Though the NFT market is on everybody’s mind, the details of how it functions and who it rewards are still murky. This past October, however, a team of researchers with funding from the Alan Turing Institute released one of the first papers to analyze the NFT market. Titled “Mapping the NFT revolution: market trends, trade networks, and visual features,” Matthieu Nadini et al. published in Nature some surprising results.
Despite the fact that NFTs have been touted as a democratizing force for art, the paper revealed that top buyers account for the majority of sales and very few artists make more than $15 dollars on individual NFTs.
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Andrea Baronchelli, who leads the Token Economy research program at the Alan Turing Institute and participated in the study, said he first became interested in looking at the NFT market following the landmark sale of Beeple’s Everydays: The First 5,000 Days (2021) at Christie’s. “We had been working on blockchain systems: anticipating the price of cryptocurrencies, looking at networks of developers and how they their collaboration affects the market, things like that,” Baronchelli said. “But the Beeple sale woke us up to the NFT market.”
Working alongside collaborators at the City University of London, where Baronchelli also works, and researchers from the Technical University of Denmark, IBM Research, and the IT University of Copenhagen, the team analyzed 6.1 million transactions of the buying, selling, and transferring of 4.1 million NFTs from 2017 to late April 2021.
Though media reports consistently trumpet the sale of million dollar NFTs and record breaking prices, the team found that $15 was the average sale price of 75 percent of NFTs, with only 1 percent of NFTs reaching prices higher than $1,500. Moreover, the study found that merely 10 percent of traders account for 85 percent of all transactions.
This analysis includes all categories of NFTs: art, collectibles, games, metaverse, and utility. Interestingly, though art NFTs receive so much attention, they only make up 10 percent of the market, with collectibles and games comprising more than 80 percent. Additionally, the researchers observed that art NFTs have risen in volume but decreased in the number of transactions. This means that the prices of art NFTs have risen, thus reducing the amount of people who are transacting in this category.
Baronchelli noted that this runs opposite to the dominant thinking in NFT communities: “We observed that there was this idea that finally the middle person was removed, gate keeping was over, and artists had direct access to buyers and therefore this would be a liberation.” Instead, he said, “What we have observed is the reemergence of gate keeping in the form of markets that pre-select and curate a selection of artists and therefore they offer them for higher prices.”
However, so much of this data comes from before of the NFT boom of 2021, and only accounts for the first quarter of 2021. A lot has happened since April, perhaps things have changed. But Baronchelli doesn’t think so. “I would expect the market to remain concentrated and more than that it seems we are observing reemergence of structures that we know in the usual art market,” he said. “The winners will not be the masses, one can expect that the structure of success that we are familiar with will be also recreated here.”