ArkStream Capital Portfolio Report for the 2nd Quarter of 2021 (2) — Efinity
ArkStream Capital invested in about 20 projects in the second quarter of 2021. We will start with a project introduction and track analysis to elaborate on why we invested in these projects.
1. Project Introduction
Built by NFT market leader Enjin, Efinity is an expandable NFT cross-chain network built on Polkadot. Enjin was founded in 2009 by Maxim Blagov and Witek Radomski. Their first product, Enjin Network, has grown to more than 20 million gamers worldwide in the next ten years.
Enjin kickstarted the NFT revolution on Ethereum. They wrote the code for one of the first-ever NFTs, created the advanced ERC-1155 token standard, and implemented ERC-1155 alongside a unique token infusion mechanism in the Enjin Platform, which now powers billions of digital assets on the blockchain.
Enjin believes NFTs can be utilized by virtually any industry, with Efinity potentially unlocking trillions of dollars in currently illiquid and unique real-world and digital assets.
Digital assets exist in the meta-universe of blockchain. Opening up the liquidity of multiple blockchains and NFTs will connect a wide ecosystem of creators, buyers, and sellers. Enjin’s vision is to build a scalable, cross-chain token network that would make creating, using, and trading NFTs far more accessible, affordable, and faster, thereby significantly increasing the volume of trade and adoption.
2. The current status of NFT public chain and Polkadot ecology
In May 2021, among the top 20 projects by NFT transaction volume, more than 70% of the projects were based on Ethereum. The NBA Top Shot, which has long dominated the NFT transaction rankings on Flow, fell to third. In addition, NFT projects based on Polygon are also growing faster. For example, Aavegotchi, the NFT project with the largest number of users on Polygon, can still maintain a daily transaction of about 5000 times in the downward trend of BTC.
At present, the most active NFT public chain is undoubtedly Ethereum. Among the top 10 projects in May, there are 6 projects based on Ethereum. The classic NFT protocol standards such as ERC721, ERC1155, and ERC998 are all built on Ethereum.
The shortcomings are also obvious: extremely high mint fees, high transaction fees, slow speed, etc., are all barriers to entry for newcomers.
In order to solve the above problems, the NFT ecology on Ethereum has adopted a solution for expansion. Polygon sidechain is currently a relatively successful expansion solution for Ethereum. Polygon relies on technical advantages. The transaction speed of Dapp on the chain is very fast and the gas fee is also very low. Each transaction costs about 0.00004USD, and Polygon is compatible with EVM and Metamask.
Currently, in Polygon’s NFT ecosystem, most of the NFT projects are migrated from Ethereum, such as the Opensea — the largest NFT trading platform, Aavegotchi — a ghost collection game based on Aave, Decentral Games — the virtual world platform, F1 Delta Time and so on. However, the Polygon sidechain also has certain drawbacks. For example, the cross-chain operation is time-consuming. It takes about 7 days to cross-chain. Currently, exchanges like AscendEX( Bitmax) and Okex support polygon, which can save a lot of time of cross-chain operations.
Flow is a brand new Layer 1 blockchain, created by Dapper Labs which is also the Crypto Kitties development team. The team created the ERC721 NFT standard format, which is the originator of the NFT field. In terms of public chain technology, the expansion principle of Flow lies in node division of labor and pipeline architecture, thereby ensuring high transaction speed and throughput of the entire network. The current biggest advantage of the Flow public chain is its market advantage, the out-of-circle game NBA Top Shot, which has been occupying first place on the NFT trading volume ranking list since its launch until today. In addition to the NBA, the current partners of Flow also include UFC, NFL, music company Warner Music, well-known game developers Animoca, Ubisoft, Samsung, NFT trading platform Opeansea, etc. But so far, the projects on Flow are still very rare, and the entire ecosystem has not been completed. NBA Top Shot is also slow due to AML/KYC.
Although many excellent NFT products based on Ethereum, due to the low-frequency contract interaction speed of Ethereum and Polygon itself and the expensive handling fees of Ethereum, neither Ethereum nor Polygon can be said to be the most suitable soil for the development of NFT. The new public chain Flow, which focuses on NFT, has higher throughput and transaction speed, is technically more suitable for the development of NFT, and also has strong Intellectual property (IP) support. However, it cannot be ignored that communication is also needed in the meta-universe of blockchain.
Polkadot is one of the most popular cross-chain solutions in the market. Many public chains can share Polkadot’s node computing resources and achieve interoperability on the asset chain by becoming parachains. Therefore, Polkadot is very suitable for integrating NFTs with different protocol standards. Assets are chained together. Only by linking the islands of the NFT meta-universe can the potential trillion-dollar market value of the NFT market be fully released.
3. Why do we invest in Efinity?
With Efinity, Enjin’s vision is to build a scalable, cross-chain token network that would make creating, using, and trading NFTs far more accessible, affordable, and faster, thereby significantly increasing the volume of trade and adoption.
Efinity is highly scalable. In contrast, the current operating speed of the Ethereum network is about 15TPS. Currently, transactions will be confirmed within 6 seconds to meet the fast response time required by mainstream applications. In the future, the runtime code of Efinity and Polkadot will be optimized to further improve TPS.
The purpose of Efinity is to become a highway for all NFTs, rather than an ordinary computing blockchain. In pursuit of this, it will support tokens from any network.
The creation, transfer, and transaction of NFT are the top priorities, which can truly reduce user operating costs. Transaction fees are only kept in the background, and end-users do not need a blockchain wallet, and there is no need to worry about how the network works. Users only need to concentrate on experiencing their collections.
The incentive layer is more suitable for the healthy development of the NFT network. Unlike Bitcoin or Ethereum, Efinity rewards network participants, not miners. From NFT creators and traders to developers and early adopters, everyone will receive EFI tokens as a reward; Efinity is built on Polkadot, allowing all NFTs on any chain to be moved to Efinity, breaking the information island and achieving NFT easily cross-chain and supercharge it with next-generation features, low fees and fast transaction time.
Built by the Enjin team, Efinity has rich market resources, a passionate user base, and has discourse power in the NFT field. Companies such as Microsoft (Azure Heroes), Samsung (Blockchain Keystore), and BMW (Vantage App) have integrated Enjin’s products and services. Efinity is an important part of ArkStream Capital’s layout of the NFT sector. The cross-chain NFT solution proposed by it is an indispensable underlying infrastructure in the NFT field.