1 The Art NFTs and Their Marketplaces Lanqing Du Michelle Kimy Jinwook Lee

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The Art NFTs and Their Marketplaces

Lanqing Du∗, Michelle Kim†, Jinwook Lee∗

∗Drexel University, Philadelphia, PA 19104, USA

†Horace Mann School, Bronx, NY 10471, USA

Email: jl3539@drexel.edu (Corresponding Author: Jinwook Lee)

Abstract—Non-Fungible Tokens (NFTs) are crypto assets with

a unique digital identiﬁer for ownership, powered by blockchain

technology. Technically speaking, anything digital could be

minted and sold as an NFT, which provides proof of ownership

and authenticity of a digital ﬁle. For this reason, it helps us

distinguish between the originals and their copies, making it

possible to trade them. This paper focuses on art NFTs that

change how artists can sell their products. The art NFTs also

change how the art trade market works since NFT technology

cuts out the middleman. Recently, the utility of NFTs has become

an essential issue in the NFT ecosystem, which refers to the

owners’ usefulness, proﬁtability, and beneﬁts. Using recent major

art NFT marketplace datasets, we summarize and interpret the

current market trends and patterns in a way that brings insight

into the future art market. Numerical examples are presented.

Index Terms—Non-Fungible Tokens (NFTs), Digital Art, NFT

Marketplace, Machine Learning, Principal Component Analysis

I. INTRODUCTION

A. NFTs and the Art Industry

In April, 2022, Sotheby’s sold a small receipt paper of the

1959 project called “Zone of Empty Space” by Yves Klein,

the French conceptual artist, for $1.2 million. It was a part of

the ledger where Klein recorded all sales and resales of the

1959 artwork ( [11]). More than a half-century later, thanks

to blockchain technology and NFTs, this ledger-keeping has

become an essential part of the art industry. ( [1], [2])

The phrase “NFT art,” we believe, is not the most accurate

phrase. NFT itself is not the art, it is simply a technology

that increases the utility of the art, by functioning as a proof

and traceability of the ownership. ( [3]–[5]) Thus, throughout

the rest of the paper, we will be using the phrase “art NFT”

as opposed to “NFT art.” There are three types of art NFT:

digital art (stand-alone), PFP (generative art), and Phygital art

(linking physical art with the NFT). ( [6]–[8]) The very brief

history of NFTs begins with digital art and its pioneer Kevin

McCoy. ( [9], [10]) In 2014 McCoy and Anil Dash created

the ﬁrst stand-alone NFT, Quantum.( [12]) Prior to Quantum,

digital artworks were “fungible,” meaning that there were

multiples of the same artwork. Following McCoy, artists like

Mike Winkelmann, better known as Beeple, and companies

like Larva Labs, creator of CryptoPunks, took center stage on

the NFT market.

The launch of CryptoPunks marked the creation of a new

category of art NFT: PFP (Proﬁle Pic) created using a tech-

nology called generative art. PFP art including CryptoPunks,

Bored Ape Yacht Club (BAYC), Doodles, and recently Clone

X doubled as a form of art and a status symbol on various

social media platforms. In the last couple of years, BAYC be-

came widely popular within the NFT community and beyond,

with the most expensive piece, #8817, selling for $3.4 million

in 2021. ( [13]) Yuga Labs, the creator of BAYC, have fully

experimented with and implemented business strategy models

like token-gating. Token-gating is a way of adding value to

an NFT by granting the holder exclusive access to content,

community, events, and physical products, in addition to the

digital token. ( [14]) BAYC was also the ﬁrst art that granted

full commercial rights to the Intellectual Property (IP) to its

holders, who were now able to commercialize their Bored

Apes. Unsurprisingly, popularity factors for BAYC include

commercial rights and exclusive access to spin-off collections

like Bored Ape Kennel Club (BAKC) and Mutant Ape Yacht

Club (MAYC) both of which have high resale value as well

access to off-line events including the annual Ape Fest.

If commerce platforms like Nifty Gateway and Superway

became well-known for their curation of digital art, mar-

ketplaces like OpenSea became highly successful from their

listing of PFP art, such as the BAYC. While digital art centers

around individual artists, like McCoy and Beeple, PFP centers

around companies, Yuga Labs and Larva Labs being the most

notable, where they curate communities, introduce roadmaps

and coordinate on and ofﬂine events and launches.

There are not yet any notable cases of the third type of

art NFT, “Phygital” art (Physical and Digital art). Yet, by

linking NFT (digital proof of authenticity) with physical art,

it will revolutionize both the NFT and the traditional art

market. The prime challenge is ﬁnding an optimal method of

linking the two; Quick Response (QR) codes, Radio Frequency

Identiﬁcation (RFID), and Near Field Communication (NFC)

are a few ways.

Art NFT is changing the landscape of the art market and

its players including, the artist, buyer, and platforms (galleries,

online commerce platform). While in the traditional art market,

galleries and auctions and their agents functioned as an inter-

mediary between the artist, the artwork, and the customers,

the emergence of NFTs has bridged the gap between the three.

Now the artist or the creator can list and mint their artwork

directly on an online platform (with little to no commission

fee) and oftentimes connect directly with their buyers. Though

there are still technical, ethical, and sometimes legal issues

associated with art NFT, it will shift the dynamic between the

artist and the buyer, the role of the intermediaries (auctions,

galleries, online platforms), and most notably the trends and

value surrounding art.

arXiv:2210.14942v1 [q-fin.ST] 23 Oct 2022

Fig. 1. Heatmap visualization: bar height on the number of sales; colormap on secondary and primary sales difference.

B. Data Collection and Our Key Findings

Our data collection is as follows: 11 marketplaces

datasets from NonFungible.com ( [15]): ArtBlocks, Azuki,

BoredApeYachtClub, CloneX, CoolCats, CrypToadz, CryptoP-

unks, Meebits, TheSandbox, VeeFriends, and WorldofWoman.

This is daily NFT marketplace datasets with one-year multi-

variate time series datasets from 09/13/2021 to 09/12/2022.

Each dataset contains the following ten features: (1) the num-

ber of sales (transactions), (2) total sales (USD), (3) average

sales (USD), (4) the number of active market wallets, (5)

primary sales, (6) secondary sales, (7) primary sales (USD),

(8) secondary sales (USD), (9) unique buyers, and (10) unique

sellers. Note that null values, <0.05% of the entire dataset,

are deleted in the given dataset.

•As shown in Fig. 1, 2, and 3, the majority of the number

of sales (i.e., transactions) comes from secondary sales

(approx. 90.16%), which means that the primary sales

are less frequent than the secondary sales.

•It appears that primary sales are more frequently observed

in ArtBlocks (approx. 30.33%). While in some speciﬁc

time periods, primary sales are more often than secondary

ones for Coolcats and VeeFriends.

•It also appears that there are seasonal patterns as regards

buyer activities. As shown in Fig. 1 and 3, we observed

some seasonal patterns for the number of sales and the

number of unique buyers.

•Speaking of similarity in the trends and patterns for

the selected marketplaces, CryptoPunks appears to have

fewer but more signiﬁcant transactions (as depicted in Fig

1 and 4). In comparison, ArtBlocks has more transactions

with smaller trading sizes.

In Table I, such art NFT marketplaces are selected based

on “All-time NFT Collection Rankings by Sales Volume”

from Cryptoslam ( [16]) subject to the data available in the

NonFungible.com database.

TABLE I

NFT COLLECTION RANKINGS BY SALES VOLUME

Collection Sales Buyers Txns

Axie Inﬁnity $4,087M 1,785,424 1,785,424

Bored Ape Yaght Club $2,416M 11,977 32,465

CryptoPunks $2,371M 6,033 22,157

Mutant Ape Yacht Club $1,731M 23,513 51,111

Art Blocks $1,305M 33,113 181,667

Otherdeed $1,047M 25,854 58,319

NBA TopShot $1,030M 445,999 21,695,225

II. MACHINE LEARNING ON THE NFT MARKETPLACE

DATASETS

A. Unsupervised Learning: PCA

The principal components of the data matrix are its singular

vectors. Using the SVD (Singular Value Decomposition),

Principal Component Analysis (PCA) ﬁnds the largest singular

values to extract the most important information from the

data (with the largest variance) by solving perpendicular

least squares (i.e., orthogonal regression). PCA, in machine

learning, is unsupervised learning. PCA is typically carried

out to generate the principal components (PCs), i.e., singular

vectors, to summarize a large dataset with correlated variables

(see, e.g., [16]). Below, (1) describes the correlation between

10 features for the art NFT marketplace BAYC, with F1

standing for the ﬁrst feature (number of sales) and F10 for

the last feature (unique sellers) as introduced in section I-B.

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1TheArtNFTsandTheirMarketplacesLanqingDu,MichelleKimy,JinwookLeeDrexelUniversity,Philadelphia,PA19104,USAyHoraceMannSchool,Bronx,NY10471,USAEmail:jl3539@drexel.edu(CorrespondingAuthor:JinwookLee)AbstractNon-FungibleTokens(NFTs)arecryptoassetswithauniquedigitalidentierforownership,poweredbyblock...

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