The cryptocurrency market witnessed a significant upswing in April 2021, marked by Bitcoin surpassing $60,000, the total value locked in DeFi nearing $100 billion, a surging interest in NFTs, and Coinbase's successful Nasdaq listing. NFTs, emerging as the next major wave after DeFi, experienced explosive growth, with their total market capitalization exceeding $30 billion by mid-April, setting a new historical record.
Following its public listing, Coinbase, a established cryptocurrency exchange, announced its exploration of NFTs as a potential new business line. Although Chief Financial Officer Alesia Haas did not disclose a timeline for offering NFTs or whether Coinbase would build a native NFT marketplace or act as a resale channel, it became evident that centralized exchanges were extending their reach into the NFT domain. Driven by potential profits, many are eager to enter this space and claim a share of the market.
However, centralized exchanges face several challenges in the NFT arena, preventing a perfect fit. Issues include a limited number of exchanges supporting efficient cross-chain and multi-chain services, and restrictive token swap functions that fail to meet diverse user needs, thereby constraining transaction convenience. Additionally, high gas fees on the Ethereum network often force users to pay more and endure longer confirmation times when trading NFTs on centralized platforms.
How Leading Exchanges Are Tackling NFT Challenges
To address these problems, major centralized cryptocurrency exchanges like Binance, Huobi, and OKX have begun exploring solutions on decentralized exchanges (DEXs) built atop their native blockchains.
Currently, the public blockchains of these three exchanges are in rapid development. Binance Smart Chain focuses heavily on application support, Huobi Eco Chain emphasizes security while enhancing financial stability and throughput, and OKExChain prioritizes optimizing solutions for on-chain asset circulation, cross-chain functionality, and trading. For NFTs, exchange-based blockchains offer distinct advantages, providing crucial "smooth transaction" support and allowing NFT projects to leverage shared public chain resources.
Furthermore, each exchange has adopted a unique strategy for NFT integration. Binance has been active in NFT investments and partnerships. Although its Binance Smart Chain has lowered the barrier to entry for developers and attracted numerous NFT projects, the crypto community criticizes it for largely replicating Ethereum-based NFTs, hurting its reputation. Multiple NFT projects are already live on Huobi's Heco chain, achieving optimistic total value locked. OKEx, meanwhile, focuses on empowering NFTs within its decentralized exchange framework.
As NFTs lead the cryptocurrency industry toward mainstream adoption, it's clear that crypto applications can integrate with real-world scenarios. NFTs have naturally become a gateway for blockchain applications to落地 (land) and connect with the physical world. While the phrase "everything can be an NFT" gains traction, it's crucial to remember that without trading, there is no value. Value is realized through transaction; lower transaction efficiency correlates with reduced liquidity and value. The current NFT market suffers from a lack of high-frequency trading venues, limiting its application mostly to traditional sectors like gaming and art collection.
Therefore, without a platform supporting high-frequency trading, converting "everything" into NFTs is meaningless. From this perspective, DEXs on exchange-based blockchains are well-positioned to solve the "low-frequency trading" problem plaguing NFT development. These blockchains not only focus on deploying crypto-related applications but also ensure decentralized trading security. They maximize the ability to meet high-frequency trading demands for various scenarios, including NFTs, while prioritizing security and user experience to provide diverse asset options and secure, trustworthy, fluid trading.
The Advantages NFTs Bring to Exchange-Based DEXs
Since encountering NFTs, DEXs on exchange blockchains have actively worked to remove industry constraints, solve problems, and empower NFT growth. However, these platforms aren't merely giving; they also reap significant benefits from NFTs. For a DEX, recognizing these advantages first can provide a crucial competitive edge.
On these platforms, initiatives like NFT test blind box airdrop events can be launched, where each box contains a random card. Unlike "traditional" NFTs, these assets possess not only collectible and gaming attributes but also holding value, as they are endowed with real economic utility. Holders can participate in fixed fee dividend pools for rewards, platform governance projects, token launches, and shared platform revenue based on their ownership weight.
Platform tokens, issued by crypto exchanges for internal circulation, are essentially exchange liabilities. In contrast, NFT holders act more like "shareholders" of the trading platform. They can co-build the ecosystem through community participation and share in the platform's development successes, achieving genuine decentralized governance. This economic value far surpasses that of ordinary platform tokens.
Currently, in their early stages, DEXs primarily focus on trading and providing liquidity, with NFT trading weight potentially remaining relatively low. However, this innovative NFT economic value empowerment mechanism will inevitably "feed back" and benefit DEX users. Furthermore, leading exchanges like the "Big Three" host a massive number of daily traders. Their large user bases can be readily converted to DEXs. While NFT projects can launch on other platforms, users accustomed to the "exchange ecosystem" often exhibit higher platform loyalty, ultimately driving further growth in the number of NFT traders on DEXs.
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Frequently Asked Questions
What is the main challenge for NFTs on centralized exchanges?
Centralized exchanges often struggle with high Ethereum gas fees, slower transaction times, and limited support for cross-chain functionality. This creates a poor user experience for NFT trading, which requires efficiency and lower costs to foster liquidity and value.
How do decentralized exchanges (DEXs) improve NFT trading?
DEXs built on exchange blockchains are optimized for high-frequency trading, offer reduced fees through alternative consensus mechanisms, and provide better cross-chain capabilities. This enhances liquidity, reduces costs, and improves the overall transaction experience for NFT collectors and traders.
Can NFT holders really benefit economically on these platforms?
Yes, beyond simple ownership, some DEXs design NFTs with utility, allowing holders to participate in revenue sharing, governance voting, and exclusive token launches. This creates tangible economic value and incentives for holding beyond speculative price appreciation.
Why are major exchanges like Binance and OKX entering the NFT space?
They recognize NFTs as a growing asset class with significant user interest. By integrating NFTs into their ecosystems, they can attract new users, increase platform engagement, and create new revenue streams, all while leveraging their existing technical infrastructure and large user bases.
Is the future of NFT trading primarily on DEXs?
While centralized platforms currently handle significant volume, DEXs offer distinct advantages in terms of permissionless access, user empowerment, and integrated economic models. The future likely involves a hybrid ecosystem, but DEXs are poised to capture a substantial share as the technology and user experience improve.
What does 'economic value' mean for NFTs on a DEX?
It refers to utility beyond art or collectibility. NFTs can grant rights to a share of platform fees, governance power, or access to exclusive events. This transforms them from static digital items into dynamic assets that generate ongoing value for the holder.
Conclusion
The innovative explorations by decentralized exchanges in the NFT realm are just beginning and are poised to profoundly impact the broader NFT ecosystem. This example demonstrates that NFTs can inject fresh vitality into exchange-based DEXs, making them more attractive to both users outside the crypto sphere and those within existing exchange ecosystems, ultimately creating a synergistic relationship.
The NFT world is vibrant and holds immense potential. As cryptocurrency infrastructure, including exchange-based DEXs, continues to mature, new ideas and projects related to NFTs will accelerate their落地 (implementation). This progress is set to drive revolutionary changes and push NFTs further into the mainstream.