NEAR NFTs were doing well at the start of 2022. The chain was garnering some interest, and naturally, liquidity was flowing into it. Project founders took notice of that, and we witnessed many new projects launch in January with (relatively) sizable mint raises. A lot of these projects have stuck around and built out essential NFT infrastructure with active communities backing them. This short-lived utopia stalled and eventually came to a stop. Less and less NFT projects were launching on NEAR. The ones that did launch were either not minting out or had to cut their NFT supply into ridiculously small numbers to ensure a “successful” mint. This effect was exacerbated by poor market conditions.
The Current Situation
In the present time, there is little to no liquidity when it comes to NEAR NFTs ($4k daily volume compared to $16m on Ethereum, $1.5m on Solana, and $440k on Cardano… as per https://cryptoslam.io/). This has prompted current project founders of some of the top projects on NEAR to seek cross-chain opportunities in order to keep their projects afloat. This constitutes a very severe issue that jeopardizes the health of the NEAR NFT ecosystem as a whole.
In essence, we are stuck in a vicious cycle: new projects are not launching on NEAR, so there is no liquidity on the chain… and there is no liquidity on the chain because new projects are not launching on NEAR.
How did we get here? And how do we get out of this?
The NEAR Foundation’s role in supporting new projects was an immense help in onboarding founders to NEAR. With that being said, the expertise required to continue guiding the growth of the NEAR NFT ecosystem by strategically supporting the right projects is beyond the scope of the current NEAR Foundation grants program. From what we have observed in the past six months, the NEAR Foundation is focusing on some unproven future use cases of NFT technology, while inadvertently neglecting the community-centric NFT projects that prove success for future founders and users. This is important to note because while music and ticketing NFT projects will definitely be a big deal in the future, it is the community-focused PFP (profile picture) projects that garner the most user interest at this current point in time.
Case Study and Future Opportunities
For new chains to experience maximum growth, DeFi and NFTs should be regarded in the same manner. NFT startups are as investable as their DeFi counterparts, yet we rarely ever see NFT projects raise as much capital. In addition to that, it’s pretty standard to see DeFi ecosystem funds in place, but NFT ecosystem funds are scarce. The argument in favor of NFTs becomes more convincing when we study the growth of Solana over the past 9 months. In the specific case of Magic Eden, the leading NFT marketplace on Solana, it launched in September 2021, about 10 months ago. Since then, it has grown to become the #2 dApp on Solana with 213,000 monthly users. Magic Eden’s monthly volume is $111m (as opposed to Paras’ $369k), and the marketplace experiences 400,000 daily transactions. The startup recently raised $130m at a unicorn valuation of $1.6b. This was only made possible by the support and investment from the Solana ecosystem. The explosive growth Solana’s NFT ecosystem witnessed has onboarded thousands of investors to the chain. Plenty of VC firms are interested in the Solana ecosystem and have been investing in NFT projects for months. This has allowed solid projects to come to light and grow the chain’s user base. A good example of this is STEPN (https://twitter.com/Stepnofficial), the move-to-earn web3 lifestyle app that took the world by storm earlier this year.
NEAR NFT Ecosystem Fund Proposal
An ecosystem fund is an early growth stage VC-esque investor that aims to accelerate the growth of the ecosystem. Deliberate investments are made into teams that solve specific problems with the end goal of expanding the chain’s user base through shipping various applications.
We propose that the NEAR Foundation find and support experts in NFTs, and specifically NEAR NFTs, to run an ecosystem fund that will invest like a VC into the NEAR NFT ecosystem. This includes investments into businesses specializing in NFT infrastructure, on/off ramps, bots, gated utility tools, notifications, etc… in addition to investments into the right creators and communities to address the vicious cycle of lack of founder support leading to lack of liquidity we have described above.
The NFT space is diverse. It is impossible for the NEAR Foundation team to be experts and understand all the needs. This is why we need a sustainable ecosystem fund with expert researchers and members of the community allocating capital. Through a well-engineered ecosystem fund with a vertical specific investment mission of making the NEAR NFT space thrive, we feel that NEAR can have a vibrant and growing NFT community.