Expanding NFT Ecosystems: A Case Study on Strategic Partnership and Artist Outreach

Executive Summary

•      A well-developed NFT ecosystem is essential for the long-term success of an Layer1 project, and Client A can exploit opportunities for further growth through the NFT domain.

•      Catalyze Research used three metrics to measure the success of Client A's NFT ecosystem and provided two solutions: promoting a new business initiative by partnering with major NFT marketplaces and onboarding NFT artists.

•      After implementing effective solutions including establishing partnerships with major NFT marketplaces and onboarding new artists through social listening, Client A experienced a 141.29% increase in NFT transaction volume, and a 23.14% increase in NFT-related social interest QoQ.

Introduction

Competition in the Layer 1 (Layer1) ecosystem has been heating up recently, with several protocols and their native tokens vying to challenge Ethereum's dominance. As per Messari's research analysts, Ethereum's market share has decreased by 20% in the last five months, although it still controls about 77% of the total value locked. Investors are increasingly drawn to Layer 1 protocols that promise lower transaction prices and faster throughput than Ethereum.

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Layer 1 blockchain protocols have gained significant attention, as they form the foundation of blockchain technology. The blockchain protocols' technical differences among leading smart contract blockchains maynot be decisive for most use cases yet. Instead, tooling, ongoing tech development and maintenance, financial and development support, composability with other apps, as well as transaction costs, are more important. Adoption of innovation in the ecosystem is a key driver for blockchain network until the lower protocols become hardened protocols with very rare changes.

NFTs began gaining popularity in the cryptocurrency industry by providing a digital solution for collectibles. NFTs reflect variousreal-world elements and cannot be replicated or exchanged at equivalency. They offer enhanced authenticity, immutability, and the ability to prove ownership. They are designed to improve marketplace efficiencies, including handling cryptocurrencies, by eliminating intermediaries and improving supply chains. They also allow for the fractionalization of asset ownership, which enables owners to sell part of their assets and digitize the value of their physical or digital assets.

NFTs also offer enhanced security through the use of blockchain, which protects against fraud in the long run. They also enhance inclusivity by bringing creators and traders from different fields into a single ecosystem, allowing for shared ownership and access to different forms of digitized assets, particularly cryptocurrencies. Therefore, it was only a matter of time before NFTs became a critical domain in the industry, due to the many advantages and benefits it offered, that were previously not available.

This thus led to the idea that Client A should focus its resources on nurturing its NFT ecosystem because NFTs are an essential, and integral part of the industry. NFTs have become increasingly popular among the general public as well, as they offer benefits such as enhanced authenticity,ability to prove ownership, and unrivaled marketplace efficiency. NFTs are designed to improve marketplace efficiencies, allowing for the conversion of physical assets into digital ones, eliminating intermediaries and improving supply chains. Thus, Client A, despite already being an established Layer 1 player through its DeFi foundations, can exploit opportunities for further growth through the NFT domain.

A solid NFT ecosystem is critical for a Layer 1 project,especially one with a DeFi-oriented ecosystem. NFTs have the potential to revolutionize the way we think about ownership and value in the digital world,and as such, they represent a significant opportunity for Layer1 projects.However, in order to capitalize on this opportunity, these projects need to have a robust NFT ecosystem that includes not just the technology to mint and trade NFTs, but also a vibrant community of artists, collectors, and investors.By partnering with major NFT marketplaces and onboarding artists, Layer1projects can expand their ecosystem and increase their NFT trading volume. In a world where digital scarcity is becoming increasingly valuable, a solid NFT ecosystem is essential for Layer 1 projects to stay competitive and relevant.

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The chart above demonstrates data for revenue in the NFTsegment on an annual basis. We can see that in 2020, the revenue generated from NFTs were at a mere $2.03M figure, as we saw massive growth to $810.9M in 2021,and $892.5M in 2022. The market is expected to continue momentum in its growth,generating $3.162B in revenue by 2027.

Based on the assessment of the current situation and the understanding of a need for additional expansion in the NFT domain, Client A engaged Catalyze Research to develop a social-listening driven strategy and marketing plan.

Problem Statement: Lagging NFT ecosystem development compared to that of its DeFi ecosystem

The development of DeFi ecosystems on Layer 1s has rapidly gained traction in the last few years, offering a range of financial services to users without intermediaries such as banks. DeFi is built on smart contracts that power decentralized applications and protocols, providing greater security and transparency for participants. This gave a competitive edge to Client A, in their rise to becoming the one of the most popular Layer1 projects available.However, Client A overlooked the significance of a developed NFT ecosystem,resulting in asymmetric growth of its entire ecosystem landscape.

Having an equally balanced ecosystem in both the DeFi andNFT domains is crucial for the long-term success of an Layer1 project. While DeFi offers financial services, NFTs offer digital ownership of unique assets such as art, music, and other digital content. The development of NFTs is essential for a complete and well-rounded blockchain ecosystem, allowing users to take ownership of digital assets and create new markets for content creators. Moreover, NFTs offer a new revenue stream for creators, making the man attractive proposition for many artists and creatives.

A well-developed NFT ecosystem is essential for the long-term success of an Layer1 project. NFTs represent a significantopportunity to expand the blockchain industry by creating new markets and revenue streams for content creators. A well-developed NFT ecosystem could offer seamless and efficient transactions, attracting more users to participate in the blockchain industry. However, the current NFT ecosystem lags behind DeFi in terms of transaction volume and user engagement, indicating that there is a significant gap in the development of the two ecosystems.

Objective: Foster the expansion of Client A’s NFT ecosystem

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The objective of this case is to help Client A foster the expansion of its NFT ecosystem, which will ultimately lead to increased social interest, NFT transactions, and the number of artists that join the ecosystem.To achieve this objective, Client A needs to build a robust and vibrant NFT ecosystem that attracts both artists and collectors alike. This ecosystem needs to provide an environment that is conducive to creativity, innovation, and collaboration. It must also foster a sense of community and encourage interaction between its members. The ecosystem must be user-friendly,accessible, and transparent to ensure that it is easy for all participants to engage with and navigate.

Methodology: A Quantitative Approach to Social Data Analysis

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To measure the success of this objective, three metrics have been identified. The first metric is NFT-related social interest. Social media platforms such as Twitter, Instagram, and Facebook provide a rich source of data that can be used to track the level of interest in NFTs. Catalyze Research scraped social data through APIs of social media outlets, and analyzed the number of posts, likes, and comments related to Client A's NFT ecosystem,determining whether the ecosystem is generating buzz and capturing the attention of potential users.

The second metric used was NFT transactions. The number of NFT transactions on Client A's platform will provide a measure of the ecosystem's overall activity level. Using the Chainstack NFT API, we gathered token data, and analyzed the volume and frequency of transactions, to identify growth in Client A’s NFT ecosystem through quantitative figures.

The third metric used was the number of artists that join the ecosystem. As artists are the primary creators of NFTs, the number of artists that join the ecosystem is a critical indicator of its success. The more artists that join, the more diverse and interesting the ecosystem becomes,which in turn attracts more collectors and investors.

Solution: Introducing New Business Initiatives and Inviting NFT Artists to the Ecosystem

The first solution that Catalyze Research suggested was to promote a new business initiative. This involves partnering with major NFT marketplaces such as OpenSea to support the trading of Client A’s NFTs on theOpenSea platform. Additionally, Catalyze Research recommended that Client A provide grants to integrate the NFT marketplace team into their ecosystem. By launching an NFT platform and establishing partnerships, NFTs based on the network could be traded on major NFT marketplaces. We advised Client A to focus on increasing efforts on NFT marketplaces, launching NFTs, and building an NFT marketplace team into their ecosystem.

The second solution provided was to onboard NFT artists,involves listing Web2 and Web3 artists with over 20K and 5K followers,respectively, through social listening. Catalyze Research used datascaping techniques to collect their contacts of potentially interested artists in bulk and deliver them to the client’s BD team. To onboard these artists, Client A would create educational materials for Web2 artists, thereby introducing them to the Web3 landscape, and create proposals for Web3 artists to onboard from other chains to the client chain and localize and distribute documentation to artists in their countries.

Results

As a result of implementing the first solution of establishing partnerships with major NFT marketplaces and enabling the tradingof Client A’s NFTs on their platform, while focusing on increasing their efforts on NFT marketplaces, launching NFTs, and building an NFT marketplace team within their own ecosystem, Client A experienced significant growth in their NFT transaction volume, increasing by 141.29%.

The second solution recommended was to onboard Web2 and Web3 artists with over 20K and 5K followers, respectively, through social listening. After implementing this solution, Client A experienced a 23.14%increase in NFT-related social interest compared to the previous quarter, withmore than 20 new artists were successfully onboarded into the NFT ecosystem,further contributing to the growth and expansion of Client A's NFT ecosystem.

Impact

Catalyze Research played a crucial role in expanding Client A's NFT ecosystem by utilizing social listening and research to identify potential opportunities for growth. We identified two solutions that proved to be effective in achieving the objective of expanding Client A's NFT ecosystem:establishing a new business initiative, and onboarding artists to its landscape.

The benefits of our framework extend beyond just Client A’s case and can be applied to many other similar cases. Our approach helps companies gain a better understanding of the market sentiment surrounding their industry, and social data based KPIs, allowing clients to not only make more informed decisions based on unbiased and objective data, but also track the results of the solutions implemented in a quantitative manner.

About Catalyze Research

Catalyze Research has a proven track record of identifying and solving industry challenges in the blockchain space. We are dedicated to helping companies anticipate and address market needs for next generation technologies. Our work with clients enables them to enhance and streamline their operations as they continue to innovate and grow.

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