Non Fungible Tokens July 2023 NFT stands for Non-Fungible Token, of NFT, types of NFT wallets, types of Foreword which is a type of digital asset that crypto exchanges, fundamentals of represents ownership or proof of blockchain networks, NFT authenticity of a unique item or piece marketplaces, type of NFTs & their of content, such as a piece of use cases, market outlook for NFT in artwork, music, or video. Each NFT is India, global investments in NFT unique, with its own digital signature space, future trends & recent and ownership history recorded on a developments in NFT. This report aims to provide various blockchain. The blockchain provides industry stakeholders including a decentralized and transparent business leaders an overall ledger of ownership, making it Abhishek Maiti perspective on the market. Director, difficult to replicate or forge the The situation is evolving rapidly, and Technology & Internet, authenticity of an NFT. 1Lattice some of the expected scenarios might In this report, we have intended to have slight variations. The report provide insights into the NFT reflects our perspectives as of April ecosystem of India. The ownership of 2023. an NFT can be transferred or sold, We, at 1Lattice, look forward to similar to physical assets like artwork continuing the discussion with our or collectibles, allowing creators to friends across sectors and exchanging monetize their digital content and notes collectors to own and display rare or unique pieces in their collections. The report talks in detail about the characteristics of NFT, components Executive summary • NFT is unique and cannot be exchanged for another collectibles; gaming which involves cosmetic & game identical unit. This uniqueness is made possible through altering; and other utilities which involves domain names, the tokenization of assets which involves the fund raising, software licenses & real estate. conversion of digital content or physical asset into a • As the popularity of NFTs continues to grow, more and digital token. NFTs are designed to be resistant to more brands are starting to use NFTs as a marketing tool duplication and forgery, with their authenticity and to engage with their audiences and offer unique ownership history recorded on a blockchain ledger & experiences or exclusive products. NFTs provide a new can be bought, sold, and transferred like any other way for brands to monetize their digital assets and create asset, allowing for the creation of a secondary market a more immersive and interactive relationship with their for digital assets. fans and customers. • Crypto exchange, crypto wallet provider, NFT • ~28M crypto wallets globally traded NFTs in FY21 with marketplace and the end user are the key entities OpenSea being the largest NFT marketplace. Collectible involved in any NFT transaction. Creation of crypto NFTs are the most traded NFT category across the globe. wallet, purchase of crypto currency, purchase of NFT In terms of global footprint of companies dealing in NFT, and sale of NFT are the key stages of NFT journey. 91 companies are headquartered in USA while 11 NFT • A blockchain network acts as a digitally maintained based companies are headquartered in India. ledger of transactions between various individuals. • As the NFT market continues to mature, one can also Immutability, decentralization, increased security, expect to see new platforms and marketplaces emerge consensus, and increased transparency are the key that make it easier for creators and investors to features of blockchain. participate in the market. These platforms may provide • NFTs can be broadly classified in relation to art which new features and functionality, such as enhanced involves digital artworks, music & photography; curation, discovery, and community-building tools. collecting which involves digital collectibles, memes, social media posts, sports collectible & fashion Glossary for frequently used terms Terminology Terminology • Cryptographic code that allows users to receive cryptocurrencies into their accounts which is made available to everyone Public key through a publicly accessible repository or directory Private key • Alphanumeric code used in cryptography which is very similar to a password • Type of currency that is declared legal tender by a government but has no intrinsic or fixed value (traditional currencies such Fiat as USD, INR, etc.) Cryptography • Blockchain based encryption Consciences • Process in computer science used to achieve agreement on a single data value among distributed processes or systems algorithm • Intellectual Property IP • Hypothetical iteration of the Internet as a single, universal, and immersive virtual world facilitated by the use of virtual Metaverse reality (VR) and augmented reality (AR) headsets • Decentralized finance DeFi © 1lattice | 04 Introduction to NFTs Characteristics NFTs are non-fungible tokens of assets which are stored & transferred on a blockchain network with a definite owner NON-FUNGIBLE TOKEN OF ASSETS TRANSFERABLE • Cannot have a like-for-like replacement • Digital representations of assets such as • All NFTs can be transferred as per the art, property, etc. terms of the embedded smart contracts • Unrepeatable & irreplaceable in nature • Tokenization refers to the creation of - Smart contracts are self executing • Enforced by popularly adopted NFT digital tokens representing the programs stored on a blockchain metadata standards such as Ethereum’s ownership of assets network to enforce its rules & logic ERC-721 which mandates all tokens to be non-fungible by possessing unique token - Smart contracts govern the creation, IDs ownership & transfer of ownership of NFTs. STORED ON BLOCKCHAIN DEFINITE OWNERSHIP • Acts as a decentralized ledger • Ownership of NFT is as per the smart contract stored on containing details of all the blockchain transactions made across all • NFT generally stored in the systems on the network / owner's crypto wallet crypto wallets • Crypto assets (cryptocurrencies & NFTs) are stored on the blockchain ( on-chain storage) or only a hyperlink to the asset is stored on the blockchain (off-chain storage) Source(s): Media articles, Media reports, Binance blog, Iberdrola, 1Lattice analysis © 1lattice | 06 Components of NFTs 6 key components of NFTs: smart contract, the asset, the owner, token ID, metadata & the creator / miner Smart contracts Token ID • Self-executing program stored on a • Unique IDs assigned to each NFT as blockchain network to enforce rules per the governing standards / of logic for the creation, ownership & protocols transfer of NFTs - ERC-721 mandates unique token • Based on protocols & standards such IDs for each NFT making the most as Ethereum’s ERC-721 which is adopted standard popularly used to create NFTs - ERC-1155 mandates that each batch has unique token IDs Tokenized asset Metadata • Refers to the asset being tokenized • Generally hosed off-chain & • Refers to the content which the NFT referenced in the metadata through a is made up of weblink • Can describe the characteristics & Owner properties of the NFT , transaction history, links to the hosted image or Owner other assets, etc. • Refers to the wallet address which possesses the NFT as represented on the blockchain Creator / miner • Refers to the wallet address responsible for minting the NFT as per the terms of the smart contract Source(s): Media articles, Binance blog, Media reports, 1Lattice analysis © 1lattice | 07 NFT ecosystem NFT ecosystem NFT ecosystem includes users who create crypto wallets to purchase cryptocurrency from crypto exchanges in order to buy & sell NFTs Key entity Stages Creation of crypto wallet Purchase of crypto currency Purchase of NFT Sale of NFT User looking to create User Receipt of cryptocurrency crypto wallet in lieu of sale of NFT Creation of wallet Selection & purchase Crypto exchange by crypto exchange of cryptocurrency for users from exchange Creation of wallet by Crypto wallet provider exclusive wallet provider Selection & purchase of NFT in lieu Selection & sale of NFT in lieu of of cryptocurrencies from open or cryptocurrencies to open or NFT marketplace licensed NFT marketplaces licensed NFT marketplaces • User looking to create crypto • Purchase of cryptocurrency • Selection & purchase of NFT • Analysis of holdings & wallet recorded on the blockchain & from marketplace recorded selection of NFT for sale - via exclusive wallet credited in user crypto wallet on blockchain in lieu of host • Debit of NFT from user wallet provider or a crypto blockchain’s crypto currency & credit of crypto currency exchange or other applicable • All transactions recorded on cryptocurrencies blockchain Transactions recorded on blockchain Source(s): Media articles, Media reports, 1Lattice analysis © 1lattice | 09 Fundamentals & types of NFT wallets There is a wide ranging choice of crypto wallets available to consumers basis their preferred mode of usage & desired security F un d amentals of cry p to wallets Ty p es of cry p to wallets Com p onents of cry p to wallets Wallet p ro v i d ers • Hot wallets: hosted online & facilitate fast • Public keys: identifiers shared by users to • Exclusive wallet providers: services which & easy exchange of crypto assets facilitate the transfer of crypto assets only provide crypto wallets • Cold wallets: hosted offline with offline • Private keys: allow users to access & withdraw • Crypto exchanges & wallet providers: services transactions which are disclosed online assets from their crypto wallet providing crypto wallets & are crypto exchanges Types of wallets Software wallet Hardware wallet Paper wallet Desktop wallet Online wallet Mobile wallet • Cold storage device • Wallets designed to be • Wallets which are run • Wallets designed to be • Physically printed paper (typically a USB drive) used on desktop online on a browser or used on mobile devices containing a QR code Definition which stores the user’s systems browser extension such as a smartphone with access to the user’s private key public & private key • Reduced vulnerability • Generally the most • Flexible & convenient • Generally the most • Most secure & safe to hacking & other secure software wallet option which can be user-friendly & wallet solution Benefits attacks type used on any device convenient wallet option Hot wallet Type of wallet Cold wallet Key players Source(s): Company websites, Coin Bureau, Media articles, Media reports, 1Lattice analysis © 1lattice | 10 Types of crypto exchanges Users can choose between centralized & decentralized crypto exchanges basis tier purchase priorities Types of crypto exchanges Centralized Decentralized / P2P Crypto exchange • Centralized currency • Purchase & sale of Definition exchange with various cryptocurrencies done on a • Platforms that allow listing of cryptocurrencies Definition currency holdings peer-to-peer (P2P) basis directly for purchase & sale between the user’s wallets • All transactions through a • Exchange only lists the user’s • Allows for trade of one cryptocurrency for central order book which intention to purchase / sell Mechanism Function another or for fiat currencies* as per market matches buyers & sellers by value of each currency intended sell / buy price Basis for • Differing policies for • All transactions made on the exchange exchange as per platform basis of existing blockchain • Adds security & reliability for safe Benefits smart contracts cryptocurrency trading Benefits • Allows users to borrow • Greater security due to funds as leverage from decentralization ridding them of exchange for trade of NFTs central points of vulnerability / • Can be in multiple forms such as centralized, failure Types decentralized / P2P exchanges Time period • Allows for instantaneous • Does not allow for immediate purchase & sale of sale / purchase cryptocurrencies • Transactions occur only when • Lists cryptocurrencies across blockchains & buyer & seller have been records transaction details on respective matched Working blockchains • Allows for purchase of cryptocurrencies in lieu Players of other cryptocurrencies or fiat currencies Note(s): *traditional currencies such as USD, INR, etc. Source(s): Company websites, Corporate finance institute, Media articles, Media reports, 1Lattice analysis © 1lattice | 11 Fundamentals of blockchain networks Blockchains are secure and transparent digital ledgers that are decentralized and immutable. They use consensus algorithms to validate new data. Blockchain network • Acts as a digitally maintained ledger of transactions between various individuals • Market consists of multiple blockchains with associated cryptocurrencies & hosted crypto assets exchanged on the blockchain - An NFT stored on Ethereum blockchain will generally be exchanged for Ether (cryptocurrency hosed on & associated to the blockchain) Features of blockchain Immutability Decentralized Increased security Consensus Increased transparency • Permanent & unalterable • No centralised server or • Decentralization • All systems / users on a • All transactions recorded governing authority eliminates central points blockchain network need on the blockchain are managing the blockchain of failure publicly available to verify the legitimacy of - To hack a blockchain mining on a blockchain means taking individual control of majority of the systems on the blockchain • Recorded entries on the • All systems on the • Verification is done • All transactions are • All transactions verified by blockchain cannot be edited blockchain have a copy of all through the blockchain’s assigned a transaction ID the owner of the assets or deleted entries on the blockchain consensus algorithm for easy identification & through cryptography* verification of the • All systems on the network • Governed by smart transaction act as notes to verify entries contracts on the blockchain Note(s): *blockchain based encryption Source(s): Company websites, 101 Blockchain, Media articles, Media reports, 1Lattice analysis © 1lattice | 12 Types of NFT marketplaces Users can buy original NFTs from open marketplaces & official NFTs of their favourite IP* from licenced marketplaces Types of NFT marketplaces Open marketplaces Licenced marketplaces • Marketplaces allowing for the creation & exchange of original • Marketplaces allowing for the creation & exchange Definition NFT s not associated with existing IP of NFTs related to existing IP • Relates to popular IP owned by popular brands Minting Listing Features Sale Trade • Sale of various types of NFTs related to digital art, e-learning, • Sale of various types of NFTs related to digital art, video games, security, real estate, sports, etc. e-learning, video games, security, real estate, sports, etc. Types of NFTs sold Players Note(s): *Intellectual property Source(s): Company websites, Forbes, Media articles, Media reports, 1Lattice analysis © 1lattice | 13 Types of NFTs & use cases Types of NFT marketplaces NFTs can be broadly classified in relation to art, collecting, gaming & other utilities Types of NFTs Art Collectibles Gaming Utility • NFTs containing items • Tokenization of • Collections of themed • NFTs containing Digital Digital such as in-game skins, artworks NFTs Domain access to unique artworks collectibles Cosmetic etc. • Most popular type of • Related to sports, pop names web domain names • Only cosmetically NFT culture, etc. alter the game • NFTs sold with the • Tokenization of • Tokenization of songs • NFTs containing game objective of Memes humorous pop culture or music merchandise Fundraising Music Game altering elements to charitable mainstays • Additional source of altering alter a player’s in-game fundraising income for artists • Tokenisation of ability • NFTs containing socially relevant & • Tokenization of Social media access to software significant social media photographs Software posts • Software can be posts Photography • Additional source of licences accessed while the • Posts by celebrities revenue & royalties user owns the NFT when resold • Tokenisation of sports • Tokenization of collectibles such as Sports land to allow trading cards, jerseys, Real estate collectibles investment in video clips of matches, real-estate through etc. NFTs • Tokenisation of luxury Fashion fashion collectible collectibles • AR & metaverse fashion Source(s): Media articles, CoinDesk, Media reports, 1Lattice analysis © 1lattice | 15 Art NFTs NFTs have opened up new opportunities & avenues for artists to earn additional & secure income free from the threat of unlicensed use Art Di g ital artworks Music Photo g ra p hy Po p ular NF T The merge When you see yourself #freehawaiiphoto • On-chain artworks of circles that • Acclaimed rock band ‘Kings of Leon’ • A photo of a scenic landscape in develop over time as it merges with released an album (‘When you see Hawaii Descri pti on other circles when multiple NFTs of yourself’), accompanying collectible the same collection are held by the merchandise & exclusive concert same wallet tickets Year of ince pti on 2 0 2 1 2 0 2 1 2 017 • Aesthetic appreciation of art & • Exclusive access to music concerts, • Aesthetic appreciation of art & Consumer utility potential i ncrease in value in the exclusive ownership of digital potential increase in value in the secondary market merchandise & early access to music secondary market • Secure source of revenue due to • Innovative selling strategy unlocking Artist utility • Monetization of digital art non-fungibility not allowing additional source of revenue unlicensed usage of photographs NFT marketplace • Nifty Gateway • OpenSea • SuperRare Initial sale price Sale price of all of NFT associated NFTs Current market value (US$) 3.2M 2M 303K Source(s): Media articles, Billboard, NFT Now, NME, CoinDesk, Media reports, 1Lattice analysis © 1lattice | 16 Collectible NFTs Collectible NFTs such as Cryptopunks, Nyan cat & Jack Dorsey’s first tweet have opened up new monetization avenues for creators Collectibles Digital collectibles Meme Social media post Popular NFT Cryptopunks Nyan cat Jack Dorsey’s first tweet 10,000 uniquely generated & Pixelated grey cat flying in a straight • Jack Dorsey, founder of Twitter’s first Description numbered characters line which is a popular culture tweet on the platform mainstay post appearing in a 10-hour YouTube video Year of inception 2017 2021 2017 Collectability & potential increase in • Ownership of a popular culture • Ownership of a landmark moment in Consumer utility value in the secondary market mainstay Internet history • Monetization of digital art • Innovative monetization of a • Monetization of creative & significant Creator utility humorous meme social media posts • Open sea • Foundation NFT marketplace Sale price of all associated NFTs 357M 561K 280 Total sale value (US$) Source(s): Media articles, NFT Now, Media reports, 1Lattice analysis © 1lattice | 17 Collectible NFTs NBA is utilizing NFTs to digitize player trading cards in a unique new avatar; Nike is buying into the metaverse through collectible in digital fashion NFTs Collectibles Sports collectibles Fashion collectibles Popular NFT NBA Top Shot Nike Dunk Genesis Cryptokicks • Short video highlights from NBA basketball games, each Unique digital sneakers designed to be worn by user Description featuring a prominent player; Similar to basketball avatars in metaverse worlds sold as NFTs trading cards 2020 2022 Year of inception • Collectability through digitization of sports-based trading • Ownership of uniquely designed sneakers that can be used Consumer utility cards & potential increase in value in the secondary market by user’s digital avatars in the Metaverse • Digital monetization of sports-based trading cards • Monetization of metaverse-based luxury fashion Creator utility • NBA Top Shot • Multiple marketplaces such as Open Sea, Binance, etc. NFT marketplace • Flow • Ethereum Blockchain Total NFTs minted in 40,000 200,000 collection Source(s): Media articles, NFT Now, Media reports, 1Lattice analysis © 1lattice | 18 Gaming NFTs Cosmetic gaming NFTs have struggled to gain traction; NFT-based games such as Axe Infinity have received a better response Gaming Cosmetic Game altering Popular NFT Ubisoft Quartz Axie Infinity • NFT-based ‘play to earn’ game in which players acquire • Cosmetic player upgrades in game developer Ubisoft’s Description various characters as NFTs either through monetary game “Tom Clancy Ghost Recon Breakpoint”, allowing transactions or gameplay-based acquisitions player avatars such as masks, clothing, etc. 2021 2018 Year of inception • An engaging Pokemon-esque game in which players own • Unique cosmetic upgrades to player avatars that other Consumer utility characters in the form of NFTs players cannot then also purchase; Further ability to sell in-game items • Greater monetization of in-game transactions & engagement • Increased monetization potential for in-game items Creator utility through more significant ownership of in-game characters • Strong initial user response spurred by the novelty associated • Highly negative player response over high costs & User response with NFTs prohibitive playtime requirements to unlock purchase of • Current market response tepid in nature due to passing of in-game NFTs leading to eventual discontinuation of the novelty related factors resulting in a dip in value of associated project NFTs Source(s): Media articles, Media reports, 1Lattice analysis © 1lattice | 19 Utility NFTs NFTs have opened up new opportunities & avenues for artists to earn additional & secure income free from the threat of unlicensed use Utility Domain name Fund raising Software license Real estate Popular NFT Unstoppable domains Save thousands of lives Disk Drill Michael Arrington’s Apartment • Online marketplace selling • NFT containing images of • NFT containing the license • Sale of Michael Arrington’s tokenized versions of domain various images of lives to use ‘Disk Drill’ a software Kyiv apartment through an names giving the owner positively impacted by the data recovery tool NFT containing a digital title Description exclusive rights to the domain issuing NGO: Noora health to property address such as social media handles, wallet addresses, etc. 2021 2021 2022 2021 Year of inception • Exclusive access to the • Innovative form of donating • Sold at a lower rate to • Greater transparency & domain address with minimal to charity incentivise purchase due to authenticity due to dispute creator utility irrefutable history of Consumer utility • Ease of resale to other ownership on the blockchain consumers • Easier facilitation of fractal ownership • Allows for easy sale & auction • Innovative method of fund • Protects creator from • Innovative form of doing of domain names raising to take advantage of software piracy business in real estate Creator utility a boom period in the market • Secure & high-speed for NFTs transfer of property rights Source(s): Media articles, Forbes, Entrepreneur, Globe Newswire, Media reports, 1Lattice analysis © 1lattice | 20 Types of NFT users NFTs have created a unique culture, uniting individuals sharing different interests & a passion for collecting rare items in digital form • Passionate about art and enjoy collecting unique • Passionate about music and enjoy collecting pieces music memorabilia • Collect and trade digital art • Collect and trade music memorabilia, such as Art enthusiasts Music fans • Open new possibilities for the art world concert tickets and backstage passes • Invest in cryptocurrencies and see NFTs as a new • Passionate about technology and enjoy collecting asset class cutting-edge gadgets and devices • Unique opportunity for crypto investors to • Collect and trade digital gadgets and virtual Crypto investors Tech enthusiasts diversify their portfolio and invest in digital assets items • Enjoy playing video games and are interested • Individuals having large social media following in collecting in-game items, such as virtual and using their influence to promote brands and skins and accessories products Gamers Influencers & • New revenue stream for game developers • Monetize their content and engage their content creators audience in new and innovative ways • Passionate about sports and enjoy collecting • Passionate about fashion and enjoy collecting sports memorabilia unique and rare fashion items, such as • Collect and trade sports memorabilia, such as Sports fans limited-edition designer collaborations and game-worn jerseys and autographed items Fashion virtual fashion items of high value enthusiasts • Enjoy collecting unique and rare items, such • Passionate about supporting charitable causes as stamps, coins , and rare books and making a positive impact on the world • Aim to expand their collections and trade Collectors • Donate to charities and support causes that are high-value items Philanthropists significant Source(s): LinkedIn, Media articles, 1Lattice analysis © 1lattice | 21 NFTs by brands Brands across different industries are turning to NFTs as a new way to engage with their audience & create buzz around their products/services • HT forayed into web 3.0 by launching digitized versions of original historic creatives which were published in Hindustan Times through the decades under the banner of “HT Timeless Tokens” • Mahindra group entered the world of NFTs, with its • MakeMyTrip entered the world of NFTs to celebrate set of NFTs based on its flagship vehicle Thar the popular as well as unexplored travel landscapes in the country • NFTs were released in collaboration with Tech Mahindra & were made available for bidding at Tech • The first batch of these digitally-crafted artworks Mahindra’s NFT marketplace “Mahindra Gallery” cover the majestic landscapes of Goa, Ladakh, Orissa, Himachal, Kashmir, Kerala, Meghalaya, Rajasthan, & Andamans • Mahindra introduced a set of 4 NFTs Standing Tall, Born of the Earth, Taking Flight, & Explore the • Each NFT comprises a kaleidoscopic meta-world view Impossible. of seen and unseen sides of India’s most acclaimed • THAR NFTs garnered high bids worth INR 26L travel destinations • The NFTs launched by HT include the iconic cover page of the first republic day HT edition • Among other NFTs, which are inspired by pertinent events and moments in India’s history such as the success of the first missile launch to the nation’s first historic win at the World Cup in 1983 against the West Indies Source(s): LinkedIn, Media articles, 1Lattice analysis © 1lattice | 22 NFT market outlook NFT: Demand drivers & barriers Marketing opportunities, growing gaming & art market, & increased interest in cryptocurrency are driving the demand for NFTs Headwinds Tailwinds Payment gateways Branding & marketing • Payment gateways often charge high transaction fees thus • NFTs offer unique branding opportunities for businesses to create making it expensive & less appealing for people to trade engaging & immersive experiences for their users • Limited payment options for purchasing NFTs & regulatory • Brands can create limited-edition virtual collectibles to build brand uncertainties make payment gateways hesitant to support loyalty & engagement NFT transactions - Samsung in partnership with Nifty Gateway, an NFT marketplace by Gemini is launching a smart NFT TV platform for its premium range Regulatory uncertainty of TVs which allows users to browse & purchase NFTs on smart TVs • Regulatory framework around cryptocurrencies and NFTs in India is still evolving, which creates uncertainty for potential Gaming & sports investors • Indian gaming market is expected to reach $5 billion by 2025 at a • Creators & investors are hesitant to engage with NFTs due to CAGR of ~30% concerns about legality & compliance • Increase fan engagement by providing a new way for fans to interact with their favorite teams and players Cyber threats & online fraud risk • Offers unique gaming & sports experiences allowing fans to trade in • Malware and viruses can infect NFT wallets, stealing private virtual assets opening new monetization opportunities keys and other sensitive data • Smart contracts have vulnerabilities, hackers can exploit Growing art market these vulnerabilities leading to loss of funds or NFTs • NFTs provide a way for artists and collectors to monetize and • Malicious links, social media posts, pop-ups, and fake authenticate digital art giveaways used by cybercriminals as bait to steal users’ NFTs • Opened new revenue streams for artists and created a new market credentials for collectors who are interested in owning unique digital art Lack of awareness Increase interest in crypto • NFTs require a digital wallet and a certain level of technical • Surge in interest in cryptocurrency and blockchain technology in India knowledge to use and manage, & lack of awareness makes has paved the way for NFTs to gain traction users more prone to cyber attacks • Crypto investors & traders see NFTs as an investment opportunity that allows them to diversify their portfolio Source(s): Media publications, 1Lattice analysis © 1lattice | 24 Benefits of NFTs Alternate investment opportunities, proof of ownership, protection of rights, & supply chain management are some of the benefits offered by NFTs • Use of NFTs as an investment vehicle, hoping to buy • Used to protect intellectual property rights low and sell high for a profit • Prevent piracy and unauthorized use of copyrighted Alternate Protection of • Addition of a new asset class to user’s portfolio, leading material investment rights to diversification opportunities • NFTs provide uniqueness to digital assets making them • Represent ownership of digital assets in a secure and more valuable and collectible transparent way • Can be used to trade, protect & preserve cultural heritage Proof of Maintaining • Ensure the authenticity of the products bought from items, such as art, artifacts, and historical documents ownership & unique the marketplace authenticity collections • Help artists and owners of digital assets to monetize • NFT linked to each product transferred between each their work supply chain stakeholder ensures complete supply chain traceability on the blockchain • Open new opportunities and revenue streams for Drives Supply chain digital creators or artists • Allows supply chain transparency & optimization monetization management • NFTs when traded & stored on blockchain, create a • NFTs create a more transparent and secure way to track permanent & immutable record of ownership charitable donations Proof of Fundraising • Leave no space for disputes or confusion • Builds more trust and transparency in charitable ownership & & charities organizations authenticity Source(s): Forbes, Media articles, Simplilearn, 1Lattice analysis © 1lattice | 25 Market statistics ~28M crypto wallets globally trade NFTs in FY21 with OpenSea being the largest NFT marketplace; Collectible NFTs are the most traded category ~28M crypto wallet straded OpenSea is the largest NFT Collectible NFTs are the most Global NFT sales grew 131x NFTs in FY21 globally marketplace popular category followed by from Q1 2020 to Q1 2021 utility and art Demographics Gender ratio Footprint Millennials are 3x as likely as Gen Z Men are 3x more likely than women 91 NFT-based companies headquartered to buy NFTs to be collectors of NFTs in USA 8% people aged between 18-34 own NFTs in Indian men are 1.6x more likely than 11 NFT-based companies headquartered India , while 4% of people aged 35-54 and 5% women to collect NFTs in India of people aged 55+ own NFTs Source(s): Fortunly, Media articles, Company analysis © 1lattice | 26 Global Investments Notable investments across NFT space in 2022-23 [1/2] Com p any F oun d e d year Hea d quarter Amount raise d F un d in g roun d Latest fun d in g Key ins ti tu ti onal in v estors year ( US $ M ) NFTically 2021 India ~1.0 Seed Feb 2023 Sparta n Group & Polygon V entures CIIE & angel investors House of Kri fi n 2021 India ~0.02 Seed Jul 2022 Multicoin Capital,Krafton, Pravega V entures, G A M A , Woodstock Fund, IOSG FanTiger 2022 India ~5.5 Seed May 2022 V entures, Polygon Studios & other angel investors Sunicon, MaksGroup SportZchain 2021 India ~0.7 Seed May 2022 Dream Sports, A lpha Wave Global, Kingsway Capital, Presight Capital, Rario 2021 Singapore ~120.0 Series A A pr 2022 A nimoca Brands Polygon Studios, Better Capital, Indigg, One World Nation 2021 India ~2.0 Seed A pr 2022 Cloud Capital SanctorCapital, GB V Capital KnownOrigin 2018 Germany ~4.7 Series A Feb 2022 Contrary Capital, Polygon Fund & other Diginoor 2021 India ~1.0 Seed Jan 2022 angel investors A rcanum Capital, Lancer Capital, Lumos W A LL 2021 India ~1.0 Seed Jan 2022 Labs, Woodstock & other angel investors Coatue, Paradigm OpenSea 2017 United States ~300.0 Series C Jan 2022 GB V Capital, CMS Holdings, GenblockCapital, MXC, ROK Capital, Solvent Jan 2022 Darkpoolliquidity, Skynet trading, Solar 2021 India ~1.8 Seed Eco Fund, Double peak, Gate .i.o, Solana Foundation, Cropper, Serum Scorpio V C, DeltaHubCapital, Dutch Crypto Investors, Hello Capital, Kangaroo Fan A nywhere 2021 India Undisclosed Seed Dec 2021 Capital, Hotbit, HalvingsCapital, Mars V entures, Oasis Capitals Source(s): Tracxn, Company website, 1Lattice analysis © 1lattice | 27 Global Investments Notable investments across NFT space in 2022-23 [2/2] Com p any F oun d e d year Hea d quarter Amount raise d F un d in g roun d Latest fun d in g Key ins ti tu ti onal in v estors ( US $ M ) year Pine 2022 Panama ~3.0 Series A Dec 2022 Sparkle V enture & A mber Group A lpha Wave V entures &other angel Bliv.Club 2021 U A E Undisclosed A ngel May 2022 investors Square Peg, Beenext, Hashed, Tiger Lysto 2021 Singapore ~12.0 Seed Aug 2022 Global & Better Capital General Catalyst, iSeed, Kearny Fitmint 2022 India ~1.6 Seed Jun 2022 Jackson, Dweb3 & 1947 Rise Fitmint 2.0 (marketplace) yet to be launched AlphaWave Global & 8i Ventures 2022 United States ~3.5 Seed Apr 2022 Revise Polygon Sequoia Capital India 2017 India ~450.0 Series D Feb 2022 - 2021 India ~1.7 Seed Jun 2022 BitLiberte Source(s): Tracxn, Company website, 1Lattice analysis © 1lattice | 28 Evolution of NFTs & future outlook NFT Evolution NFTs have evolved from being restricted to niche artworks to now disrupting various industries • Landmark sale of NFTs such as: • Sale of the first • Sale of Jack Dorsey’s - The Merge • Launch of NFT.NYC NFT ‘Quantum’ first tweet as an - Nyan cat the largest NFT based via Sotheby’s NFT$ 2.9M - Kings of Leon’s ‘When you event in Times Square (auction house) • Inception of see yourself’ in New York City for US$ 1.47M Cryptopunks - Save thousands of lives 2014 2015 2017 2018 2019 2020 2021 2022 • Launch of NBA Top Shot - the • Mainstream • Release of the • Release of Axie first mainstream sports NFT integration of NFTs first blockchain Infinity the most in the Metaverse commodity based card successful ‘play • Release of Decentraland, the with Nike Dunk trading game to earn’ NFT first virtual real estate-based Genesis Cryptokicks ‘Spell of Genisis’ based game game Source(s): Media articles, NFT Club, NFT News Pro, Decrypt, NFT.NYC, Media reports, 1Lattice analysis © 1lattice | 30 NFT: Recent developments Major NFT Trends: NFT-backed loans, film/TV/real estate experiments, and emerging use in social media 1. NFT-backed loans 8. Big brands using NFTs - Use of NFTs as collateral to borrow funds and get - Release of limited edition NFT collectibles by NFT-backed loans by some DeFi* platforms big brands and designers like Manish Malhotra, T-series, etc. - Helps NFT owners to access liquidity without having to sell their NFTs - Aim is to develop new revenue streams, boost social media engagement and build customer loyalty 2. Experiment in film & TV industry Recent - Creates possibilities for merchandising, and 7. NFT Membership monetizing TV and film projects developments - NFT membership programs helps in bringing - NFTs can be purchased to view the show’s NFT in NFT space together their most loyal users release and episodes - Members owning specific NFTs have access to 3. Virtual real estate exclusive perks, events, rewards, or services - Offering virtual real estate as NFTs. E.g. 6. Personality NFT investment in an NFT house in the metaverse - Allows people to share their personality with - Represents virtual spaces in online worlds or others and find like-minded people over the gaming environments that can be bought and sold internet to build a community like physical real estate - Personality could be minted on the blockchain with a psychometric test and shared with others 4. Social media profile picture - Use of NFTs as profile pictures on social media like 5. Launch of alternative chain Twitter, Facebook and Instagram - Creation of more affordable & alternative blockchains such as Avalanche and Solana compared to traditional ones ensuring cheap and faster transactions Note(s): Decentralized finance Source(s): Media articles, 1Lattice analysis © 1lattice | 31 NFT: Future trends Fractionalization of NFTs, interoperability, cross-platform compatibility, soulbound tokens & integration of NFTs with metaverse will disrupt the NFT market in future Future trends which are expected to disrupt the NFT market Fractionalization of NFTs Interoperability Cross-platform compatibility • Fractional ownership of NFTs, enabling • Most NFTs are built on specific blockchains, • Instead of being restricted to trading on which limits their interoperability specific marketplaces or exchanges, NFTs multiple people to own a fraction of an NFT making it more accessible to a could be bought and sold on a wide • With the development of new blockchain broader audience and creating new range of platforms, providing greater technologies more interoperability investment opportunities flexibility and accessibility for both between blockchains can be seen allowing buyers & sellers cross-platform seamless transfer of NFTs between platforms Soulbound tokens (SBTs) Integration with Metaverse New use cases • SBTs, a different type of NFT used to • NFTs could become an essential • NFTs continue to find new use cases symbolize an achievement or part of an component of the Metaverse, a virtual beyond digital art, including in gaming, individual’s identity & reputation like world where people can interact with each virtual real estate, collectibles, sports, medical history, credit verification, other and digital objects and music leading to more widespread exclusive memberships, identity adoption and greater mainstream appeal. • NFTs could represent digital assets such verification, etc. as virtual real estate, clothing, & • SBTs could be self verified & could prevent accessories theft, scams & other fraudulent actions Source(s): Media publications, 1Lattice analysis © 1lattice | 32 NFT awareness & participation Greater awareness, user-friendly platforms, low barriers to entry, diverse use cases, security, regulations & incentives are crucial for driving participation in NFTs Education & • Need for increased prevalence of educational campaigns, community building activities & partnerships to help individuals better understand & invest in NFTs Awareness • Need for increased prevalence of user-friendly, accessible, and easy-to-use NFT marketplaces and platforms User-friendly - Would facilitate greater & easier participation in the NFT ecosystem for an average user platforms • Ensuring trust & security of NFT transactions essential in building confidence among individuals Trust & • NFT marketplaces should have robust security measures in place, such as two-factor authentication and security smart contract audits • Need for lower transaction fees across platforms such as crypto exchanges & NFT marketplaces Lower barriers to entry • By reducing fees and improving the user experience, NFTs can become more accessible to a wider audience • Clear and favorable regulations can help create a more secure and stable environment for NFTs Regulations • Working with regulators and policymakers, the blockchain industry can help create a regulatory framework that supports NFT adoption and growth • Incentivizing users with rewards and benefits can encourage more participation in NFTs Incentives • Can be done through exclusive access to NFT exclusive sales & events, loyalty programs, prize pools or contests, referral programs, etc. Source(s): Media articles, 1Lattice analysis © 1lattice | 33 Case studies Case study: OpenSea OpenSea is the largest NFT marketplace responsible for sale of some of the most valuable NFTs Founded in Headquarters Valuation (CY22) Market type #NFTs 2017 New York, USA US$ 13.3B Open 80M+ Company overview • Largest open NFT marketplace which allows users to create, list & mine their own original NFTs • NFTs range across art, music, domain names, virtual worlds, trading cards, collectibles, sports assets & other utilities like special membership passes • Compatible with various blockchains such as: Ethereum, Polygon, Klaytn & Solana Timeline N otable NF Ts Bore d A p e Yacht Club Azuki F i d enza • Founded by Alex Atallah 2017 & David Finzer • Received pre-seed funding of 2018 NF T US$ 120K from Y-Combinator • US$ 2M seed funding from 2019 • A collection of 10,000 ape • A collection of 10,000 • A collection of 999 computer various investors themed NFTs hosted on anime inspired avatars generated artworks inspired Descri pti on the Ethereum blockchain NFTs by the density & velocity of • Launch of minting platform to 2020 fluid over time & space allow users to mint NFTs directly on OpenSea • Generative art produced by • Culturally notable NFTs • Initial sale of collection software algorithms • Acquisition of Dharma with highest selling NFT for US$ 29M, subsequent 2021 Notability Labs, a cryptocurrency in the collection selling secondary sales for US$ • Consistent & high sales value wallet provider for US$ 3.4M 300M in 2022 Source(s): Company websites, Media reports, NFT Now, CoinDesk, 1Lattice analysis © 1lattice | 35 Case study: Rario Rario is an Indian NFT marketplace selling NFT based digital playing cards based on prominent cricketers Founded in Headquarters Valuation (CY22) Market type #NFTs 2021 Gurugram, India US$ 120M Licensed 150K Company overview • Licensed marketplace for NFT based digital trading / player cards of prominent cricket players • Affiliated with various prominent players such as Sachin Tendulkar, cricketing boards such as Cricket Australia & league teams such as Gujrat Titans & Punjab Kings Timeline N otable NF Ts Lalit Yadav Sachin Tendulkar Charith Asalanka • Founded by Ankit Wadhwa 2021 & Sunny Bhanot • US$ 120M series A funding Apr-22 NF T investment by Dream Capital • Investment from & release of Oct-22 Sachin Tendulkar based NFTs • NFT of Lalit Yadav, a • NFT of Sachin Tendulkar • NFT of Charith Asalanka, a Descri pti on prominent cricketer post his investment into prominent cricketer • Launch of mobile application Mar-23 Ravio with complete portfolio of • One of the highest valued • Release of NFT post • One of the highest valued Notability 150 players NFT listed April 2023 NFT listed as of April 2023 investment of Sachin • Official licencing deal with Tendulkar Apr-23 Cricket Australia & release of Current _ US$ 2M US$ 2M NFTs of affiliated cricketers market value Source(s): Company websites, Media reports, 1Lattice analysis © 1lattice | 36 Case study: Pine Pine is a DeFi* firm providing NFT-backed financing services such as loans & margin trading Founded in Total funding Function 2022 US$ 1.5M NFT backed DeFi Company overview • A blockchain based DeFi company providing NFT-backed loans • Key product being the Pine Protocol, smart contract infrastructure allowing asset (NFT) backed financing to be conducted on various blockchains • Also includes the Pine Platform, a two sided loan marketplace to allow borrowers & lenders to interface with the Pine Protocol Features Timeline Pine now pay Bid now pay Pine loans Bulk borrowing Pine listing • Rollout of first functional Jan-Mar 22 later later version of Pine Protocol • Allow users to • Allow users to • Allow users to • Allow users to • Allows users to • Introduction of new pledge NFTs as purchase NFTs place bids to pledge existing list their pledged features such as: collateral for a on a credit basis purchase NFTs NFT holdings as NFT for sale Definition - Loan extension loan equivalent on a credit basis collateral to • Requires users • Once sold the Mar-Sep 22 & working - Purchase of NFTs with to the NFT value purchase new to have • Requires users debt is repaid & pine loans NFTs cryptocurrency to have any excess - Simple & flat fee meeting margin cryptocurrency • Does not require amount will be structure requirements meeting margin cryptocurrency sent to user • Introduction of features requirements margins amount crypto wallet such as: Sep-Present - Listing & selling of • Allows for NFT • Allows for • Allows for margin • Allows for • Allows for easy Pine loan collaterals based loans margin trading trading on NFT margin trading repayment of on NFT marketplace with NFTs auctions without user Benefits loan - Automatic loan holding required repayment cryptocurrency - Dynamic fee structure margin amount Note(s): *Decentralised finance Source(s) : Company websites, Company whitepaper, Media reports, Tech in Asia, 1Lattice analysis © 1lattice | 37 We’re here for you Let us know how can we meet your business requirement? 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