The global market for non-fungible tokens (NFTs) crossed $40 billion in 2021 as the craze for digital luxury blocks turned into a major investment asset.
Citing new data from blockchain analytics firm Chainalysis Inc, Bloomberg shows that Ethereum smart contracts tied to the NFT market received nearly $41 billion in cryptocurrencies last year.
Chainalysis spokeswoman Maddie Kennedy said the latest estimate is an update of the December NFT report that looked at data through mid-October.
The popularity of NFTs exploded in 2021 with celebrities like Paris Hilton, Shawn Mendes and former first lady Melania Trump joining the crypto mania. NFTs have seen record multi-million dollar sales.
Meanwhile, some analysts have predicted that Ethereum’s dominance in the DeFi sector may erode further until the final sharding phase comes in 2023.
JPMorgan Chase & Co. has described. Sharding as “most important” to the progress of the Ethereum network.
Currently, Ethereum holds a 70% market share in the DeFi space.
Analysts said that Ethereum may be at risk of losing more share in the DeFi market. But for the network, expansion is vital to maintaining its market dominance, but it may come “too late,” they said.
“The optimistic view of Ethereum’s dominance is in jeopardy,” wrote Nikolaos Panegirzooglu, who led a group of analysts.
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Smaller Competitors Outperform Ethereum
Ethereum has been one of the major cryptocurrencies for several years now. The Ether token is the second cryptocurrency after Bitcoin by market capitalization. Its highest dollars came from the DeFi segment.
However, that has changed. Bloomberg reported that its “share of total value booked in DeFi” had fallen from 100% at the start of 2021 to 70% by the end of the year.
She noted that the price of Ether, which more than doubled in 2021, could take a beating in the new year if enthusiasm for the Ethereum blockchain continues to decline.
Panigirtzoglou points out that Ethereum’s loss of market share to standalone blockchains rather than those based on Ethereum’s Layer 1 network for security is a “problematic” aspect.
JPMorgan said that blockchains such as Ethereum competitor Terra, Binance Smart Chain, Avalanche, and Solana, are rapidly gaining significant market share.
JP Morgan said these competitors are taking huge cash and using it to boost their own ecosystems. The price of the Ether token has increased by about 220% in the past year. By contrast, Solana’s rate is up 7000%, and the avalanche is up 2,200%, far outstripping Ether’s annual growth.