identities by owning NFTs. At the same time, young consumers have high demands for social interaction and virtual experiences. The application of NFT Crypto in the metaverse, games, and other fields provides them with rich social and entertainment experiences. For example, in the metaverse, young consumers can purchase NFT virtual land and buildings to create their virtual homes and interact with other users; in blockchain games, young consumers can enhance their competitiveness and gaming experience by owning NFT game props. The active participation of young consumers not only drives innovation and development in the NFT Crypto market but also brings new consumption concepts and business models to the market.

6. Case Study

6.1 CryptoPunks

6.1.1 Project Introduction

CryptoPunks was born in June 2017, created by the Canadian Larva Labs team, and is one of the earliest NFT projects on the Ethereum blockchain, known as the pioneer of the NFT field. The project consists of 10,000 unique pixelated character avatars, each with a unique and recognizable style filled with retro 8-bit pixel art aesthetics. Each CryptoPunk has unique facial features including hairstyle, hat, glasses, expressions, etc., totaling 9 different attribute categories such as humans, apes, zombies, and aliens. Among them, there are only 9 aliens, 24 apes, and 88 zombies. These rare category CryptoPunks are highly sought after in the market, commanding relatively high prices.

The distribution method of CryptoPunks is unique. In the early stages of the project, users could claim these NFT avatars for free. At that time, as long as users had an Ethereum wallet and paid a small amount of gas fee (used to pay Ethereum network transaction fees), they could claim a CryptoPunk from the project’s official website. This free distribution model attracted the attention of many early cryptocurrency enthusiasts and NFT collectors, who actively participated in claiming, resulting in CryptoPunks accumulating a loyal user base in the early stages of the NFT market. Over time, the value of CryptoPunks has been gradually recognized by the market, and its trading market has become increasingly active. Users can freely buy and sell CryptoPunks on NFT trading platforms like OpenSea, with trading prices varying based on the rarity, characteristics, and other factors of each CryptoPunk.

In its development process, CryptoPunks has gone through several important stages. From 2017 to 2018, as an early project in the NFT market, CryptoPunks gradually gained recognition in the niche cryptocurrency community, attracting a group of investors and collectors interested in emerging digital assets. Although the overall size of the NFT market was relatively small at that time, CryptoPunks, with its unique creativity and scarcity, established a certain level of visibility in the market. From 2019 to 2020, with the continuous development of blockchain technology and the gradual warming up of the NFT market, the value of CryptoPunks began to be recognized by more people. Some well-known cryptocurrency investors and celebrities began to collect CryptoPunks, further enhancing its visibility and influence in the market. In 2021, the NFT market experienced explosive growth, and as a veteran project, CryptoPunks became one of the focal points in the market. Its price surged significantly, and market trading volume repeatedly reached new highs. Many rare categories of CryptoPunks were traded at prices of several million dollars, becoming iconic projects in the NFT market. In March 2022, Yuga Labs acquired CryptoPunks and Meebits for approximately 430 million US dollars, attracting widespread attention globally. This acquisition not only brought more powerful resources and support to CryptoPunks but also signaled further maturity and integration of the NFT market.

6.1.2 Market Performance and Impact

CryptoPunks occupies an important position in the NFT market, with a significant market share. In the early stages of NFT market development, due to its first-mover advantage and unique project characteristics, CryptoPunks dominated the market. With the continuous development of the market and the emergence of new NFT projects, although its market share has fluctuated, it still remains at a high level. According toNonFungible.comThe data shows that during the boom of the NFT market in 2021, CryptoPunks’ market share reached over 20%, ranking among the top in the entire NFT market. Even in the competitive year of 2024, CryptoPunks remains one of the most popular and valuable NFT projects in the market, with its market share stabilizing at around 10% - 15%, consistently ranking at the forefront among many NFT projects.

From the perspective of price trends, the price of CryptoPunks has shown drastic fluctuations. In the early stages of the project, due to low market awareness, the price of CryptoPunks was relatively low, and many early participants obtained these NFTs at very low cost. As the market’s recognition of NFTs continues to increase, the price of CryptoPunks began to rise rapidly. In 2021, the floor price of CryptoPunks (referring to the lowest-priced NFT in a project) rose from less than 10ETH at the beginning of the year to over 50ETH at the end of the year, an increase of over 400%. Prices for some rare categories of CryptoPunks soared, such as the price of the Alien CryptoPunk, which once exceeded 1000ETH, equivalent to millions of dollars. From 2022 to 2023, as the overall NFT market entered a period of adjustment, the price of CryptoPunks also experienced a certain degree of pullback. The floor price dropped to around 30-40ETH by the end of 2022, and the prices of some rare CryptoPunks also declined. However, in 2024, as market sentiment improved, the price of CryptoPunks once again showed an upward trend, with the floor price rising to over 50ETH, demonstrating the project’s strong resilience and attractiveness in the market.

CryptoPunks has had a profound impact on the NFT market, with significant pioneering significance. As one of the earliest NFT projects, CryptoPunks laid the foundation for later NFT projects, pioneering the important NFT category of avatars (PFP, Profile Picture). Its unique pixelated art style and limited release model have become objects of imitation by many followers. Many new NFT projects have drawn on the design and release methods of CryptoPunks, driving the diversified development of the NFT market. At the same time, the success of CryptoPunks has attracted a large number of investors and creators to enter the NFT market, injecting vitality into the market. It has shown people the potential and value of NFT as an emerging digital asset, igniting more innovation and investment enthusiasm. Many investors have started paying attention to and investing in NFT projects because of the success of CryptoPunks, while numerous creators have been inspired to launch their own NFT works, promoting the prosperity of the NFT market. In addition, CryptoPunks has also driven the development of the NFT trading market. The rise of NFT trading platforms such as OpenSea is closely related to the trading demand of CryptoPunks. The active trading of CryptoPunks on these platforms has accumulated users and transaction data for the platforms, driving the maturity and improvement of the NFT trading market, making it a global digital asset trading market.

6.2 BAYC (Bored Ape Yacht Club)

6.2.1 Project Features and Success Factors

Bored Ape Yacht Club (BAYC for short) is an NFT image project launched on April 30, 2021, consisting of 10,000 unique NFTs. Each NFT displays a hand-drawn portrait of a bored ape with unique accessories such as hats, glasses, and other items. BAYC’s project features are very prominent, with a unique artistic style featuring cartoon ape images that are colorful, vivid, and highly recognizable, making them popular among young consumers and trend enthusiasts. This unique artistic style sets it apart from many NFT projects, attracting a lot of user attention.

The success of BAYC is multifaceted. Among them, community building is one of its key success factors. BAYC has built a strong and active community, where users holding BAYC NFTs not only have a digital collectible, but also feel like they have joined an exclusive club. In this community, members stay closely connected through social platforms such as Twitter, Discord, sharing and discussing topics and experiences related to BAYC. The community frequently organizes various online and offline activities to enhance interaction and sense of belonging among members. Many celebrities, such as NBA superstar Curry, have changed their social media avatars to BAYC, leveraging the celebrity effect to significantly increase the visibility and influence of BAYC, attracting more people to join the community.

The ownership model is also an important factor in the success of BAYC. Unlike most NFT projects, BAYC buyers own their copyrights, allowing them to freely create and develop derivative products related to BAYC. This innovative copyright model has inspired users’ creativity and engagement, as users can develop peripheral products based on their own Bored Ape Yacht Club NFTs, such as clothing brands, themed novels, animations, etc. BAYC also has its clothing brand, launching a series of fashion items themed around Bored Apes that are highly popular in the market. Through the transfer and openness of copyrights, BAYC has built a rich IP ecosystem, further enhancing the project’s value and influence.

The diversity of gameplay is also an important reason for BAYC’s user attraction. In addition to having collection value, owning BAYC NFTs can also enjoy many other additional benefits. Users can enter the official website’s collaborative graffiti board for creation, showcasing their creativity and talent; BAYC has purchased a piece of land in the game The Sandbox as a club, providing a gathering place for members in the metaverse, where members can socialize and hold events; The BAYC team also airdropped a wearable hoodie to each user, making it convenient for users to recognize and communicate with each other in real life, enhancing the cohesion of the community. In addition, BAYC has also launched derivative NFTs of the same series, such as the Bored Ape Kennel Club, where community members can obtain a dog-themed NFT for free, further enriching users’ collections and gameplay.

6.2.2 Challenges and Response Strategies

Despite the huge success of BAYC, it also faces many challenges in its development. The increasingly fierce market competition is one of the main challenges it faces. With the rapid development of the NFT market, more and more NFT projects are emerging, leading to intensified market competition. Some emerging NFT projects continue to launch innovative gameplay and unique designs, attracting a large number of users’ attention, posing a threat to BAYC’s market share. For example, some new NFT avatar projects enter the market with lower prices, richer gameplay, and more attractive art styles, diverting some potential users, putting pressure on BAYC to acquire new users and maintain user activity.

Price fluctuations and market uncertainty are also important challenges facing BAYC. The overall price fluctuations in the NFT market are significant, and the price of BAYC is also influenced by market sentiment, macroeconomic environment, and other factors, leading to considerable uncertainty. During the adjustment period of the NFT market in 2022-2023, the floor price of BAYC experienced a significant drop, plummeting from over 100ETH at its peak to around 30-40 ETH. This not only impacted investor confidence but also had a certain impact on the brand image of BAYC. Additionally, the regulatory policies regarding NFTs are still unclear, with significant differences in regulatory attitudes among different countries and regions, further increasing the uncertainty surrounding the future development of BAYC.

To address these challenges, BAYC has adopted a series of proactive strategies. In terms of innovation and expansion, BAYC continues to launch new projects and gameplay to maintain user freshness and engagement. In March 2022, Yuga Labs, the company behind BAYC, announced the launch of the metaverse project Otherside, the largest expansion of the BAYC NFT universe, aimed at building a new metaverse. Players own land in the world, and NFTs can be transformed into playable characters, with over 10,000 people able to play simultaneously. Through this project, BAYC has successfully expanded its business scope, attracted more users interested in the metaverse, and further enhanced its brand value and market influence.

In terms of brand building and partnerships, BAYC actively collaborates with other brands and IPs to enhance brand visibility and influence. BAYC partnered with the well-known luxury brand Tiffany to launch the “NFTiff” project, designing and creating limited edition “NFTiff passes” for CryptoPunks digital art collectors. Holders of this pass can enjoy exclusive opportunities to customize Tiffany pendants, as well as receive NFT digital renderings and identity certificates of the pendants. By collaborating with top luxury brands like Tiffany, BAYC has not only enhanced its own brand image and value but also attracted more attention from traditional luxury consumers, achieving brand crossover integration and expansion.

In terms of community maintenance and development, BAYC continues to strengthen community building, enhance the sense of belonging and loyalty of community members. The BAYC team actively communicates with community members, listens to their opinions and suggestions, continuously optimizes the project’s functionality and user experience. At the same time, by organizing various online and offline activities such as community gatherings, art exhibitions, and lucky draws, the interaction and cohesion among community members are enhanced, further consolidating BAYC’s position and influence in the community.

7. Prediction of Future Development Trends

7.1 Technological Innovation Trends

7.1.1 Improvement of Blockchain Technology

In the future, blockchain technology is expected to achieve significant breakthroughs in performance, security, and other aspects. In terms of performance improvement, the upgrade of Ethereum 2.0 has attracted much attention. Ethereum 2.0 adopts the Proof of Stake (PoS) consensus mechanism, which significantly reduces energy consumption compared to Ethereum’s current Proof of Work (PoW) mechanism, while also significantly increasing transaction processing speed. According to the official Ethereum roadmap, after the upgrade, Ethereum 2.0 is expected to increase its transaction processing speed (TPS) from the current 15-20 transactions per second to thousands of transactions per second. This will greatly alleviate the congestion issues during NFT transactions peak periods on the Ethereum network, reduce transaction fees, improve the efficiency and user experience of NFT transactions. For example, on NFT trading platforms like OpenSea, a large number of NFT transactions will be confirmed and processed more quickly, users will no longer need to wait for transactions to complete for a long time, and transaction costs will also be significantly reduced, attracting more users to participate in NFT trading and promoting further prosperity of the NFT market.

In addition to Ethereum 2.0, other emerging blockchain technologies are also constantly exploring and developing to solve the blockchain performance bottleneck. For example, some blockchain projects adopt sharding technology, dividing the blockchain network into multiple shards, each shard can process transactions independently, thereby achieving parallel computation and improving the transaction processing capacity of the entire network. Polygon (formerly Matic Network) is a typical representative that adopts sharding technology. It cooperates with Ethereum to provide an efficient second-layer scaling solution for Ethereum. Through Polygon’s sharding technology, Ethereum’s TPS has been significantly improved, while reducing transaction costs, making NFT trading on Ethereum more efficient and cost-effective. In the future, with the continuous maturation and application of sharding technology, more blockchain projects may adopt this technology to provide stronger technical support for the development of NFTs.

In terms of security, blockchain technology is also constantly evolving. The development of quantum computing technology poses a potential threat to the security of blockchain, as the powerful computing capabilities of quantum computers may crack the encryption algorithms on which current blockchains rely. To address this challenge, researchers are actively developing post-quantum encryption algorithms. These new encryption algorithms are able to withstand attacks from quantum computers, ensuring the security of data on the blockchain. For example, some post-quantum encryption algorithms based on lattice cryptography are currently in the research and experimental stages, and are expected to be applied in blockchain technology in the future to provide more reliable protection for the ownership and transactions of NFTs. In addition, the security audit technology of blockchain will continue to be improved, by conducting comprehensive audits of smart contracts and blockchain code, promptly identifying and fixing potential security vulnerabilities, and reducing the risk of NFT projects being targeted by hackers.

7.1.2 Development of Cross-chain Interoperability

The development of cross-chain technology will have a profound impact on the development of NFT Crypto. Currently, NFTs are mainly concentrated on a few blockchains such as Ethereum, and NFT assets between different blockchains are isolated from each other and cannot be interoperable. The emergence of cross-chain technology will break down these barriers, enabling the free circulation and interaction of NFT assets between different blockchains. For example, through cross-chain bridge technology, users can transfer NFTs from Ethereum to other blockchains such as Polkadot or Solana, and use and trade these NFTs in different blockchain ecosystems. This not only expands the application scenarios of NFTs but also increases their liquidity and market value.

The cross-chain ecosystems represented by Cosmos and Polkadot are actively developing. Cosmos adopts the Inter-Blockchain Communication protocol (IBC), allowing secure and efficient communication and asset transfer between different blockchains. In the Cosmos ecosystem, multiple blockchain projects have achieved cross-chain interoperability of NFTs, allowing users to freely transfer and trade NFTs between different Cosmos chains. Polkadot, on the other hand, achieves interoperability between different parachains through its unique relay chain architecture. NFT projects on Polkadot can interact with applications on other parachains, providing users with a richer and more diverse range of services. For example, an NFT gaming project based on Polkadot can be combined with financial applications on other parachains to enable financial functions such as NFT asset collateralization and lending, further expanding the application boundaries of NFTs.

The development of cross-chain interoperability will also promote the integration and competition of the NFT market. With the free circulation of NFT assets between different blockchains, users can choose and trade NFTs in a larger market scope, which will intensify the competition among NFT projects and prompt project parties to continuously improve the quality and innovation of their projects to attract users. At the same time, cross-chain technology will also drive the integration and development of NFT trading platforms. Comprehensive NFT trading platforms with cross-chain trading functionality may emerge to provide users with more convenient and efficient cross-chain NFT trading services.

7.2 Market Development Trends

7.2.1 Market Size Growth Forecast

In the future, the NFT Crypto market is expected to continue to grow. With the continuous advancement of technology and the expansion of application scenarios, NFT Crypto will attract more users and funds into the market. In the digital art field, NFT will continue to drive the development of the digital art market, and more and more artists will choose to issue and sell their works through NFT. According to market research institutions, by 2025, the share of NFT in the global digital art market will increase from the current 30% to over 50%, and the market size will reach 500 billion US dollars. In the gaming sector, the number of users and the market size of NFT games will also show a rapid growth trend. Taking Axie Infinity as an example, its active user base exceeded 2 million in 2021, and it is expected that by 2025, the active user base of global NFT games will exceed 100 million, and the market size will reach 30 billion US dollars.

From the perspective of market demand, the rising demand for digital assets and the influx of new user groups will provide sustained growth momentum for the NFT Crypto market. As people’s awareness and acceptance of digital assets continue to increase, the demand for collecting and investing in digital assets will also continue to grow. At the same time, the younger generation of consumers show a high level of interest and participation in emerging digital assets, making them an important consumer group in the NFT Crypto market. According to statistics, users under 30 years old currently account for over 60% of the NFT Crypto market. With the improvement of this group’s purchasing power and further market development, their demand for NFT Crypto will continue to grow, driving the continuous expansion of the market size.

From the perspective of market investment, the participation of institutional investors will further drive the growth of the NFT Crypto market. More and more traditional investment institutions are beginning to pay attention to the NFT Crypto field, entering the market through direct investment in NFT projects, purchasing NFT assets, or investing in NFT-related funds. For example, some well-known hedge funds and venture capital institutions have started to lay out in the NFT Crypto field. Their investments will bring a large amount of funds and resources to the market, promoting the prosperity and development of the market. It is expected that in the next few years, the investment scale of institutional investors in the NFT Crypto market will grow at a rate of more than 50% per year, further driving the expansion of the market size.

7.2.2 Expansion of Application Fields

NFT Crypto has broad prospects for application expansion in new fields. In the education sector, NFTs can be used for the authentication and issuance of academic certificates, skill certificates, and more. Traditional academic and skill certificates are at risk of forgery and tampering, while NFT certificates, based on the tamper-proof nature of blockchain, can ensure the authenticity and uniqueness of certificates. NFT academic certificates or skill certificates obtained by students can be verified and recognized globally, providing convenience for students’ employment and career development. Additionally, NFT certificates can also record students’ learning processes and achievements, providing more comprehensive and accurate data for education assessment and talent selection. For example, some online education platforms have begun to experiment with using NFT certificates. After students complete course learning and pass assessments, they will receive corresponding NFT certificates, which can be displayed and verified on the platform, increasing the credibility and value of students’ learning achievements.

In the medical field, NFT also has potential application value. NFT can be used for the management and sharing of medical data, where patients’ medical records, diagnostic reports, etc., can be stored in the form of NFT on the blockchain, ensuring the security and privacy of the data. At the same time, through authorization, doctors, research institutions, etc., can access and use this data, promoting the development of medical research and clinical diagnosis. For example, in the field of genetic testing, patients’ genetic data can be encrypted into NFTs, and only authorized medical institutions and researchers can access this data for disease research and the development of personalized treatment plans. This not only protects the privacy of patients but also improves the efficiency of medical data utilization, providing support for innovation and development in the medical field.

In the field of supply chain management, NFT can achieve full traceability of product information. By recording information such as the production, transportation, and sales of goods on NFT, consumers can scan the QR code on the product or use other methods to obtain detailed information about the product, including the source of raw materials, production process, transportation trajectory, etc., thereby ensuring the quality and safety of the product. For example, in the agricultural supply chain, farmers can record information such as planting information and fertilization and pesticide use on NFT. When consumers purchase agricultural products, they can use a mobile application to view this information and understand the production process of agricultural products, making their purchase with confidence. At the same time, the traceability function of NFT can also help enterprises optimize supply chain management, improve the efficiency and transparency of the supply chain.

7.3 Regulatory Policy Trends

7.3.1 Global Regulatory Policy Coordination Trends

With the globalization of the NFT Crypto market, the trend of global regulatory policy coordination is becoming increasingly apparent. Different countries and regions are gradually realizing that independently formulating regulatory policies may not effectively address the challenges brought by the NFT Crypto market, such as market manipulation, money laundering, tax evasion, and other issues. Therefore, strengthening international cooperation and coordination, establishing unified regulatory standards and norms, has become an important direction for the future development of regulatory policies.

International organizations play an important role in promoting global regulatory policy coordination. For example, the Organization for Economic Co-operation and Development (OECD) is actively researching tax and regulatory issues related to NFT Crypto, planning to release relevant reports and guidelines for reference by countries. The Financial Action Task Force (FATF) is also focusing on anti-money laundering and counter-terrorism financing regulations in the NFT Crypto market, developing corresponding standards and recommendations, and requiring financial institutions in various countries to strengthen monitoring and review of NFT Crypto transactions. The proposed Markets in Crypto-Assets Regulation (MiCA) by the European Union, while primarily aimed at regulating crypto-assets within the EU, has certain reference value for the formulation of regulatory policies in other countries and regions regarding the classification and regulation of NFTs.

Countries are also strengthening regulatory cooperation and information sharing. Some countries have begun bilateral or multilateral dialogues on NFT Crypto regulatory issues, exchanging regulatory experiences and practices, and jointly exploring measures to address market risks. For example, the United States and the European Union maintain close communication and cooperation on cryptocurrency regulation, engaging in in-depth discussions on the definition and regulatory framework of NFTs, seeking consensus. At the same time, regulatory authorities are enhancing information sharing among countries, timely grasping the dynamics and risks of the NFT Crypto market through the establishment of a cross-border regulatory information exchange mechanism, jointly combating illegal activities.

In the future, as global regulatory policies continue to coordinate, there may be some unified international regulatory standards and rules. These standards and rules will cover various aspects of the issuance, trading, taxation, anti-money laundering, etc. of NFT Crypto, providing clear guidance and norms for market participants. At the same time, unified regulatory standards also help eliminate regulatory differences between different countries and regions, reduce market arbitrage opportunities, and promote fair competition and healthy development of the NFT Crypto market.

7.3.2 The importance of compliant development

The compliant development of the NFT Crypto industry is of vital significance. Compliance development can protect the legitimate rights and interests of investors. In the absence of effective regulation, the NFT Crypto market faces many risks, such as project fraud, market manipulation, smart contract vulnerabilities, etc. These risks may lead to huge losses for investors. Through compliant development, establishing a sound regulatory system and risk prevention mechanism can standardize the market order, strengthen the review and supervision of projects, improve market transparency, and reduce investor risks. For example, requiring NFT projects to disclose information can help investors fully understand the background, team, technology, risks, and other information about the project, enabling investors to make wiser investment decisions and avoid fraud and deception.

Compliance development contributes to the sustainable development of the NFT Crypto industry. A compliant market environment can attract more investors and companies to enter the NFT Crypto field, providing ample funding and resources for the industry’s development. At the same time, compliance development can enhance market participants’ confidence, promote market stability and prosperity. For example, when investors and companies believe that the NFT Crypto market is effectively regulated, and that transactions are secure and rights are protected, they are more willing to participate in market activities, driving industry innovation and development. Conversely, if the market is in a disordered and chaotic state, investors and companies may lose confidence in the market, leading to market contraction and hindering industry development.

Compliance is also a necessary condition for the NFT Crypto industry to integrate into the mainstream financial system. As the NFT Crypto market continues to expand, its impact on the financial system is becoming increasingly significant. Only by achieving compliance can the NFT Crypto industry effectively connect with the traditional financial system, gaining more financial support and services. For example, some banks and financial institutions have begun to explore providing custody, payment settlement, and other services for compliant NFT Crypto projects, provided that these projects comply with relevant regulatory requirements. At the same time, compliance also helps the NFT Crypto industry to be clearly defined and regulated in terms of taxation, law, etc., avoiding conflicts with existing laws and regulations, and creating a favorable legal environment for the industry’s long-term development.

Conclusion

Investors should fully understand the investment risks in the NFT Crypto market, and do well in risk control and management. Due to the market’s uncertainty and high volatility, investments may face the risk of asset loss. Investors should set reasonable stop-loss and take-profit points based on their own risk tolerance. When investment losses reach the stop-loss point, they should decisively cut losses to avoid further losses; when investment returns reach the take-profit point, they should take profits in a timely manner to lock in gains. At the same time, avoid excessive borrowing for investment to prevent falling into debt distress due to investment failures.