Major cryptocurrency exchange Kraken is launching its own non-fungible token (NFT) platform in the coming months. As of Tuesday morning, customers can sign up to join its waitlist.
The platform will provide unique offerings, most notably subsidizing Ethereum (ETH-USD) transaction costs — such as gas fees, the cost of paying for transactions on Ethereum, and other proof-of-stake blockchains, according to the exchange's chief operating officer, David Ripley. It would also hold customer assets in custody.
“Depending on how you measure it, cryptocurrencies went from seeing modest adoption to something that is a multi-billion dollar industry,” Ripley told Yahoo Finance. “We see over the next five to 10 years, the same type of trajectory and total market size could come to fruition for NFTs, so we are viewing this as a massive opportunity with a massive potential market.”
How much Kraken would subsidize transaction fees, which can even be worth more than the NFT price itself in some cases, is not entirely clear. The marketplace's new website touts "zero gas fees for trades on Kraken NFT" with an asterisk that notes: "*Gas fees will be incurred when transferring NFTs on and off the Kraken platform."
“Since transaction (gas) costs on Ethereum are substantial, a marketplace that offers zero fees or subsidized costs could attract users from other marketplaces similar to how Robinhood attracted customers from other brokerages by removing trading fees,” Mason Nystrom, senior research analyst at Messari, told Yahoo Finance, adding that at the very least the initiative could nudge other marketplaces to the same offering.
Ripley added that the platform will roll out with support for Ethereum and Solana-based (SOL-USD) NFTs with plans to add those on other chains in the future. Other features include using a framework to vet listed projects, integrate NFT-specific data such as a rarity metric, and give customers the option to custody their assets with the exchange.
The rise of NFT platforms
The news of Kraken’s NFT trading platform comes two weeks after Coinbase Global (COIN) launched its own, which aims to differentiate itself from other marketplaces like Open Sea by adding a social media twist.
Only available to select users in its beta phase, Coinbase’s platform has less than 1,000 users with the marketplace’s total trading volume amounting to just $443,100 since launch, according to data tracked by Dune. By comparison, Open Sea saw $1.8 billion in trading volumes (ETH NFTs only) for the same period, according to on-chain data tracker Nansen.
While cryptocurrency prices have languished in recent weeks and search interest for NFTs has waned, the market's trading volumes haven't reflected the same sell-off, notably thanks to returning buyers, Nansen stated.
Since plummeting at the end of February, trading volumes for NFTs on Ethereum — where the majority of NFTs are created — shows improvement. Over the last 30 days, volume has risen by 52% to 1.51 million ETH. Weekly volumes also show the market has witnessed steady improvement from below $200,000 during the week of February 28 to over $450,000 in the last week of April — 2022's third-highest trading week for the crypto assets.
The Ethereum blockchain's high transaction costs caused by network congestion has proven to be a a consistent dilemma for NFT users, most notably over the past weekend when Bored Ape Yacht Club (BAYC) creator Yuga Labs launched a record virtual land sale for its highly-anticipated metaverse, Otherside.
As Bloomberg reported Monday, the sale raised around $320 million, but also created a buying frenzy that sent Ethereum transactions soaring from 1,140 to 104,999 transactions in a 24-hour period, according to Etherscan. By consequence, costs jumped by 94% from $11 to $200, according to Messari, resulting in approximately $180 million in transaction fees from the sale with some of those transaction fees failing to end in a purchase.
Yuga Labs has since promised it will refund investors for failed transactions, but the incident drives home the value in subsidizing blockchain transaction fees for users.
This post has been updated with additional information about gas fees.
David Hollerith covers cryptocurrency for Yahoo Finance. Follow him @dshollers.
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