The Whitepaper of

by Oliver Meyer,
Dr. Johannes Kotte
& Christian Hackler
Version 1.6 / Update 08.07.2024

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Abstract

It is widely accepted that NFTs have significantly changed the market for digital assets. Previously, buying and selling digital assets such as images, audio and video files was mostly an unstandardized, sometimes offline process that often required third parties acting as agents. Today, NFTs are often used as digital certificates of authenticity. They ensure that among a multitude of potentially completely identical copies, only one file can be considered a signed original and hence are used to buy, own and sell digital assets. However, after a short and massive surge in 2021, the NFT market collapsed in 2022, displaying growth rates of around -90 percent (“surge-and-collapse”).

This discussion paper argues that – next to macroeconomic factors (war in Ukraine) and macro-societal (Covid-19 lockdowns) factors – deal fever and fraud are two main drivers behind the collapse and that the growth potential of the NFT market remains extraordinarily high, if these challenges can be mastered. Deal fever stems from buyers being driven by the fear of missing out on significant capital gains (“FOMO”), combined with the lack of structured information and communication about NFTs. This makes the market vulnerable to single news and hence high price and activity volatility. Fraud seems to be ubiquitous and has likely reduced the trust into the market.

While there have been innumerable technical innovations in the NFT space, these two challenges at least partly call for social innovation. In order to re-establish trust and prevent a second surge-and-collapse, a social corrective is required. This paper argues that collecting, generating, condensating and displaying reliable valuation-relevant data on a decentralized ledger of a democratic entity is to be the most promising way to do so. The NFT community should work on making this happen.

A view on the current state of the NFT space

NFTs and the ownership problem for digital assets

Essentially, an NFT is a securely transferable data storage, stored in a public ledger of a blockchain. For digital assets, NFTs are often used as digital certificates of authenticity. They ensure that among a multitude of potentially completely identical copies, only one file can be considered a signed original. They are used to buy, own and sell

- digital art work and collectibles (e.g., OpenSea, Rarible, SuperRare),

- gaming items and in-game assets (e.g., Helix, Illuvium),

- assets in the virtual world such as real estate (e.g., Roblox, Sandbox, Decentraland),

- music and other forms of digital media (e.g., SanSound, BandRoyalty),

- rights such as the right to access a premise or club (both real and virtual), or to execute a voting right (coachella, Azuki)

- certificates of authenticity and location of physical assets (BrickEstate, RedSwan, Realesto).(1)

It is widely accepted that NFTs have significantly changed the market for digital assets. As digital assets can be copied easily, quickly, infinitely, at low cost and without a loss in quality, it is impossible to tell apart the original and the copy – which in the past made it very hard to effectively and efficiently identify the owner of digital assets and transfer the ownership.(2) Of course, intellectual property laws know property rights also for digital assets, including ways to transfer and enforce them (including copyrights, which are typically not included in NFTs(3)). But this is mostly an unstandardized, sometimes offline process and often requires agents such as marketers or lawyers. On top of that, possession of digital assets is very easy to obtain and almost bears the same fruits as ownership itself. Hence, ownership rights were hard to be secured and transferred effectively. As markets can’t operate without clear property rights and the ability to enforce them, markets for digital assets tend to struggle to operate efficiently and at scale.(4)

Software companies solved the problem by selling hardware (CDs), requiring user codes and delivering software as a service. Gaming companies sell digital assets that only function in their own controlled environment: the game. For digital art and collectibles, NFTs were the solution: “In doing so, they make it possible to build markets around new types of transactions – buying and selling products that could never be sold before, or enabling transactions to happen in innovative ways that are more efficient and valuable.”(5) NFTs sought to empower digital creators to effectively own and monetize their artwork and cultivate their communities directly, without interference from agents.(6) This is directly obvious in the markets for digital art and collectibles, but also in the gaming industry. Due to the wake of various metaverses, creating and selling digital assets has become a vibrant business.(7)

(1) ResearchGate
(2) OneArtNation, Harvard Business Review
(3) SocialSamosa
(4) Harvard Business Review
(5) ibidem
(6) Vulcan Post, NFTnow, OneArtNation
(7) Cointelegraph

The NFT trading surge-and-collapse in 2021-22

Depending on whether one considers ‘Colored coins’ by Meni Rosenfeld, Vitalik Buterin and Yoni Assia or ‘Quantum’ by Kevin McKoy as the first ones, minting NFTs started in 2012 or 2014 respectively. The NFT market has seen tremendous growth ever since. It peaked in late 2021 when the number of sales and active wallets hit all-time highs.(8) Various NFTs sold for unprecedented prices, sometimes in the millions of USD(9), even on well reputed platforms like Christie’s and Sotheby’s.(10)

Half a year later, however, the number of monthly sales went from almost 5.4m on Sep 1, 2021 to 1.3m on May 12, 2022 (-75 percent) and the number of monthly active market wallets had gone from over 1m in December 2021 to little over 400,000 in May 2022 (-59 percent).(11)

Graph 1: Number of NFT sales and active wallets trading NFTs 13 May 2021 – 12 May 2022.
Source: Graph by NonFungible, obtained from Vulcan Post (retrieved 5 April 2023)

A report by Protos from June 2021 supports this, showing that the number of NFT transactions on Ethereum dropped by over 90 percent between May and September 2021.(12)

(8) Vulcan Post, NonFungible
(9) NFTnow, ChainWitcher
(10) Christie’s, Sotheby’s
(11) Graph by NonFungible, obtained from Vulcan Post
(12) Protos

Potentially further fueled by the collapses of Terra Luna in May 2022(13) and FTX in November 2022,(14) this trend has continued to this day: Current data by NonFungible(15) shows that the number of monthly sales went down to 333,521 (-94 percent compared to Sep 1, 2021) and the number of monthly active wallets went down to 129,670 (-87 percent compared to Dec 3, 2021). The global number of unique buyers has even gone down to 86,798. Even though the monthly trading volume is still at a considerable volume of roughly 467m USD (coming from over 4bn USD in September 2021), it is fair to say that the market for NFTs imploded.

(13) BBC
(14) Forbes
(15) NonFungible

Graph 2: Number of NFT sales and NFT Sales volume NFTs 6 Apr 2022 – 5 Apr 2023.
Source: Graph by NonFungible (retrieved 5 April 2023)

Graph 3: Number of NFT sales and active market wallets 30 Mar 2023 – 5 Apr 2023.
Source: Graph by NonFungible (retrieved 5 April 2023)

While the development has not been identical across all segments, all of them were affected, as can be seen from the comparison of the segment-specific graphs:

Graph 4: Number of NFT sales and NFT sales volume 6 Apr 2022 – 5 Apr 2023.
Source: Graph by NonFungible (retrieved 5 April 2023)

Accordingly, the general interest in NFTs has fallen sharply, as indicated by a 90 percent decline in Google searches for “NFT” since its peak in calendar week 4 of 2022 (=100).(16) Meta even pulled out of NFTs completely in March 2023.(17)

(16) Google Trends
(17) The Verge

Graph 5: Interest in the search term “NFT” over time
Source: Graph by Google Trends

Reasons for the 2022 NFT trading collapse

Overview

Despite all the bad news, there are positive indicators as well: After ebay entered the NFT space in 2021(18) and offered its first NFT collection in May 2022,(19) Amazon announced in January 2023 to enter the NFT arena.(20) Hence, two of the biggest ecommerce players seem to double down on the market. Furthermore, some analysts expect a significant increase in market size over the coming years – even after the steep downward trend of the world economy and NFT market was in full swing: End of May 2022, SkyQuest Technology expected the NFT Market to reach a value of 122 bn USD by 2028, implying a CAGR of over 34 percent from 2022 to 2028.(21) In June 2022, Research and Markets forecasted a 35 percent CAGR (4.5x) 2022-27 of the NFT market.(22) Given that the market collapsed by about 90 percent, a growth of 4.5x would mean that almost half of that loss would be recuperated in the next 4 to 5 years.

Is this possible? And if yes, what needs to happen in order for the NFT market to show this growth?

Before going into these questions, it is important to know who is owning or interested in NFTs, before turning towards political and macroeconomic aspects followed by NFT market-specific aspects.

(18) Reuters
(19) Techcrunch
(20) Cryptonews
(21) GlobeNewswire
(22) PRnewswire

NFT investor demographics

Geography: Using data from Google Trends, Statista data shows that the interest in NFTs is highest in East Asia and Oceania: The most interested people live in China, Hong Kong, Singapore and Macao. Taiwan and South Korea are also in the top ten. Apart from Gibraltar, there is no European country among the top ten and Cyprus is the only European country in the top 25. Canada and the US come in on ranks 27 and 40 respectively. The first large European economy is Switzerland, ranking at 46. Europe’s biggest economy, Germany, ranks at 124.(23)

Graph 6: Interest in NFTs by country, top 15 countries
Source: Graph by Statista

In line with that, CashNetUSA(24) found that people from Singapore and Hong Kong are most interested in NFTs – measured by online searches per capita. The rest, however, differs widely: Canada, Iceland, US, Liechtenstein, San Marino, Australia, New Zealand and Malta follow.

With regards to NFT ownership, India leads the way with 7% of people owning NFTs, followed by Vietnam (6%), Hong Kong and Singapore (both 5%), Brazil, Ghana, Indonesia, Nigeria and the Philippines (all 4%). The US comes in on no. 10 (3%), followed by Ireland, Kenya, and Canada.(25)

(23) Statista
(24) CashNetUSA
(25) Finder

Graph 7: NFT ownership by country, top 15 countries
Source: Graph by Finder

Altogether, it seems fair to say that the engagement in NFTs seems to be highest in East Asia, Oceania and North America.

Age: According to Finder data, 18-34 year-olds are most likely to own an NFT in most countries, except for Hong Kong, Vietnam, Ghana and Kenya.

Graph 8: NFT ownership by country, top 15 countries
Source: Graph by Finder

Data by the US Census Bureau for the US is a bit more granular: It shows that 18-24 year-olds are the most engaged age group regarding NFTs. 14 percent are trading NFTs and 18 percent are interested in doing so. They are followed by the 25-34 year age group with 8 percent trading and 11 percent interested.(26)

Gender: According to data by Finder, men are more likely to own an NFT. On average, about 4% of men worldwide report owning an NFT, compared to 2% of women. The gap between men and women is widest in the United States, where 4% of men report owning an NFT, and only 1% of women. The difference is lowest in Japan, where 2% of women own an NFT compared to 1% of men.(27)

Income: Data by the US Census Bureau shows an interesting divide in NFT investments depending on income for the US: People with an annual income of less than 25,000 USD are equally likely to invest in NFTs as those earning more than 150,000 USD annually. Middle-income respondents (25,000 to 150,000 USD) were the least interested, with up to 94% not interested in NFT at all.(28)

(26) Civic Science
(27) Finder
(28) Civic Science

Graph 9: NFT ownership by income group, United States
Source: Graph by Civic Science

It is noteworthy that in the area of crypto currency, investors mostly only invest their disposable income.(29) Of course, this might be different for NFTs. However, it is likely that there is a considerable overlap between traders of NFTs and cryptocurrencies.(30)

Information sources: It is also remarkable that NFT and cryptocurrency investors turn mainly to online sources for their research. According to a study by Strategy&, YouTube, websites, forums and Instagram of the top four sources of information. Also Binance finds that 52 to 60 percent of cryptocurrency investors turn mainly to online sources for research.(31)

(29) Binance
(30) Security.org
(31) StrategyandPwC, Binance

Political and macroeconomic factors leading to the 2022 NFT trading collapse

Looking at The Dotcom bubble helps understand the macroeconomic dynamics. The Dotcom bubble was a speculative frenzy in the late 1990s and early 2000s that saw the rapid rise and fall of many internet-related companies. From 1994 to its peak in March 2000, the Nasdaq stock market index increased by over 10x and subsequently fell by almost 80 percent from its peak by October 2002. Nevertheless, it recovered and grew by almost 100% over the next two years, reaching the levels of early 1999.(32)

Graph 10: Development of Nasdaq 1994-2018.
Source: Graph by Yahoo Finance (retrieved 5 April 2023)

The reasons for the Dotcom bubble and its burst are numerous. Among the most prominent are:

1. Technology shift: Investors were excited by the prospect of the web 2.0 revolutionizing industries and creating new opportunities for businesses to grow and thrive. As a result, there was a rush of investment into internet-related companies, many of which had little or no earnings and were operating at a loss.

1. Availability of funds: Funding from venture capitalists was easily available due to low interest rates. A lowered top marginal capital gains tax in the United States encouraged individuals to invest in shares, including internet-related companies that were performing very well despite bad traditional metrics such as the price-earnings-ratio.

1. Public encouragement: Investment banks encouraged investments in technology companies as they profited significantly from initial public offerings of these companies.

This led to a frenzy of buying and selling of technology stocks, driving up the prices to unsustainable levels. And it came to a strong surge when various events shook that house of cards, for example:

- Japan’s economic outlook for 1999 and 2000 was not positive.

- Mid 1999, the Federal Reserve Bank started to increase their interest rates.

- Warning voices urged a stricter look at corporate key metrics or even predicted that many internet companies would soon file for bankruptcy.

- Yahoo! and ebay ended their merger talks.

- Microsoft was about to lose an antitrust case and saw a sharp decrease in its share price.

(32) Marketwatch, YahooFinance
(33) News-Gazette, Strategic Organization, BusinessInsider retrieved from archive.org, BusinessInsider, Totally wired
(34) JRI, cao.go
(35) Barrons, Bloomberg
(36) CNN
(37) NewYorkTimes

This led to the realization that many Dotcom companies were overvalued and had little or no earnings to support their stock prices. Additionally, many of these companies were operating in an unproven market, with no clear path to profitability. The effect was reinforced by the fact that many employees of technology companies sold their shares directly after their lock-up periods, which led to a further decrease of the share prices.

The similarities with the situation in the NFT market in 2021 and 2022 are uncanny:

Technology shift: The transition from Web 1.0 to Web 2.0 played a significant role in the Dotcom bubble(38) and its aftermath. Web 1.0 was characterized by static, one-way communication where users were primarily passive consumers of content. Websites were often informational in nature and focused on presenting information to users in a static manner. The transition from Web 2.0 to Web 3.0 is still ongoing, but it represents another major shift in the evolution of the Internet and the technology industry. While Web 2.0 was focused on user-generated content and interactive communication, Web 3.0 is focused on decentralization, interoperability, and machine-to-machine communication – and hence driving growth beyond the current levels. Yet, Web 3.0 is still in its infancy and hence Web 3.0 companies are also operating in an unproven market, with no clear path to profitability – just like Dotcom companies in the late 1990s.

Availability of funds: Just like in the late 1990s, in 2021, during the hype of the NFT market, money was easily available. Interest rates were at record lows and venture capital investments at record highs.(39) 2022 was very different, however: After Russia’s invasion of Ukraine in February 2022, energy prices increased strongly due to the war and sanctions.(40) Interest rates followed shortly thereafter, in an attempt to curb inflation.(41) As a result 2022 saw a strong decline in venture capital funds.(42) Moreover, private consumption decreased(43) and along with it most likely also the willingness to invest into NFTs as disposable incomes (that investors mostly started to deteriorate. Especially, the investor group earning less than 25,000 USD annually, is likely to slow down or stop trading as their disposable income will deteriorate most due to inflation.

Public encouragement: Also during the NFT hype, there was a lot of public encouragement. This aspect will be discussed in the next chapter.

This (admittedly superficial) look at the political and macroeconomic environment suggests that these aspects might have played a notable role in the NFT market decline. Hence, it is not unlikely that the market recovers once these macroeconomic factors improve.

However, a closer look at Graph 1 reveals that the number of NFT sales and active market wallets already started to decrease months before Russia’s invasion of Ukraine. This trend was only accelerated by the political and economic developments after February 2022. In line with that a study by Strategy& shows that 36% of German cryptocurrency and NFT investors had already reduced their investments in Q4 of 2021.(44) Hence, not everything can be explained by macroeconomic factors. NFT market-specific aspects will be discussed in the following chapter.

(38) Bankrate
(39) DW, Factset
(40) ECB
(41) Reuters, NewYorkTimes
(42) Deloitte
(43) CrunchBase
(43) StrategyandPwC

NFT market-specific aspects leading to the 2022 NFT trading collapse

What needs to happen in the NFT space in order to get back on the growth track? Factors suspected to prevent NFT mass adoption are:(45)

1. Accessibility: It is tedious to trade NFTs because it requires a certain level of technical understanding and skill.

1. Scalability: In some cases the blockchain technology was unable to handle the high market demand.

1. Environmental impact: It takes a high amount of energy to run blockchains.

1. Real life utility: Often, NFTs do not play a role in people’s real (offline) lives – or their virtual lives do not play a big enough role in their lives as a whole.

1. Security: NFTs can get (and already got) stolen when the smart contract security is inadequate.

1. Fraud: NFTs get faked, illegally minted from someone else’s artwork, or sold in fake NFT stores.

1. Valuation: There is a lot of uncertainty in determining the fair price of an NFT.

All of them are reasonable barriers to NFT adoption beyond the levels of 2021. But not all of them are likely the reason for the sudden decrease in NFT trading in 2022, as a closer look reveals:

Accessibility and scalability

It is apparent that problems with accessibility and scalability did not prevent people from trading in 2021. Hence, the lack of access or technical scalability cannot be causal for the sudden drop. Nevertheless, it is not unlikely that the strong surge in NFT prices motivated NFT investors to accept the fact that trading NFTs is tedious in return for extraordinary profits. When the market declined, generating profits became increasingly hard, which might have been a reason to slow down or stop trading. This is underpinned by the fact that some NFT investors are so-called ‘flippers’ trying to buy low and sell high quickly.(46) And it would also be in line with OECD data from the Asian cryptocurrency market: The most important reason to trade cryptocurrencies is to “make money quickly”.(47) And while this might not be the same for NFTs, it is likely that there is a considerable overlap between traders of NFTs and cryptocurrencies.(48)

Altogether, it seems likely that improved accessibility and scalability will increase the NFT market growth. Technical and usability innovations will help to do so. However, it seems unlikely that problems with accessibility and scalability were an important reason for the surge in NFTs and are a main driver to recover from the crisis.

Environmental impact

There is very little data about how important environmental aspects are for NFT investors. However, concerns about the environmental impact of cryptocurrency increased among investors, journalists, academics and policy makers. While this did not specifically mention NFTs, it suggests that there is a growing awareness about the environmental cost of blockchain-based technologies. The environmental impact of NFTs specifically has also been a topic of discussion and debate, during which several artists and art fans have expressed concerns about the environmental impact of NFTs, to the point where companies canceled their plans to launch NFT businesses after a public outcry for environmental reasons. As awareness of the environmental impact of NFTs has grown, one might speculate that investors have become more hesitant to buy and invest in NFTs, which could contribute to the decline in demand.

However, the timing speaks against it: In May 2021, Ethereum announced that it will reduce its energy consumption by 99.9 percent through changing from a proof-of-work to a proof-of-stake mechanism. However, as mentioned before, the number of NFT transactions on Ethereum dropped by over 90 percent between May and September 2021 – so after this announcement.

Moreover, while there is a public debate about it, ecological considerations do not seem to play a big role for crypto currency and NFT investors. Recent studies about their attitudes and behaviors do not even touch upon this topic.

Altogether, concerns about the environmental impact of NFTs might have played a role, but are unlikely to be an important driver.

Real life utility

The time spent online and gaming has significantly increased during the COVID-19 lockdowns, which means that – in absence of real life encounters – the digital life became more important to many. Interestingly, over 75% of e-sports fans are interested in NFTs. Accordingly, real life utility of digital assets is likely to have increased during the COVID-19 lockdowns as people’s online lives played a bigger role than ever before.

What about the timing? The first lockdown in Wuhan, China, started in January 2020. Globally, most of the lockdowns happened in 2020 and 2021, only very few were still imposed in 2022. The hype around NFTs rather suddenly started mid 2021, the decline started in the beginning of December 2021 and accelerated in February 2022 (see Graph 1). This seems to be consistent with the idea that more time online results in more engagement with NFTs: One could argue that in 2020 people spent time online in a ‘usual way’ (websites, social networks, gaming, etc.) and after a while extended their activities to such things like NFTs. This is in line with research showing that the most important sources of information are social media, websites and forums. In any case, many people did presumably have more time to invest into NFT research and trading during lockdowns as meeting people outside their household was not an option.

However, it should be mentioned that the hype around NFTs began only shortly after artist Beepl sold “Everydays: The First 5000 Days”, an NFT-linked digital collage for 69 m USD on March 11, 2021. This might be a coincidence, but also hints towards other motives like investors’ greed that caused an ‘NFT gold rush’.

Altogether, real life utility seems to be a considerable driver of NFT investments. The return of a ‘normal life’ without lockdowns in 2022 might have contributed to a reduced interest in NFTs. This is in line with the fact that from May to November 2022, China was the country with the highest interest in NFTs (see NFT investor demographics), a time when only China still imposed large-scale lockdowns.

Security, fraud, and valuation concerns

Security, fraud, and valuation concerns remain as potential drivers of the surge-and-collapse starting in 2021. All of them essentially come down to a lack of trust and reliable information. Given the macroeconomic dynamic in 2022 and the presumed decrease in disposable income resulting from that, it is likely that the importance of these aspects has increased during that time. As it will remain a problem also in more prosperous times, these aspects will be the focal point of this discussion paper.

In connection with security, fraud, and valuation concerns, this paper argues in favor of two important reasons for NFTs’ surge-and-collapse in 2021-2022:

1. Deal Fever: FOMO combined with the lack of structured information and exchange about NFTs makes the market vulnerable to single news and hence high price and activity volatility.

1. Fraud: Fraudulent business practices seem to have been ubiquitous and have likely reduced the trust into the market.

It is impossible to prove this hypothesis without directly asking people that pulled out of the market, but the argument can be underpinned by the following observable indicators and logic.

(45) Cointelegraph, NFTify
(46) Colormatics
(47) OECD
(48) Security.org
(49) See for example: Morgan Stanley, New York Times, CNBC, Columbia University, White House
(50) See for example: Wired, TheVerge, ArtNews, CNN
(51) Ethereum
(52) OECD, Binance, StrategyandPwC
(53) Pew Research, Frontiers, DAK, PubMed, WEF, Forbes
(54) Codeless
(55) AP News
(56) Wikipedia
(57) Binance, StrategyandPwC
(58) Yahoo Finance, Entrepreneur

Deep Dive: Deal Fever

Deal Fever can be characterized as “going forward with a deal without performing enough analysis and due diligence beforehand. Getting enthralled in the excitement of a potential deal can either lead to you making a bad deal or paying too much. (It) is all about pursuing the end goal at all costs instead of thoroughly looking at the means, and fully evaluating whether the deal will be good (…)”(59)

A key driver of Deal Fever in the NFT space seems to be the fear of missing out, or ‘FOMO’. This is “the feeling of apprehension that one is either not in the know or missing out on information, events, experiences, or life decisions that could make one’s life better.”(60)

In order for FOMO to happen, NFT market participants would first of all have to be influenced by others. This can be supported by the fact that the crave for NFTs differs by location, as a recent study of CashNetUSA found.(61) Hence, it is likely that the crave for NFTs is a social construct, i.e. it is influenced by a person’s media consumption or social contacts, be it in real life or online. This was presumably also fueled by high-profile celebrities embracing NFTs, such as musicians and sports stars(62) as well as the widespread use of social media influencers promoting NFTs.(63)

(59) Dealroom
(60) Wikipedia
(61) CashNetUSA
(62) Harvard Business Review
(63) SocialSamosa, TokenizedHQ, Jennifer Kate

Influencers deserve a closer look:

Next to NFT creators that promote their artwork, influencers also play an important role in the NFT space. They are either selling their NFTs or allow NFT creators to promote their work to a broader audience by tapping into existing communities.(64)

(…) influencers have an outsized impact on the NFT space. Equally as important as the artists and creators themselves are the celebrities, curators, marketplace owners, and tastemakers who promote NFT projects on YouTube, Instagram, Discord, and, of course, Twitter (…).

Decrypt (65)

(T)hey can be the decisive factor between a successful or failed launch.

TokenizedHQ (66)

Often, people follow them for advice and guidance on how to navigate the NFT market. Hence, NFT influencers do not only leverage their reach, but also their credibility and trust with their followers. But what earns them trust?

- Their reach on social media (working as social proof),

- The belief that they have above-average experience or success in collecting or investing in NFTs,

- The ability to break down complex topics into simple and actionable insights that inexperienced users can understand.(67)

So trustworthiness is key. However, concerns have been raised regarding that. It has been criticized that they merely give buying advice instead of substantially examining and criticizing the art work.(68) On top of that, their advice in some cases seems to be more driven by their personal interest than that of their followers:

A common criticism of NFT influencers is that they are paid to promote projects that they never actually vetted properly, often leaving behind disgruntled investors. (…) Some of the biggest influencers fail to do proper due diligence and will promote nearly anything for money. And what’s even worse is when they do so in a concealed way.

TokenizedHQ (69)

As payment is frequently made in the form of free NFTs, influencers have a vital interest in hyping certain NFTs rather than giving solid advice.(70)

Does all of this lead to FOMO? Various publications(71) indicate that FOMO seems to have been a serious issue in the NFT space – to the point that even help guides have been published online(72) or businesses are bearing the term “FOMO” in their names.(73)

The whole market is driven by FOMO and Hype.

Rikam Palkar (74)

The feelings of greed, fear, and anxiety have reached their peak in NFT investing and need to be addressed. People are investing in NFTs with money they can’t afford to lose and with the hopes that empty promises lead to execution.

Ty Herrenbruck (75)

(64) Ibidem
(65) Decrypt
(66) TokenizedHQ
(67) TokenizedHQ, Jennifer Kate
(68) Monopol-Magazin
(69) TokenizedHQ
(70) The fact that Meta pulled out of NFTs might change their role, but this remains to be seen.
(71) For example: Ebutemetaverse, TechCrunch, CyberScrilla, Nefture, Patlid
(72) Ebutemetaverse, Patlid, Ledger
(73) FOMOlab, thatFOMOisreal
(74) Rikam Palkar
(75) Ty Herrenbruck

As commentators of the NFT space utter, the NFT hype was driven by the wish to get rich quickly:

Of course, it’s hard not to get hyped by a get-rich-scheme where so many actually have gotten rich quick: with so much vapor changing hands for so much money, you can’t spell NFT without FOMO.

CashNetUSA (76)

We’ve had amazing stories of rags to riches come ups, people pulling themselves and their families out of crippling debt, and others making a significant impact in their communities.

NFTnow (77)

And FOMO seems to be consciously instrumentalized by businesses:

Projects will create a reality where they are, without a doubt, the next “blue chip.” They will convince you that they will sell out immediately and reach the moon in a beat. They’re the chance of a lifetime for you. They’re the project that will make all your dreams come true.”

Nefture (78)

Because 99% of NFT & Crypto projects are built to create FOMO, and many of them are VERY GOOD at it! Which creates the perfect environment for scammers to successfully scam you.

Nefture (79)

This anecdotal evidence suggests that the NFT space was characterized by a trader mentality (looking for short term gains from price fluctuations), rather than an investor mentality (looking for long term gains from investing in assets that are sold below their ‘inner value’). This argument can be underpinned by the fact that important drivers of ‘value’ have not materialized yet. Forbes defines value as follows:

Value = Scarcity + Utility + Reputation + Liquidity (80)

(76) CashNetUSA
(77) NFTnow
(78) Nefture
(79) Nefture
(80) Forbes

Scarcity is a dilemma for creators, owners and businesses since scarcity is necessary to make art valuable, but at the same time limits growth.(81) So value and explosive growth as it has been seen in the NFT space are a paradox. However, this could be alleviated by an increase in demand and real-life utility, for example through substantial growth of the metaverse, which could create a surge in demand for NFTs. This, however, is still in its infancy.

While Gartner predicts that 25 percent of people will spend at least one hour per day in the Metaverse by 2026(82), real-life utility of NFTs is still low for the majority of applications. As long as digital art and metaverses are things mostly imagined to be mass-adopted in the future (instead of being so now), assets for such occasions will remain an investment based on speculation on their real-life utility in the future.(83) On top of that, the use of the Metaverse might in some instances be possible only through local monopolists – like gaming companies or hardware providers (e.g., virtual reality goggles).

In addition, the NFT market is a place of high pace and uncertainty, which is hard to keep up with, even for professionals:

There’s a running joke within the industry that days in web3 are like months in the web2 world. As exaggerated as it seems, it’s also true. No matter how hard you try, it’s impossible to keep up with all of the information.

NFTnow (84)

On top of that, especially at 2021 prices, a lot was at stake. Prices of NFTs were skyrocketing and in many cases barely affordable.(85)

Life-changing sums of wealth can be made, lost, or stolen overnight.

NFTnow (86)

As a result, the NFT space is “an industry fueled by FOMO, FUD, luck, and deep emotions.”(87)

All of that comes in combination with the fact that there are very few guidelines on how to determine the ‘inner value’ or a fair price of an NFT. Unlike regarding the evaluation of stock prices or companies, there is neither technical analysis, nor a mathematical scheme to determine the ‘inner value’ of art, let alone digital art. The value of NFTs is a social construct. Anyone can assign any value to it. Hence, “people can’t determine the factors that might drive the price of NFTs. Due to this, the fluctuations in prices remain constant, and evaluation of NFT becomes a big challenge.”(88)

Given this evidence, it seems fair to conclude that the NFT space in 2021 suffered from Deal Fever.

(81) Spiceworks
(82) Gartner
(83) Forbes, Cointelegraph, NFTify
(84) NFTnow
(85) ChainWitcher, NFTnow
(86) NFTnow
(87) ibidem; “FUD” is an acronym for “fear, uncertainty and doubt”
(88) Geekflare

Deep Dive: Fraud

Fraud is ubiquitous in the NFT market(89) and it can happen on the individual level or as a market manipulation. On the individual level, scammers trick individual people into revealing their wallet details (phishing scams, customer support impersonation, airdrop scams) or selling their NFTs at very low prices (bidding scams).(90) The bigger problem seems to occur on a market level, though: As the NFT market is relatively small, it is prone to manipulation.

- In Rug-Pull scams, fraudsters hype a specific NFT (often through social media) but disappear after receiving funds from NFT investors – as happened in the ‘Frosties’ case.(91)

- Similarly, in NFT investor scams, developers hype an entire NFT project and disappear after receiving funds from venture capitalists or other investors – as happened in the ‘Evil Ape’ case.(92)

- In pump-and-dump schemes, scammers artificially inflate NFT prices by misrepresenting the asset and spreading misleading information about it – in order to sell it at the inflated price and also vanish right after the sale.

- When selling plagiarized NFTs, fraudsters sell fake NFTs as originals and the NFT price plummets after the plagiarism becomes known. The problem is huge: In January 2022, OpenSea tweeted that more than 80 percent of NFTs minted using its minting tool were fake.(93)

- Wash trades are a market manipulation, in which an investor sells and buys the same assets in order to create misleading, artificial activity and prices in the marketplace. Wash trading patterns seem to be ubiquitous in the NFT space. Two examples:
  - - End of 2021, a Crypto Punk #9998 sold for 532m USD, a mind-boggling number even compared to the already high prices that Crypto Punks typically yield. The person who bought it, bought it from itself – presumably to inflate prices or to gain publicity.(94)
  - - In January 2022, the NFT market unexpectedly grew by 129 percent month over month. Much of the increase was due to the newest competitor on the NFT marketplace scene: Looksrare. The marketplace was only launched on January 10 and had already generated a volume of more than two billion dollars in its 19 days of existence.(95) CryptoSlam estimates that more than 8.3 bn USD worth of wash trades have been made on the market place, the vast majority of its sales volume to that date.(96)

To be fair, scams also exist in other asset classes than NFTs. However, other asset classes, such as the markets for stocks, bonds or real estate, are more heavily regulated and have stricter disclosure requirements: They for example require regular financial statements, prospectuses, land registers, notaries, etcetera. In contrast to that, NFT investors are not only facing scams. They also struggle to find all the necessary information about an NFT. There are platforms showing details of NFTs and helping evaluate them (e.g. Etherscan, NonFungible, NFTpricefloor, rarity.tools), but these information are very basic and make it hard to identify fraudulent patterns.

(89) Forbes, inews, TheVerge, The Guardian
(90) Cloudwards, NFTically
(91) Justice.gov
(92) The Crypto Times
(93) Twitter
(94) InfluencerMarketingHub
(95) The Block, t3n
(96) Decrypt, Twitter

Implications for the future of NFTs

In order to become a fully functioning market, the NFT space lacks not only better technology for aspects like improved accessibility, scalability and security. It requires a corrective to counter deal fever and fraud and replace it by trust and price stability. How can this be achieved? Through the collection, generation, condensation and simple display of data that is reliable and relevant for valuation.

1. In a world of ‘socially assigned value’ and a lack of mathematical schemes to check the ‘inner value’ of an item, social checks and balances might be the only adequate way to prove or disprove the alleged value of NFTs. As opposed to sellers that are very good at creating FOMO, buyers don’t seem to have much of a voice in the market. They compete with each other for the best deals rather than collaborating in order to identify FOMO or fraudulent patterns. Hence, they are exposed to the risk of being scammed or ripped off by FOMO-induced overpricing. In the future, they should have joint forums in which they support and inform each other about certain aspects of NFTs.

1. As the NFT space is hard to oversee, NFT investors need data about the ‘socially assigned value’ of an NFT. This could be drawn from the currently known sources as well as the forums mentioned above.

1. This data needs to be enhanced by fraud prevention data. Unlike ‘socially assigned value’ this can probably be inferred from technical data such as the number and frequency of trades, the trustworthiness of the wallets that have been involved, persistence of price levels (lack of outliers), comparing trading volume to social media metrics, fraud detection indicators in social media profiles, transparency on press coverage on fraudulent patterns or scandals, etcetera.(97)

1. This data needs not only be available. It must also be
  - - Condensed (ratings, scores, etc.),
  - - at hand at low costs (free of charge, available from a few places), and
  - - have a low likelihood of being displayed in a manipulative or hyped way.

What are appropriate means to this end?

- Decentralization: The technical tools are already at hand. Blockchain technology is ideal to create the necessary trust – by making the data public and hard to manipulate.

- Democratization: The organizational tools are also at hand. In order to avoid the manipulation by a well-informed centralized entity (such as influencers, creators or companies) at the expense of the uninformed crowd, the collection, generation, condensation and display of relevant data can be done by a decentralized autonomous organization (“DAO”).(98) In such a DAO, decisions are made publicly and with the participation of all token holders, which effectively prevents manipulation.

To sum it up: It is likely that deal fever and fraud are the main drivers of the surge-and-collapse in 2021-22. In order to prevent that from happening again, a social corrective is required. Collecting, generating, condensating and displaying reliable and valuation-relevant data on a decentralized ledger of a democratic entity seems to be the most promising way to do so. The NFT community should work on making this happen.

(97) See also Coingecko
(98) Coindesk

Contents

2.1 NFTs and the ownership problem of digital assets 3

2.2 The NFT trading upswing and slump in 2021-22 and the further development to date 4

2.3 Reasons for the collapse of NFT trading in 2022 9

2.3.1 Overview 9

2.3.2 Demographic data of NFT investors 10

2.3.3 Political and macroeconomic factors that led to the collapse of NFT trading in 2022 15

2.3.4 NFT market-specific aspects leading to the collapse of NFT trading in 2022 18

2.3.5 Implications for the future of NFTs 27

ACYC 29

3.1 Introduction 29

3.2 Vision ACYC 30

3.3 Brand identity 30

3.4 Token value and influence on the ecosystem 32

3.4.1 Introduction 32

3.4.2 The professional user and the calculation of market capitalization 33

3.4.3 Conclusion 34

trendhub.one – A token-based NFT valuation system 34

4.1 Initial situation 34

4.1.1 Why is trendhub doing this social media topic now and why not directly with NFT? 34

4.1.2 But why no NFT yet? 35

4.1.3 What makes trendhub a NEXT-GEN survey tool 36

4.1.4 What makes trendhub a decentralized community-driven rating system? 39

4.2 Vision trendhub 41

4.3 Problem-Solution Fit 41

4.3.1 Overview 41

4.4 Product-market fit 51

4.4.1 The business model 51

4.4.2 Tokenomics 54

4.4.3 Market entry 57

4.4.4 What makes trendhub a decentralized, community-driven rating system? 57

4.5 The system described in detail 58

4.6 How trendhub can change the social media landscape 60

4.6.1 Financial participation in the value creation of content 60

4.6.2 Slow consumption of social media content 63

4.6.3 Tamper-free distribution system for digital goods 65

4.6.4 Trend determination by the Community for the assessment of market values 66

4.7 Outlook for the improvement and growth of the platform 68

4.7.1 Survey algorithm 68

4.7.2 Tagging 68

4.7.3 NFT assessment 69

4.7.4 Additional growth levers 69

NFTtrust.it – A token-based rating system for NFT creators 70

5.1 Problem-Solution fit 70

5.1.1 NFT Creator & Influencer Trust Rating 70

5.1.2 NFTtrust.it Token incentives 71

5.2 Product-market fit 72

5.2.1 The business model is based on various sources of income 72

5.2.2 Market entry begins with the supply side of the platform and takes place in vertical areas. 72

5.2.3 Outlook 73

NSN protocol – ensuring a seamless data flow 74

6.1 Problem-Solution fit 74

6.2 NSN protocol as a decentralized NFT metadata infrastructure 75

6.3 Product-market fit 76

6.3.1 Business model still to be defined 76

6.3.2 Tokenomics 77

6.3.3 Market entry 78

Summary
The history of NFT development to date
1. NFTs and the digital asset ownership problem

Essentially, an NFT is a securely transferable data store that is stored in a public ledger of a blockchain. For digital assets, NFTs are often used as digital certificates of authenticity. They ensure that among a large number of potentially completely identical copies, only one file can be considered a signed original. They are used to buy, own and sell

digital artworks and collector’s items (e.g. OpenSea, Rarible, SuperRare),
In-game items and assets (e.g. Helix, Illuvium),
Assets in the virtual world such as real estate (e.g. Roblox, Sandbox, Decentraland),
Music and other forms of digital media (e.g. SanSound, BandRoyalty),
Rights such as the right of access to a venue or club (both real and virtual) or the right to vote (Coachella, Azuki)
Certificates of authenticity and location for physical goods (BrickEstate, RedSwan, Realesto).

It is widely recognized that NFTs have significantly changed the market for digital assets. Because digital assets can be copied easily, quickly, infinitely, cheaply and without loss of quality, it is impossible to distinguish the original from the copy – which in the past made it very difficult to effectively and efficiently identify the owner of digital assets and transfer ownership. Of course, intellectual property laws also recognize ownership rights for digital assets, including ways to transfer and enforce them (including copyrights, which are usually not included in NFTs ). However, this is mostly a non-standardized, sometimes offline process that often requires agents such as marketers or lawyers. In addition, ownership of digital assets is very easy to obtain and bears almost the same fruits as ownership itself. Therefore, it has been difficult to secure and effectively transfer ownership rights. Since markets cannot function without clear ownership rights and the ability to enforce them, digital asset markets typically struggle to function efficiently and at scale.

Software companies solved the problem by selling hardware (CDs), charging for user codes and offering software as a service. Game companies sell digital goods that only work in their own controlled environment: the game. For digital art and collectibles, NFTs were the solution: “They allow markets to be built for new types of transactions – buying and selling products that couldn’t be sold before, or conducting transactions in innovative ways that are more efficient and valuable. NFTs sought to empower digital creators to effectively own and market their artworks and nurture their communities directly, without the interference of intermediaries. This can be seen directly in the digital art and collectibles markets, but also in the games industry. In the wake of various metaversions, the creation and sale of digital goods has become a vibrant business.

The NFT trading upswing and slump in 2021-22 and the further development to date

Depending on whether you consider the “Colored Coins” by Meni Rosenfeld, Vitalik Buterin and Yoni Assia or the “Quantum” by Kevin McKoy to be the first, the minting of NFTs began in 2012 and 2014 respectively. Since then, the NFT market has experienced tremendous growth. The peak was reached at the end of 2021, when the number of sales and active wallets reached an all-time high. Various NFTs were sold at unprecedented prices, sometimes in the millions , even on prestigious platforms such as Christie’s and Sotheby’s.

Six months later, however, the number of monthly sales fell from almost 5.4 million on September 1, 2021 to 1.3 million on May 12, 2022 (-75 percent), and the number of monthly active wallets had fallen from over 1 million in December 2021 to just over 400,000 in May 2022 (-59 percent).

Figure 1: Number of NFT sales and active wallets trading NFTs May 13, 2021 – May 12, 2022.

Source: Graphic by NonFungible, obtained from Vulcan Post (retrieved on April 5, 2023)

A June 2021 report from Protos confirms this, showing that the number of NFT transactions on Ethereum fell by over 90 percent between May and September 2021.

Possibly further fueled by the collapses of Terra Luna in May 2022 and FTX in November 2022, this negative trend has continued to this day: Recent data from NonFungible shows that the number of monthly sales has dropped to 51,076 (-99 percent compared to September 1, 2021) and the number of monthly active wallets has dropped to 20,966 (-98 percent compared to December 3, 2021). The total number of unique buyers has even fallen to 10,350. Even though the monthly trading volume is still attractive at around USD 110 million (from over USD 4 billion in September 2021), it is fair to say that the market for NFTs has imploded.

Figure 2: Number of NFT sales and NFT sales volume NFTs 6 Apr 2022 – 5 Apr 2023.

Source: Graphic by NonFungible (retrieved on April 5, 2023)

Figure 3: Number of NFT sales and active wallets March 30, 2023 – April 5, 2023.

Source: Graphic by NonFungible (retrieved on April 5, 2023)

Although the trend was not identical in all segments, they were all affected, as a comparison of the segment-specific charts shows:

Figure 4: Number of NFT sales and NFT sales volume 6 Apr 2022 – 5 Apr 2023.

Source: Graphic by NonFungible (retrieved on April 5, 2023)

ART
COLLEC- TIBLES
GAMING
META- VERSE
UTILITY

Accordingly, general interest in NFTs has declined sharply, as evidenced by a 95% drop in Google searches for “NFT” since the peak in calendar week 4 of 2022 (=100). Meta even withdrew from NFTs altogether in March 2023.

Figure 5: Interest in the search term “NFT” over time

Source: Graphic from Google Trends

Reasons for the collapse of NFT trading in 2022
1. Overview

Despite all this bad news, there are also positive indicators: Ebay entered the NFT space in 2021 and offered its first NFT collection in May 2022, Amazon announced in January 2023 that it would enter the NFT arena. Two of the largest e-commerce providers therefore seem to have recognized the future opportunities of the market. Furthermore, some analysts expect the market size to increase significantly in the coming years – even after the steep downward trend of the global economy and the NFT market was in full swing. Even in early 2024, SkyQuest Technology expects the NFT market to reach a value of USD 312 billion by 2031, which would mean a CAGR of 33.7 percent from 2024 to 2031. In June 2022, Research and Markets forecast a compound annual growth rate (CAGR) of 35 percent (4.5x) for the NFT market between 2022 and 27. Given that the market has collapsed by around 95 percent, 4.5x growth would mean that almost half of this loss would be recovered in the next four to five years.

Is this possible? And if so, what needs to happen for the NFT market to show this growth?

Before addressing these questions, it is important to know who owns or is interested in NFTs before moving on to political and macroeconomic aspects, followed by NFT market-specific aspects.

Demographic data of NFT investors

Geography: Based on data from Google Trends, Statista shows that interest in NFTs is highest in East Asia and Oceania: most interested parties live in China, Hong Kong, Singapore and Macau. Taiwan and South Korea are also among the top ten. Apart from Gibraltar, there is no European country in the top ten and Cyprus is the only European country in the top 25. Canada and the USA are ranked 27th and 40th respectively. The first major European economy is Switzerland, which is ranked 46th. The largest European economy, Germany, ranks 124th.

Figure 6: Interest in NFTs by country, top 15 countries

Source: Graphic from Statista

Accordingly, CashNetUSA found that people from Singapore and Hong Kong are the most interested in NFTs in terms of online searches per capita. However, there are big differences between the other countries: Canada, Iceland, the USA, Liechtenstein, San Marino, Australia, New Zealand and Malta follow.

In terms of NFT ownership, India leads with 7%, followed by Vietnam (6%), Hong Kong and Singapore (both 5%), Brazil, Ghana, Indonesia, Nigeria and the Philippines (all 4%). The USA is in 10th place (3%), followed by Ireland, Kenya and Canada.

Figure 7: NFT ownership by country, top 15 countries

Source: Graphic from Finder

Overall, it can be said that engagement in NFTs appears to be highest in East Asia, Oceania and North America.

Age: According to Finder data, 18- to 34-year-olds are most likely to own an NFT in most countries, except Hong Kong, Vietnam, Ghana and Kenya.

Figure 8: NFT ownership by country, top 15 countries

Source: Graphic from Finder

The US Census Bureau’s data for the US is a little more detailed: it shows that 18-24 year olds are the most engaged age group when it comes to NFTs. 14 percent trade NFTs and 18 percent are interested in doing so. This is followed by the 25-34 age group with 8 percent trading NFTs and 11 percent interested in doing so.

Gender: According to Finder’s data, men are more likely to own an NFT. On average, about 4% of men worldwide report owning an NFT, compared to 2% of women. The gap between men and women is widest in the United States, where 4% of men and only 1% of women report owning an NFT. The gap is smallest in Japan, where 2% of women own an NFT, but only 1% of men.

Income: US Census Bureau data shows an interesting disparity in investment in NFTs depending on income in the US: those with an annual income of less than $25,000 are just as likely to invest in NFTs as those with an annual income of more than $150,000. Middle-income respondents ($25,000 to $150,000) were the least interested, with up to 94% having no interest in NFTs at all.

Figure 9: NFT ownership by income group, United States

Source: Graphic by Civic Science

It is worth noting that in the cryptocurrency sector, investors usually only invest their disposable income. Of course, this could be different for NFTs. However, it is likely that there is significant overlap between traders of NFTs and cryptocurrencies.

Sources of information: It‘s also worth noting that NFT and cryptocurrency investors rely primarily on online sources for their research. According to a study by Strategy&, YouTube, websites, forums and Instagram are among the top four sources of information. Binance also found that 52 to 60 percent of cryptocurrency investors primarily turn to online sources for research.

Political and macroeconomic factors that led to the collapse of NFT trading in 2022

A look at the dotcom bubble helps to understand the macroeconomic dynamics. The dotcom bubble was a speculative frenzy in the late 1990s and early 2000s that saw the rapid rise and fall of many internet-related companies. From 1994 to its peak in March 2000, the Nasdaq stock market index rose more than tenfold and then fell almost 80% from its peak by October 2002. Nevertheless, it recovered and rose by almost 100 % in the following two years, reaching the level of early 1999.

Figure 10: Development of the Nasdaq 1994-2018.

Source: Chart from Yahoo Finance (retrieved on April 5, 2023)

The reasons for the dotcom bubble and its bursting are numerous. Among the most important are:

Technological change: Investors were excited by the prospect that Web 2.0 would revolutionize industries and create new opportunities for business growth and success. As a result, there was a rush to invest in internet-related companies, many of which made little or no profit and operated at a loss.
Availability of funds: Funding from venture capitalists was readily available due to low interest rates. A lowered top capital gains tax in the United States encouraged individuals to invest in equities, including internet-related companies, which performed very well despite poor traditional metrics such as price-to-earnings ratios.
Public encouragement: Investment banks encouraged investment in technology companies as they benefited significantly from the IPOs of these companies.

This led to a buying and selling frenzy in technology stocks, driving prices to unsustainable heights. And there was a sharp rise when various events shook this house of cards, for example:

Japan’s economic outlook for 1999 and 2000 was not positive.
In mid-1999, the Federal Reserve Bank began to raise its interest rates.
Cautionary voices called for stricter scrutiny of company figures and even predicted that many Internet companies would soon file for bankruptcy.
Yahoo! and ebay have ended their merger talks.
Microsoft was on the verge of losing an antitrust case and recorded a sharp fall in its share price.

This led to the realization that many dotcom companies were overvalued and had little or no earnings to support their share prices. In addition, many of these companies were operating in an unproven market where there was no clear path to profitability. This effect was exacerbated by the fact that many employees of technology companies sold their shares immediately after the lock-up period expired, leading to a further fall in share prices.

The similarities with the situation on the NFT market in 2021 and 2022 are considerable:

Technological change: The transition from Web 1.0 to Web 2.0 played an important role in the dotcom bubble and its consequences. Web 1.0 was characterized by static, one-way communication where users were primarily passive consumers of content. Websites were often informative in nature and focused on presenting information to users in a static way. The transition from Web 2.0 to Web 3.0 is not yet complete, but represents another important change in the development of the Internet and the technology industry. While Web 2.0 focused on user-generated content and interactive communication, Web 3.0 focuses on decentralization, interoperability and machine-to-machine communication – driving growth beyond current levels. However, Web 3.0 is still in its infancy and therefore Web 3.0 companies are also operating in an unproven market with no clear path to profitability – just like the dotcom companies in the late 1990s.

Availability of funds: As in the late 1990s, money was readily available in 2021 during the hype of the NFT market. Interest rates were at a record low and venture capital investment at a record high. Conditions changed in 2022: following Russia’s invasion of Ukraine in February 2022, energy prices rose sharply due to the war and sanctions. Shortly afterwards, interest rates followed suit in an attempt to curb inflation. As a result, 2022 saw a sharp decline in venture capital funds, and the willingness to provide venture capital. Consequently, it can be assumed that the willingness to invest in NFTs also fell sharply as disposable incomes (of most investors) deteriorated. In particular, the group of investors earning less than USD 25,000 per year is likely to slow down or stop trading as their disposable income will deteriorate the most due to inflation.

Public encouragement: There was also a lot of public encouragement during the NFT hype. This aspect will be discussed in the next chapter.

This (admittedly superficial) look at the political and macroeconomic environment suggests that these aspects may have played a notable role in the decline of the NFT market. It is therefore not unlikely that the market will recover once these macroeconomic factors improve.

However, a closer look at Chart 1 shows that the number of NFT sales and active market exchanges began to fall months before Russia’s invasion of Ukraine. This trend was only accelerated by the political and economic developments after February 2022. In line with this, a study by Strategy& shows that 36% of German cryptocurrency and NFT buyers had already reduced their investments in the fourth quarter of 2021. Therefore, not everything can be explained by macroeconomic factors. NFT market-specific aspects are discussed in the following chapter.

NFT market-specific aspects leading to the collapse of NFT trading in 2022

What needs to happen in the NFT sector to get back on the growth path? The following factors are suspected of preventing the mass adoption of NFTs:

Accessibility: Trading NFTs is cumbersome as it requires a certain level of technical understanding and skill.
Scalability: In some cases, blockchain technology has not been able to cope with high market demand.
Environmental impact: A large amount of energy is required to operate blockchains.
Usefulness in real life: Often, NFTs don’t play a role in people’s real (offline) lives – or their virtual lives don’t play a big enough role in their lives overall.
Security: NFTs can be (and have been) stolen if the security of smart contracts is inadequate.
Fraud: NFTs are counterfeited, illegally minted from someone else’s designs or sold in fake NFT stores.
Valuation: The determination of the fair price of an NFT is subject to great uncertainty.

All of these factors are reasonable barriers to NFT adoption beyond 2021 levels. But not all of them are likely the reason for the sudden drop in NFT trading in 2022, as a closer look shows:

Accessibility and scalability

Obviously, accessibility and scalability issues did not stop people from taking action in 2021. So lack of access or technical scalability cannot be the cause of the sudden drop. Nevertheless, it is not unlikely that the sharp rise in NFT prices has led NFT buyers to accept the fact that trading NFTs is arduous in exchange for extraordinary profits. As the market declined, it became increasingly difficult to make profits, which may have been a reason to slow down or stop trading. This is backed up by the fact that some NFT buyers are so-called “flippers” who try to buy low and sell high quickly. And it would also be consistent with OECD data from the Asian cryptocurrency market: The number one reason for trading cryptocurrencies is to “make a quick buck”. And while this may not be the case for NFTs, it is likely that there is significant overlap between traders of NFTs and cryptocurrencies.

Overall, it seems likely that improved accessibility and scalability will increase the growth of the NFT market. Technical and user-friendly innovations will contribute to this. However, it seems unlikely that accessibility and scalability issues have been a major reason for the rise of NFTs and are a major factor in the recovery from the crisis.

Effects on the environment

There is very little data on how important environmental aspects are for buyers of cryptocurrencies. However, concern about the environmental impact of cryptocurrencies has increased among buyers, journalists, academics and policy makers. While NFTs have not been specifically mentioned, it suggests that awareness of the environmental costs of blockchain-based technologies is growing. The environmental impact of NFTs has also been a topic of discussion and debate, with several artists and art enthusiasts voicing their concerns about the environmental impact of NFTs, to the point where companies have canceled their plans to launch NFT businesses following a public outcry on environmental grounds. As awareness of the environmental impact of NFTs has grown, it could be suggested that buyers have become more hesitant to purchase and invest in NFTs, which could contribute to the decline in demand.

However, the timing speaks against it: In May 2021, Ethereum announced that it would reduce its energy consumption by 99.9 percent by switching from a proof-of-work to a proof-of-stake mechanism. However, as already mentioned, the number of NFT transactions on Ethereum fell by over 90 percent between May and September 2021 – i.e. after this announcement.

Furthermore, ecological considerations do not seem to play a major role among cryptocurrency and NFT buyers, although there is a public debate about it. Recent studies on their attitudes and behaviors do not even touch on this topic.

Overall, concerns about the environmental impact of NFTs may have played a role, but are unlikely to be a major factor.

Usefulness in real life

Time spent online and playing games has increased significantly during COVID-19 lockdowns, meaning that – in the absence of real-life encounters – digital life has become more important for many. Interestingly, over 75% of e-sports fans are interested in NFTs. Accordingly, the real-world use of digital goods is likely to have increased during COVID-19 lockdowns, as people’s online lives played a bigger role than ever before.

What about the timeline? The first lockdown in Wuhan, China, began in January 2020. Overall, most lockdowns were imposed in 2020 and 2021, with very few still in place in 2022. The hype around NFTs began rather suddenly in mid-2021, with the decline starting in early December 2021 and accelerating in February 2022 (see Figure 1). This seems consistent with the idea that more time online leads to more engagement with NFTs: One could argue that in 2020, people spent their time online in “usual ways” (websites, social networks, games, etc.) and after a while expanded their activities to include such things as NFTs. This is in line with research showing that the main sources of information are social media, websites and forums. In any case, many people presumably had more time to invest in NFT research and trading during lockdown periods, as it was not possible to meet people outside their household.

However, it should be noted that the hype around NFTs only began shortly after artist Beepl sold “Everydays: The First 5000 Days”, an NFT-related digital collage, for $69 million on March 11, 2021. This could be a coincidence, but also points to other motives such as the greed of the buyers, which triggered an “NFT gold rush”.

Overall, real life benefits appear to be a key driver of investment in NFTs. The return to “normal life” without lockdowns in 2022 may have contributed to lower interest in NFTs. This is consistent with the fact that China was the country with the most interest in NFTs from May to November 2022 (see NFT investor demographics), a time when only China was still imposing large-scale lockdowns.

Concerns about security, fraud and valuation

Security, fraud and valuation concerns remain potential causes for the surge and collapse from 2021, all of which essentially boil down to a lack of confidence and reliable information. Given the macroeconomic dynamics in 2022 and the resulting likely decline in disposable income, it is likely that the importance of these issues will increase during this period. As this will remain a problem even in more prosperous times, these aspects will be the focus of this discussion paper.

In the context of security, fraud and valuation concerns, this paper identifies two key reasons for the rise and collapse of NFTs in 2021-2022:

Deal fever: FOMO combined with the lack of structured information and exchange on NFTs makes the market susceptible to single news items and therefore high price and activity volatility.
Fraud: Fraudulent business practices appear to have been pervasive and have likely reduced confidence in the market.

It is impossible to prove this hypothesis without directly interviewing the people who have withdrawn from the market, but the argument can be supported by the following observable indicators and logic.

Deepening: Business fever

Deal fever “means getting involved in a deal without doing sufficient analysis and due diligence first. If you get carried away with the excitement of a potential deal, you can either make a bad deal or overpay. (It’s about pursuing the end goal at all costs, rather than thoroughly examining the means and fully evaluating whether the deal will be good (…)”

One of the main causes of deal fever in the NFT space seems to be fear of missing out, or “FOMO”. This is “the feeling of apprehension that you either don’t know or are missing out on information, events, experiences or life choices that could improve your life”.

For FOMO to occur, NFT market participants would first need to be influenced by others. This can be supported by the fact that the desire for NFTs varies by location, as a recent study by CashNetUSA found. Therefore, it is likely that the desire for NFTs is a social construct, i.e. it is influenced by a person’s media consumption or social contacts, whether in real life or online. This has also likely been fueled by celebrities such as musicians and sports stars who embrace NFTs, as well as the widespread use of social media influencers who promote NFTs.

Influencers deserve a closer look: In addition to NFT creators promoting their artwork, influencers also play an important role in the NFT space. They either sell their NFTs or enable NFT creators to introduce their work to a wider audience by tapping into existing communities.

(…) Influencers have an outsized influence on the NFT space. Just as important as the artists and creators themselves are the celebrities, curators, marketplace owners and tastemakers who promote NFT projects on YouTube, Instagram, Discord and, of course, Twitter (…).

They can be the decisive factor for a successful or unsuccessful start.

People often follow them to get advice and guidance on how to navigate the NFT market. Therefore, NFT influencers not only leverage their reach, but also their credibility and trust with their followers. But what gives them trust?

Your reach on social media (acts as social proof),
the belief that they have above-average experience or success in collecting or investing in NFTs,
the ability to break down complex topics into simple and actionable insights that even inexperienced users can understand.

Trustworthiness is therefore the key. However, concerns were also expressed in this regard. They have been criticized for merely recommending purchases rather than examining and critiquing the artworks in depth. In addition, in some cases their advice seems to be driven by their personal interests rather than those of their followers:

A common criticism of NFT influencers is that they are paid to promote projects that they have never properly vetted, often leaving disgruntled investors behind. (…) Some of the biggest influencers fail to do proper due diligence and will promote almost anything for money. And it’s even worse when they do this in a covert way.

Since payment often comes in the form of free NFTs, influencers have a vital interest in hyping certain NFTs rather than giving sound advice.

Does all this lead to FOMO? Various publications suggest that FOMO appears to be a serious problem in the NFT sector – to the point that even help guides have been published online or companies have the term ‘FOMO’ in their name.

The entire market is driven by FOMO and hype.

The feelings of greed, fear and anxiety have peaked in NFT investing and need to be addressed. People invest in NFTs with money they can’t afford to lose and in the hope that empty promises will lead to execution.

As commentators in the NFT space say, the NFT hype was driven by a desire to get rich quick:

Of course, it’s hard not to be hypnotized by a “get rich” scheme where so many have actually gotten rich quick: With so much steam changing hands for so much money, you can’t spell NFT without FOMO.

We have heard amazing stories of people who have gone from rags to riches, of people who have freed themselves and their families from crippling debt, and of others who are making a difference in their communities.

And FOMO seems to be deliberately instrumentalized by companies:

Projects create a reality in which they are without doubt the next “blue chip”. They will convince you that they will sell out immediately and reach the moon in no time. They are the opportunity of a lifetime for you. They are the project that will make all your dreams come true.”

Because 99% of NFT and crypto projects are designed to create FOMO, and many of them are VERY GOOD at it! This creates the perfect environment for scammers to successfully scam you.

This anecdotal evidence suggests that the NFT space was characterized by a trader mentality (looking for short-term gains from price fluctuations) rather than an investor mentality (looking for long-term gains from investing in assets selling below their “intrinsic value”). This argument can be supported by the fact that key drivers of “value” have yet to materialize. Forbes defines value as follows:

Value = scarcity + benefit + reputation + liquidity

Scarcity is a dilemma for artists, owners and companies, as scarcity is necessary to make art valuable, but at the same time limits growth. Value and explosive growth, as seen in the NFT sector, are therefore a paradox. However, this could be mitigated by an increase in demand and real utility, such as a significant growth in the metaverse, which could trigger a surge in demand for NFTs. However, this development is still in its infancy.

While Gartner predicts that 25 percent of people will spend at least an hour a day in the metaverse by 2026 , the real-world use of NFTs is still small for the majority of applications. As long as digital art and metaverses are things that are imagined to be used en masse in the future (and not already today), assets for such occasions will remain an investment based on speculation about their actual use in the future. In addition, the use of the metaverse may in some cases only be possible by local monopolists – such as game manufacturers or hardware providers (e.g. virtual reality goggles).

In addition, the NFT market is characterized by a high pace and a great deal of uncertainty, which is difficult to manage even for professionals:

There is a joke in the industry that days on the Web3 are like months in the Web2 world. As exaggerated as that seems, it’s also true. No matter how hard you try, it’s impossible to keep up with all the information.

What’s more, there was a lot at stake, especially with 2021 prices. Prices for NFTs have skyrocketed and in many cases are barely affordable.

Life-changing sums of money can be created, lost or stolen overnight.

As a result, the NFT sector is “an industry driven by FOMO, FUD, happiness and deep emotions.”

In addition, there are very few guidelines for determining the “intrinsic value” or appropriate price of an NFT. Unlike the valuation of stock prices or companies, there is no technical analysis or mathematical scheme for determining the “intrinsic value” of art, let alone digital art. The value of NFTs is a social construct. Anyone can assign any value to it. Therefore, “people cannot determine the factors that might drive the price of NFTs. For this reason, price fluctuations remain constant, and the valuation of NFTs becomes a major challenge.”

In light of these facts, it seems fair to conclude that the NFT space suffered from deal fever in 2021.

Deepening: Fraud

Fraud is ubiquitous in the NFT market and can take place on an individual level or as market manipulation. At the individual level, fraudsters trick individuals into giving away their wallet details (phishing scams, impersonation of customer support, airdrop scams) or selling their NFTs at very low prices (bidding scams). However, the bigger problem seems to be at the market level: Since the NFT market is relatively small, it is susceptible to manipulation.

In rug-pull scams, scammers advertise a particular NFT (often via social media) but disappear after receiving money from NFT buyers – as happened in the case of “Frosties”.
Similarly, NFT investor fraud is where developers pitch an entire NFT project and disappear after receiving funds from venture capitalists or other investors – as happened in the case of “Evil Ape”.
In pump-and-dump schemes, fraudsters artificially inflate the price of NFTs by misrepresenting the asset and spreading misleading information about it – in order to sell it at an inflated price and disappear immediately after the sale.
When selling counterfeit NFTs, scammers sell fake NFTs as originals, and the NFT price plummets after the plagiarism becomes known. The problem is huge: In January 2022, OpenSea tweeted that more than 80 percent of the NFTs minted with its minting tool were counterfeit.
Wash trades are a market manipulation where an investor sells and buys the same assets to create misleading, artificial activity and prices in the market. Wash trading patterns seem to be ubiquitous in the NFT space. Two examples:
- At the end of 2021, a Crypto Punk #9998 was sold for USD 532 million, a staggering figure even compared to the already high prices Crypto Punks usually fetch. The person who bought it bought it off themselves – presumably to drive up prices or get publicity.
- In January 2022, the NFT market unexpectedly grew by 129 percent compared to the previous month. Much of this increase is due to the newest competitor in the NFT marketplace: Looksrare. The marketplace had only launched on January 10 and had already generated more than two billion dollars in volume in its 19 days of existence. CryptoSlam estimates that more than $8.3 billion worth of wash trades have been made on the marketplace, representing the majority of the volume of sales to date.

To be fair, fraud also exists in asset classes other than NFTs. However, other asset classes, such as the equity, bond or real estate markets, are more regulated and have stricter disclosure requirements: for example, they require regular financial statements, prospectuses, land registers, notaries, etc. In contrast, NFT buyers not only have to deal with fraud. They also struggle to find all the necessary information about an NFT. While there are platforms that show details of NFTs and help with their valuation (e.g. Etherscan, NonFungible, NFTpricefloor, rarity.tools), this information is very basic and makes it hard to spot fraudulent patterns.

Impact on the future of NFTs

To become a fully functioning market, the NFT space not only lacks better technology for aspects such as better accessibility, scalability and security. It needs a corrective to combat deal fever and fraud and replace it with trust and price stability. How can this be achieved? By collecting, generating, aggregating and easily displaying data that is reliable and relevant to valuation.

In a world of “socially assigned value” and a lack of mathematical methods to verify the “intrinsic value” of an item, social controls may be the only reasonable way to prove or disprove the purported value of NFTs. Unlike sellers, who are very capable of generating FOMO, buyers do not seem to have much say in the market. They compete with each other for the best deals instead of working together to detect FOMO or fraudulent patterns. Therefore, they are at risk of being cheated or ripped off by FOMO-related inflated prices. In the future, they should set up joint forums where they can support each other and inform each other about certain aspects of NFTs.

As the NFT space is difficult to survey, NFT buyers need data on the “socially assigned value” of an NFT. This could be obtained from currently known sources as well as the forums mentioned above.

This data needs to be supplemented by anti-fraud data. Unlike ‘socially assigned value’, this can likely be derived from technical data, such as the number and frequency of transactions, the trustworthiness of the wallets involved, the consistency of price levels (lack of outliers), comparison of trading volume with social media metrics, fraud detection indicators on social media profiles, transparency of press coverage of fraudulent patterns or scandals, etc.

This data must not only be available. It must also be

Summarized (ratings, grades, etc.),
are available at low cost (free of charge, available in a few places) and
have a low probability of being manipulated or exaggerated.

What are suitable means to this end?

Decentralization: The technical means are already available. Blockchain technology is ideal for creating the necessary trust – by making the data public and difficult to manipulate.
Democratization: The organizational tools are also available. To avoid manipulation by a well-informed centralized entity (such as influencers, creators or companies) at the expense of the uninformed crowd, the collection, generation, aggregation and display of relevant data can be done by a decentralized autonomous organization (“DAO”). In such a DAO, decisions are made publicly and with the participation of all token holders, which effectively prevents manipulation.

To summarize: it is likely that deal fever and fraud are key drivers of the recovery and collapse in 2021-22. A societal corrective is needed to prevent this from happening again. Collecting, generating, aggregating and presenting reliable and assessable data on a decentralized ledger of a democratic entity seems to be the most promising way to do this. The NFT community should work to make this possible.

ACYC
1. Introduction

ACYC (“NSN”) aims to revolutionize the NFT market by creating platforms that enable transparent and democratic assessment of NFTs (Trendhub) as well as their creators and promoters (NFTtrust). This will be combined with a centralized data connection hub (NSN protocol) that facilitates the seamless exchange of standardized NFT metadata between NFT-related entities. These measures will increase trust, reduce information asymmetry and promote market growth. Our ultimate goal is to create a more efficient, trustworthy and accessible NFT ecosystem for creators and buyers alike.

ACYC will be a metadata aggregator for NFTs in the future. Metadata includes e.g. sensor data, certificates, usage history, condition history, repair data and numerous types of ratings. In the future, investors and buyers will have more background data on products and services to make a comprehensive investment or purchase decision.

However, ACYC is based on its own metadata provider trendhub.one. trendhub.one is a decentralized, community-driven rating system that creates ratings and ACYC transmits these ratings to marketplaces, stores and other third parties on request.

Now we come to the question of why trendhub is not doing this alone, but is bringing ACYC into play?

We see that in the future, especially with NFT technology, many metadata providers will emerge that will collect metadata on products, objects, houses, building materials, any physical and digital goods in a variety of ways. With NFT technology, we will have a digital log book in each of these assets that captures different metadata. This digital log book is the NFT. The manufacturer of the goods can use this log book to map the entire supply chain and all participants in the supply chain of the goods have access to enter new metadata and view previously recorded metadata. It is therefore possible to find out the current ownership, point of sale and location of the goods.

ACYC aims to capture all locations where an NFT is sold, traded or transferred in order to open a window at these locations so that the appropriate metadata from the provider for the NFT can be filtered and displayed by ACYC. With the NFT technology and ACYC, it will therefore be possible to filter metadata live according to the history and the current requirement of the location, to assess goods more comprehensively on the basis of the correct background information and to make an assessment of the purchase or transfer of the NFT.

trendhub deals with the most frequently used metadata, the ratings. Since ratings are the third most frequently used metadata on the Web2, right after properties and description, ACYC will have the task of establishing many partnerships with marketplaces, stores and magazines on the Web3. The aggregator network of ACYC thus enables other metadata providers to use the infrastructure of ACYC and transfer their metadata to all stores worldwide via a single partner.

In future, end customers or users of this metadata on goods will have all the information that is relevant to them.

Vision ACYC

ACYC collects and disseminates metadata about NFTs so that users have a better basis for deciding which NFTs to interact with and use. This will enable billions of people to use a secure Web3.

Brand identity

Despite the considerable amount of greed-driven deal fever and fraud, there are also a sizable number of NFT idealists who are making a difference for the better. That’s who we want to be. That’s why ACYC is a purpose-driven organization that aims to make a positive and lasting impact on NFT creators and buyers. We believe that creators and buyers are more willing to invest time and money in NFTs if they feel well informed about them and their value. This can be achieved by providing them with valuable information to increase their confidence. As a result, creators of high-quality NFTs benefit, which in turn benefits buyers.

Purpose	Build trust in NFTs by providing valuable information.
Vision	We empower buyers of NFTs to make good decisions, based on balanced, reliable and socially controlled data on NFTs, by…
Mission	…harness the collective knowledge of the NFT community and provide them with reliable, condensed and easy-to-understand data to make informed decisions. Technically and data-wise, all our products are always rock solid. When products are powered by social interaction, we make them fun and easy to use wherever possible.

Why have we made this our brand identity? There is evidence that in the past, the creation of FOMO has been used as a targeted manipulation technique to induce buying fever among shoppers. In addition, wash trades and other types of fraudulent behavior have been identified to manipulate buyers and prices. These techniques were likely used to generate profits from the sale of NFTs to buyers infected with deal fever and lacking the proper tools to recognize fraudulent patterns. As outlined above, there is reason to believe that this aspect, among others, led to the collapse of the market in 2022.

NSN aims to educate NFT buyers so that they can recognize and resist these techniques. Relevant and reliable information about NFTs, their inventors as well as their promoters (influencers) is an effective antidote. However, there is no platform that provides all or most of the information relevant for evaluation. On the contrary, “shopping clubs” for NFTs are emerging that deliberately withhold information from non-members, such as Premint.xyz. This will further increase the information asymmetry between buyers and sellers.

In contrast, NSN aims to provide buyers with trustworthy and relevant data: Trendhub and NFTtrust will facilitate the creation of decentralized, democratic and data-driven valuations for NFTs, where the educated community agrees on the true value of an NFT. In addition, NSN aims to simplify the complex process of sharing NFT data between different market participants to make this information accessible to a wide audience.

But who will ensure that NSN does not deceive its users to its own advantage? To prevent NSN’s management from manipulating its products to the detriment of its users, NSN will implement certain aspects of a decentralized autonomous organization (“DAO”). What is a DAO? Unlike a traditional corporate organization with shareholders, executives and board members making decisions about the future direction of the company, DAOs do not concentrate decision-making power in such a centralized group. Instead, they make decisions through a governance process with community proposals and voting: a DAO is governed through the use of smart contracts, which set the rules for the DAO and are used to execute decisions. To this end, a DAO issues governance tokens. Anyone who holds governance tokens can make decision proposals, which are then voted on by the other token holders. If a proposal reaches a certain number or proportion of votes, it is accepted and executed according to the rules of the smart contract. This decentralized and democratic decision-making is the main difference to traditional companies, where decisions are made by a central management employed by the shareholders.

However, legal, personnel and financial matters in particular are heavily regulated by laws that often make the management of a legal entity personally liable for the actions of the entity. Therefore, these aspects must not be placed in the hands of a community of token holders who do not bear this responsibility. However, product development can be democratized to a certain extent. For products such as NSN’s, not all changes can or should be voted on, as this would slow down or even hinder product development. However, changes of significant importance should be voted on. Therefore, developments of major importance are voted on by the governance token holders.

In addition, product changes can be proposed and voted on by governance token holders. All token holders and users of NSN products (“community”) are informed about all product changes of medium or high importance. In addition, the community can make its own suggestions for product changes, which can then be voted on Trendhub.

Token value and influence on the ecosystem

Introduction

The token ecosystem in trendhub is based on an ecosystem that we know from the non-digital world. It is a financial ecosystem that we are familiar with from horse betting or other sports betting, for example. However, it must be noted from the outset that the trendhub token ecosystem has nothing to do with the gambling factor as with conventional betting. We would like to note in advance that the focus of our token ecosystem is based on a scientific factor and exists to give results an objective direction.

The token that is paid into the ecosystem by the user is tied to one dollar and relates to the guarantee of the user’s vote. Furthermore, in the trendhub token ecosystem there are no individual odds for the competing participants in the poll, as is known from sports betting, for example. As a result, the user cannot achieve an extraordinarily high profit in one day, but neither can he suffer an extraordinarily rapid loss as a result. Furthermore, the user can see from the content of the participating competitor in the survey, the characteristics in the left box, the description in the middle box and the community comments below the carousel in which direction the rankings or the trend is developing. These three factors, the standardized stake, the eliminated odds and the trend indicators eliminate the gambling factor.

trendhub has thus abstracted a financial ecosystem that has existed for centuries and transformed its negative characteristics into positive ones.

The professional user and the calculation of market capitalization

For users who want to professionalize their participation in token votes on hubs on trendhub, there are two main goals: to promote the learning effect and to monetize their participation. To achieve this, they need to train regularly and continuously hold CRED tokens in their wallet.

In the trendhub token ecosystem, this means that users should have a certain amount of CRED tokens in their wallet every day in order to be able to participate in the daily voting intervals. The user aims to achieve a continuous increase in their CRED holdings through permanent and high-quality valuation. They will then exchange the surplus that they do not need for daily participation into USD. We assume a daily token stake of 35 $ CRED. This means that every user who wants to participate in the system in the long term will maintain this stake.

In our assumptions, we assume that 35% of total users participate regularly, i.e. daily, in the voting intervals. To do this, these users should permanently hold 35 $ CRED in their wallet. Assuming 250,000 total users, this corresponds to a market capitalization of approx. 3 MUSD. We assume an exponential increase in users within the first three years, in which we inspire 5,000,000 users a day with the platform from year four onwards. This would then correspond to a market capitalization of around USD 61 million

Assumption Ø number of users year 1 after foundation:

number of active users: 250,000
Percentage of users who permanently hold $35 CRED: 35%

number of users holding $35 CRED: 250,000 × 0.35=87,500250,000 \times 0.35 = 87,500250,000 × 0.35 = 87,500
total quantity of permanently held CRED tokens: 87,500×35 = 3,062,50087,500 \times 35 = 3,062,50087,500×35 = 3,062,500

Assumption Ø number of users from year 4 after foundation:

number of active users: 5,000,000
Percentage of users who permanently hold $35 CRED: 35%

number of users holding $35 CRED: 5,000,000×0.35=1,750,0005,000,000 \times 0.35 = 1,750,0005,000,000×0.35=1,750,000
total quantity of permanently held CRED tokens: 1,750,000×35 = 61,250,0001,750,000 \times 35 = 61,250,0001,750,000×35 = 61,250,000

Conclusion

The users who continuously have CRED tokens in their accounts for voting will steadily increase the market capitalization of the token. This not only stabilizes the value of the token, but also encourages user engagement and long-term participation in the trendhub ecosystem

trendhub.one – A token-based NFT valuation system

Initial situation

Why is trendhub doing this social media topic now and why not directly with NFT?

Viewed from different perspectives, trendhub offers users three key added values. Trendhub is, as we call it, a NEXT-GEN survey platform in which users feel an unprecedented experience, especially through visualization and technology. It is also a pure social media platform that can be seen as a supplement to the established platforms and, last but not least, a decentralized community-driven evaluation platform. Of course, each of the three added values can be selected individually and can be controlled via the hub content. The content in the carousel is specifically viewed and evaluated by the participants through the title and the question about the content.

In the course of preparing for market entry, we asked ourselves how we should brand and design trendhub. Either we align ourselves with one of these three use cases or we find a middle ground. In order to make a decision here, trendhub must be viewed from its UX and core functionality. trendhub has four main pages on which the user interacts with content, one of which is the hub page itself, which is unique in its composition on the Internet and is not remotely presented in the same way on any other platform. But what characterizes the hub page and what added value does it bring? You first need to understand how all other social media platforms such as Facebook, Instagram, Twitter and the like are structured. Essentially, each of these platforms displays media data such as an image or video in a post format, which also includes a description of the post with hashtags and emojis. In addition, there is always a Like button in the lower post area, which is also used for a collection of images (gallery) as a whole in these posts, as well as a Share button and a comment area.

trendhub breaks up this presentation of the post. Like all other social media platforms, trendhub has a personalized interests feed that displays posts based on the user’s interests. But instead of opening the media file, trendhub opens a media community space for this post. In contrast to the gallery in conventional social media posts, the media on trendhub are clearly displayed in a 3D format in a virtual space and the community places the likes and communication specifically on one medium for each post topic. In this way, the topic achieves a clear result from the discussion through this presentation, tools, aids and distribution of likes and comments from the community.

This shows that trendhub can essentially be recognized as a social media platform. However, the focus is on bringing the discussion to a clear conclusion by clearly assigning the likes and evaluating them at the end of the discussion.

We have found that focusing on a survey platform is negatively associated with the fact that surveys are generally boring, time-consuming and if participants have to be remunerated for their participation. The situation is similar with the focus on a decentralized community-driven evaluation platform. As with the survey platform model, this approach is based on the user’s view that the action of rating is in the foreground and therefore work must be done, even if it is remunerated. As we have worked out, we can promote trendhub as a new type of social media platform. In this picture, people associate trendhub with the ease of dealing with content and topics that they are used to from conventional social media platforms. The only difference is that we also communicate that the discussion through the trendhub media community system can serve as a survey tool and help the community and creators with a clear result.

For companies, this can result in a new way of working with their customers in product management or marketing in order to improve their products on the one hand and to offer their customers further added value through new, staged content on the other. Influencers can obtain various evaluations from community interaction either for themselves or in cooperation with a company

But why no NFT yet?

In 2021, we entered the NFT market and achieved relatively good success with NFTaggregator.io, the pre-version of trendhub, a social media platform specialized in the NFT market. In 9 months, we attracted 4,000 NFT art creators to our platform, who published around 150 stories about their NFTs every day. With the gradual decline of the NFT market, we then explored how much future there was in the platform developed at the time and also investigated what the current problem was in the NFT market, why it was declining and why it would not pick up again anytime soon. After our investigation, we found that the NFT market, as in the crypto market at that time between 2017-2019, offers too little background information for inexperienced traders or those interested in buying. Nevertheless, there is interest in investing in this market. However, this leads to inexperienced users who are willing to buy being misled and financially exploited by elitist groups. This has driven us to counteract this by starting to digitally record and evaluate social media reputations and display them on NFTs in order to distinguish fake accounts from genuine accounts. We can therefore say that since the end of 2021, our project DNA has consisted of seeing NFTs and ratings as our driving force and our duty to contribute to the NFT market.

In mid-2023, we evolved the NFT social media platform from NFTaggregator.io into a decentralized community-driven valuation platform specializing in the valuation of digital art linked as NFTs. After launching this model in the NFT market that existed at the time, we realized how inactive the NFT market was compared to mid-2021. However, we realized that there was more potential in the community-driven review platform than just applying it to NFT art. We then took the community-driven rating platform, which was focused on voting, and developed it further to allow creators to create any kind of rating for their content on our platform.

So, in mid-2024, we had a very advanced form of a completely new type of social media platform that focuses on using its approach to bring discussions and thus also surveys to a very precise result through the community. And it does so in the guise of an attractive social media platform. However, the technology can also realize its potential without the NFT technology. This makes us independent of the volatility of the crypto and NFT market. This flexibility is what we need as a start-up in order to remain and become liquid and competitive. From this perspective, we made the decision to launch without the NFT technology so as not to overburden our target groups but still provide them with the trendhub benefits and direct our users to the NFT technology on trendhub at the right time.

What makes trendhub a NEXT-GEN survey tool

Regular surveys have 4 big problems:

the data they receive is not good, not valid, not objective enough to be of any serious value.
the rewards do not offer enough incentive and are distributed across the board to all participants, which means that the participant does not have to be interested in providing good answers.
participants often cannot be properly selected due to lack of time, wrong incentives, or lack of background information on the person.

4 Surveys are boring, time-consuming and often don’t offer the right financial incentives.

Surveys should have the major goal of delivering results in which participants have given their answers to the best of their knowledge and belief.

But how can this be if the participant’s interest is to receive many rewards in a short time and there is no incentive to answer the question to the best of their knowledge and belief?
But how can this be if the content on the topic hardly exists or does not exist and therefore does not provide sufficient insight into the topic?
But how can this be if the participants themselves qualify for the survey, not because they have an interest in the topic, but because they are receiving the next reward?
So how can it be that valid results are obtained using these techniques when the majority of online and offline surveys have these shortcomings?

What does trendhub do differently to produce valid results?

Visual & Informative

Basically, trendhub is completely redesigning the survey. First and foremost, the survey does not take place in the guise of a survey tool, but in the form of a discussion as we know it in social media posts, but the division of the content in the trendhub content community space makes it possible for likes or votes to be distributed to the individual topics by the participants. The question in the content community space is always a component. Another essential component in the Content Community Room is the 3D Carousel, in which the media or topic components are displayed in a three-dimensional rotating manner. Below this are the 3 dynamic data areas in which the properties, description and user comments on the individual media are displayed. The presentation of the media in the 3D carousel and the respective dynamic display of their data in the data areas below serve to provide the user with a constant overview of all participants in the survey and to make all basic data immediately available. This interplay between the presentation of the media and the provision of information at a glance on desktop and mobile means that the user who is to cast their vote has the best prerequisite for being able to visually and mentally grasp all the participants in the survey as a whole in order to take all the data into account as much as possible for their decision and also to cast their vote quickly.

In this way, trendhub provides the best visual and informative basis for gaining an in-depth understanding of the topic.

Selection & Community

Due to the fact that trendhub is a social media platform with a focus on in-depth and results-driven topics, trendhub will invite and retain target groups of all kinds with interactive topics and gamification. As a result, trendhub will gain an extensive community over time. We are already working on our algorithm learning the interests and preferences of user profiles. This enables us to invite the right target group to the relevant surveys. Because the most important thing for the survey is to select the right group of respondents. This means that the community in the survey consists of the creator’s community and the selected test group from trendhub. In addition, the community has the opportunity to exchange information directly about the topics in the comments section of the survey and to respond specifically to the content with tags and markers, which promotes a deeper and more varied discussion and can enrich the understanding of the topic in a multidimensional way. However, it must be mentioned here that the combination of community interaction and the two-liked system – consisting of subjective and objective voices – creates an even more differentiated and richer data basis.

This two-liked system allows participants to give both their personal opinions (subjective vote) and their well-founded, rational considerations (objective vote). This differentiation leads to a clearer analysis of the survey results, as emotional and rational aspects are recorded separately. It also encourages deeper discussions, as participants can share and defend their different perspectives and assessments. This prevents groupthink and contributes to a more diverse and balanced data collection. The combination of community exchange and two-liked system makes Trendhub a unique platform that integrates qualitative and quantitative data in an innovative way, leading to more accurate and valuable results.

The survey automatically receives the right participants and connects them in order to obtain a diverse vote for the result.

Gamification & Behavior

trendhub offers four earning models that incentivize participants to cast their votes. The participant-based cash distribution, the participant-based points distribution, the creator-based cash distribution and the creator bonus distribution.

With participant-based point distribution, the trendhub distribution system automatically deposits a point in the hub’s wallet for each participant by casting their vote for a topic component. All participants vote according to this principle. After the poll is finished, all votes are distributed to the topic components. The trendhub distribution system is similar to a betting system in that the points are distributed back to the users who have shifted the most votes to a topic component or who have agreed in the poll which topic component is in first place, second place and so on.

The participant-based money distribution is based on exactly the same principle of voting and distribution of points, except that it is not points that are distributed, but money in the form of coins.

By depositing a small amount of money, where the loss can represent a risk, something fundamental happens in the user’s voting behavior. The user is now driven by the possible loss of the money to think urgently about what not only he thinks can become place 1, but what everyone thinks will become place 1. This is because the risk changes the perspective in voting behavior.

With the participant-based distribution of points, the user takes action with the PERSONAL like button, thereby making a subjective, largely low-risk decision, and with the participant-based distribution of money, the user takes action with the EXPERT like button, thereby making a risky but objective decision.

The result, which is determined at the end of the survey, is the average of subjective and objective views on the topic. In this way, trendhub achieves a new quality standard for surveys.

In conclusion, we note that

The 6 aspects of a new approach to surveys make trendhub a NEXT-GEN survey tool, because we solve all 4 problems that previous survey tools do not solve.

What makes trendhub a decentralized community-driven rating system?

First, we need to understand what a centralized rating system is.

With a centralized system, this very often means that an intermediary at headquarters stores, administers and manages the data. If we look at the central rating system, we see vergleich.org, stern.de, expertentesten.de, trustedshops.de, trustedpilot.com and numerous offshoots of these online comparison sites in Germany.

There is a fundamental risk with a centralized system that the middleman can be manipulated. In the examples of centralized rating platforms listed above, it has also been proven that the middleman is also manipulated here. In most cases, the manipulation is financially driven.

There is an urge from the Web3 community to drive and support the Web3 Internet Layer, particularly because the middleman in the central system can be manipulated. This is because the projects for the Web3 Internet Layer have at least the idea of providing a decentralized system for their use case.

This is exactly what we aspire to, which is why we have developed trendhub as a decentralized community-driven rating platform in which the party that rates is financially independent of the manufacturers of the goods, although the manufacturers of the goods on trendhub pay for the community to participate in their product tests. This can work because, on the one hand, the trendhub financial and distribution system is fully automated and acts on its own, with no middleman needing to or being able to intervene. The system distributes the money to those who agree on which goods have the most value.

This means that the party on trendhub, which is valued, is value-driven and not financially influenced.

We have two different starting points for the interest from which ratings are determined. On the one hand, we have the independent platform-driven interest in determining ratings and, on the other hand, that the users themselves have an interest in having the community determine ratings for their own compilation of participating competitors.

In the independent platform-driven interest to elicit reviews, the trendhub platform itself aggregates products, services, etc. that have already been created digitally on marketplaces and stores and imports them with their complete categorization, tags and metadata. The trendhub algorithm for creating competitions in the interest of the platform selects the participants for the competition in such a way that the competition is independent and fair. Users are then invited to the competitions based on their experience and interest, which our AI learns and our algorithm processes. In this way, we bring the right group of prospects to the right competition. We then transfer the evaluation back to the marketplaces and stores using an API. This gives buyers and investors a second opinion, a second indicator to correctly assess the product or investment and reach their decision more quickly.

The system continues in a similar way with the user-driven interest in having ratings determined, except that the ratings do not have the same weighting as the ratings from the independent platform-driven interest. Otherwise, the platform makes it possible to automatically select the right group of test subjects for the creators in order to achieve the fairest possible ratings.

Vision trendhub

trendhub will significantly improve the ability of billions of people to make decisions about personal interests and problems in their private and business lives based on real user experiences.

Problem-Solution Fit

Overview

Trendhub is a gamified, token-based NFT valuation method that aims to collect, generate, summarize and display reliable and valuation-relevant data on NFTs. In addition, it enables social checks and balances. It works as follows.

Data collection	The first step is to import the relevant NFTs into Trendhub. Publicly available data on each NFT and its creator is collected and displayed together with the NFT, for example: NFT: Creator, creation date, description, important attributes, price history, sales history, standing offers, wash trade indicators, etc. Creators: Engagement data from social media accounts (followers, number of posts, number of likes, number of comments), fraud indicators, press reports, etc.
Generation of data	In addition, own data is generated as follows: NFTs can be claimed by the owners (creators or buyers) via their wallets. You can also add a story to the NFT. NFTs can compete against other NFTs in polls in which users vote for the most valuable NFT. The NFT with the most votes wins the poll. Users can comment on the individual NFTs in a poll. The votes and comments from the polls are evaluated.
Processing of data	As a wealth of data and information is collected and generated and could be displayed, it is necessary to bring it into an understandable format. The collected and generated data is condensed into an assessment of the sales potential between 0% and 100%, and one score without an upper limit
Display of the data	All available data is displayed next to the NFT in a sensibly condensed form. All relevant information can be found in the same place: on the NFT overview page.

Surveys at the heart of the evaluation system

In addition to importing and displaying existing data, new rating-relevant data is generated through polls in which the NFTs compete to win: Nine curated NFTs are selected for a time-limited survey in which they compete for votes. They are presented to poll participants along with structured data about the NFT and its creator. The NFT with the most votes wins the poll (“winning NFT”). The voters are therefore key members of the community. There will be two types of votes:

Personal votes

Personal votes cost nothing and can win nothing.
Voters only need to be registered and verified.
Voters choose the NFT that they think has the highest value and should therefore win the poll by simply clicking a button.
However, the NFT with the most personal votes wins nothing.

Expert votes

Expert votes determine the winner of the survey.
Expert voting is a pay-to-play process, meaning that voters pay a predetermined amount of NSN tokens into the poll’s token pool and vote for the NFT that they believe has the highest value and will therefore win the poll.
At the end of the survey, the NFTs with the highest value, which together account for at least 50% of the votes, are the winners.
Expert voters who voted for NFTs that are not among the winners will not receive tokens from the token pool. Their token deposits will be used to replenish the prize pool for the winning voters.
Winning voters are those who voted for the winning NFTs. They receive a share of tokens from the poll’s token pool that exceeds their deposits.
All expert voters receive badges for participating in polls, regardless of whether they won or lost with their vote. Depending on the number of poll participations, they receive different types of badges (e.g. bronze, silver, gold and platinum badges), which are displayed in their profile.

Voters can use any resource to determine the value of NFTs in the poll. Trendhub assists voters by providing an NFT overview page and the creator’s profile page on Trendhub, both of which are linked under the respective NFT in the poll. Owners and creators have a strong incentive to provide valuable and reliable information on these pages to help their NFT win the poll and increase the value of the NFT.

In addition, each poll has a comments section that allows all voters to share their opinions on the NFTs in the poll. Experts have a strong incentive to provide reliable information about the participating NFTs in order to win the poll – positive information about the NFT they voted for and negative information for everyone else. Comments can be upvoted or downvoted by other members of the community. The sum of upvotes (+) and downvotes (-) is displayed below each comment.

Incentives for surveys

People who participate in personal voting have less incentive to provide valuable and reliable information, but may be intrinsically motivated to do so. In addition, personal voting ensures that every user feels part of the community from the start and can get to know the system in a fun way. The more people join the community, the more data is generated. In addition, more traffic on the website means more revenue, which is used to fund the service.

It is important that money is involved in the polls. In order to avoid losses or make gains, voters will not cast favors, but rather vote for the NFT they expect to win. However, it is important not to make participation in the poll too expensive, as this would limit the number of participants. Low participation in turn reduces the amount of data that voters provide, making polls vulnerable to manipulation and their results unreliable. Manipulation could result in inexperienced community members losing money and leaving the platform as they (rightly) perceive the poll to be rigged. Therefore, it is important to find a sweet spot between too cheap and too expensive. This “sweet spot” must be determined in user tests.

For all NFTs that participated in the poll, the votes received will be recorded on the NFT overview page and the NFT with the most votes will receive a poll winner badge. The owner of the winning NFT will also receive a share of tokens from the poll’s token pool. Trendhub receives a certain number of tokens from the pool of each feedback round as a fee, which is also used to incentivize the losers of the poll to participate in further polls.

The pay-to-play principle also discourages bot voting, as a mere user account is not enough to participate in a poll. Nevertheless, bot detection remains an important issue. Since only registered users can participate in polls, it is important to authenticate users and avoid accounts created by bot farms. Security barriers that can be activated at will are cookies, IP and email.

Security concerns

For expert voters, it is very important that they trust the system, especially that their tokens are secure. Therefore, expert voters connect directly to the poll with their wallets. Profits and losses are distributed on the basis of a smart contract in a completely decentralized manner and without middlemen. Trendhub also only participates in the smart contract and does not act as an intermediary, which makes rug-pull fraud impossible.

NFT ratings as a strong condensed valuation indicator

The collected and generated data is condensed into a Sales Potential Rating and a Value Score. Both are continuously developed over time based on the knowledge gained and the data collected. The initial ratings that are used are shown below.

Evaluation of the sales potential (Sales Potential Rating)

The sales potential rating shows the development of the potential sales value of the respective NFT. It comprises the factors shown below, ranges between 0 and 100% and increases or decreases steadily depending on the value of the input factors. The poll performance refers to the performance of the NFT on Trendhub. Platform and market specific data is also taken into account to ensure that the value is validated by the market. Finally, the reputation of the creator is also considered as a value driver.

Figure 12: Factors for the assessment of sales potential

Source: Team

NFT Value Score

This value expresses the historical value of an NFT. The longer the NFT has been on the market and has gained recognition through its visibility, the higher the NFT Value Score. It has no upper limits and increases monotonically over time. The factors shown below are included in the value.

Figure 13: Factors that determine the NFT Value Score

Source: Team

Both scores are displayed on the overview page of the respective NFT, together with the name of the NFT, the external information collected and the most influential comments. Together they serve as indicators for NFT buyers when making their investment decision.

In addition, all of the above information is stored as a dynamic NFT (“dNFT”) , which is constantly updated. They are stored in a smart contract on the blockchain. When the NFT rating changes, the smart contract updates the rating score and the date of the rating. The appearance of the dNFT changes depending on the rating score: the color of the NFT could change from green to yellow to red when the rating score decreases. This visual representation makes it easier for users to quickly understand the overall rating of a product. The dNFT can be used to track the rating of an NFT over time, allowing one to see how the rating has changed over a period of time without the risk of manipulation.

NFT search and comparison as a powerful research tool for buyers

To ensure that the information generated can also be used, it must be presented correctly, made searchable and comparable. This is an important prerequisite for building a functioning affiliate marketing business, as described below in the Business model section. The following graphic and paragraphs describe the basic concept of NFT search and comparison.

Data acquisition and labeling

NFTs can be characterized by the information that is available about them, whether from third parties or internally generated, for example:

NFT description: title, creator, creation date, image, description, attributes, background story, press reports, etc.
Data of the creator:
- Third party: name, image, social media engagement (followers, number of posts, number of likes, number of comments), fraud indicators, press reports, etc.
- Internal data: Data from NFTtrust (see below)
Owner data: name, CV, trading history, social media accounts, press coverage, etc.
Valuation data:
- Third-party provider: Price (current and past), coin data, trading history, standing offers, wash trade indicators
- Internal data: Votes, polls won, ratings, most influential comments, etc.
Affiliate links: Links to the marketplaces where the NFT can be purchased.

This data is collected and consolidated in a raw database.

However, a prerequisite for the effective search and comparison of NFTs is the assignment of standardized attributes (“tags”). Tags are metadata, i.e. data that describe other data and can be used to provide additional information about an NFT, e.g. the title, artist, description and other relevant attributes. The assignable tags are organized into a standardized taxonomy (“tag tree”), which is then used to assign the attributes from the taxonomy to each NFT, often using artificial intelligence. The result is an NFT catalog that can be navigated using standardized and therefore comparable tags.

NFT overview page

The NFT overview page displays all of this tagged information (NFT description, creator data, owner data, rating data, partner links, etc.) and is optimized for the following five aspects:

User friendliness	Find and understand information easily
User engagement	Offer opportunities for participation, e.g. through content (text, video, images), forums, etc.
Visibility in the search engine	Indexing, uniqueness of content, KPIs for user retention, central web vital data
Buyer conversion	Click on links to the marketplaces where the NFT can be purchased
Voter conversion	Invite visitors to also take part in surveys

NFT search

Users can search for NFTs by tags using predefined search terms such as the author’s name, the year of creation or the NFT ranking.

To ensure that the NFT metadata remains accurate and up-to-date, the metadata can be stored in the blockchain along with the NFT itself by using a dynamic NFT. The dynamic NFT would contain a reference to the metadata, and any changes to the metadata would also be reflected in the dynamic NFT. This would ensure that users can search and compare NFTs based on the most accurate and up-to-date information available.

NFT comparison

In addition to a powerful search, users will want to compare NFTs. Trendhub offers comparison tools. In addition to the search, which already filters out irrelevant NFTs, Trendhub offers additional filtering and sorting options that allow users to sort and compare NFTs based on their characteristics. For example, users can sort NFTs by price, rarity or popularity to quickly identify the most valuable or in-demand NFTs. The resulting NFTs are displayed on an overview page that allows users to quickly get an overview of the NFTs that match their criteria.

Based on their rating, users can assign them to a shortlist where the NFTs are displayed side-by-side in a table format. This allows users to quickly and efficiently compare the shortlisted NFTs and find the NFTs that best match their preferences.

API as a way to make reviews available on third-party websites

The NFT rating generated by the surveys on Trendhub is made available to external applications and services via an API. This means that the rating is also used where the NFT is sold.

NFT marketplaces, stores, blogs, etc. receive the added value of increasing the trust of their customers through the rating. In addition, each user validates the relevance of the data on the market through the rating.

Community functions for user profile and network development

The community members’ profile page includes modules for displaying skills, NFTs, stories, posts with information on NFTs, collections (favorites list), contacts (friends), groups, badges and their own NFTs.

The community stream “TALK” brings NFT creators, buyers and sellers together. This is where NFT drops are announced, partnerships are sought, the latest survey winners are celebrated, new acquaintances are made and the community exchanges ideas.

The leaderboard lists the NFTs with the most votes and the most polls won, NFT owners and NFT creators whose NFTs have won the most votes and feedback rounds.

Trendhub benefits everyone involved

NFT owner: By having NFTs participate in surveys, the NFT owner obtains data about their NFT through genuine user participation. This is likely to increase the awareness, liquidity or price of the NFT. In addition, NFT owners will receive a share of tokens from the token pool if their NFT wins the survey.

NFT buyers: Buyers benefit on several levels: First, they can easily find and compare NFTs that are relevant to them. Secondly, they get balanced, reliable and socially controlled data on NFTs in one place. This is particularly due to the fact that

Anyone can comment on NFTs, not just creators, owners or influencers;
Expert voters have a strong incentive to provide reliable information about the participating NFTs in order to win the poll – positive information about the NFT they voted for and negative information about all others;
not all NFTs can win a survey, which makes it possible to distinguish the valuable ones from the less valuable ones.

Voters: Users have the opportunity to increase their number of NSN tokens by voting for the NFT that won the poll.

Community members: Even if users do not buy, sell or advertise NFTs, they can have fun on the platform and exchange ideas about NFTs.

NFTs: The awareness and value of an NFT increases the more polls it wins. Through the votes collected, the participation in polls, the polls won and the users’ favorites, the value increases in a way that is transparent to every user.

NFT creators: Creators whose NFTs participate in or win surveys gain notoriety and visibility. New creators are given a platform to showcase their artwork.

NFT marketplaces and stores: Trendhub contributes to a functioning market by reducing the likelihood of deal fever and fraud – both important factors in the ups and downs of 2021-22. In doing so, Trendhub contributes to greater trust and transparency in the NFT space, which should facilitate mass adoption of NFTs. In addition, Trendhub can be used as a valuable traffic source.

Trendhub: The token-based NFT voting system receives a fee in the form of tokens from the pool of each feedback round. In addition, platform users and the data generated on the platform can be monetized.

Product-Market fit

The business model

Due to the current lack of platforms that provide balanced, reliable and socially controlled data on NFTs, Trendhub is expected to gain a significant number of users. Market research shows that website traffic to NFT-related websites is still significant – despite the collapse of the NFT market in 2022. It also shows that community websites tend to be the biggest players – even though Deviantart and Behance offer more than just NFT art – and that older websites tend to have lower bounce rates than younger ones.

	Traffic, in m visits (Similarweb)			Bounce rate (Similarweb)
	Dec 22	Jan 23	Feb 23	Feb 23	Launch date	Kind of business
Deviantart.com	101.7	102.1	91.7	33%	August 2000	All Art, more than NFT. Marketplace and community
Behance.net	40.4	45.8	41.9	33%	November 2005	All Art, more than NFT. Marketplace and community
Opensea.io	24.1	27.4	23.7	32%	December 2017	Pure market place
sorare.com	8.3	7.9	7.2	32%	March 2019	Community for sport trading cards (niche)
magiceden.io	5.8	8.7	7.2	25%	December 2019	Pure market place
axieinfinity.com	2.3	2.4	1.8	29%	November 2018	Community, Play-to-earn game
foundation.app	1.1	1.5	1.2	48%	February 2021	Pure market place
rarible.com	1.0	0.8	0.9	39%	December 2020	Pure market place
superrare.com	0.5	0.7	0.6	49%	April 2018	Pure market place
looksrare.org	0.5	0.5	0.5	42%	August 2021	Community and market place
knownorigin.io	0.1	0.1	0.1	64%	March 2018	Market place
solsea.io	0.1	0.1	0.1	49%	December 2021	Pure market place

75% quartile			91.7	48%	(excl. knownorigin because outlier)
25% quartile			0.1	32%
Average			7.7	40%	(excl. DeviantArt because outlier)

It can be assumed that Trendhub has the potential to grow to the average number of monthly visits within three years. In the current market situation, this means 7.7 million monthly visits, a considerable number of visits. Furthermore, it can be assumed that the market will continue to grow. As outlined above, after the sudden and extreme slump in the market in 2022, a CAGR of 34% seems achievable by 2027. This would lead to 25 million monthly visits in 2027. Regardless of which scenario is considered realistic, it can be stated that the potential ranges from considerable (7.7 million monthly visits) to high (25 million monthly visits).

There are three main sources of income that come directly from Trendhub users:

Issue of coins for voter turnout

In order to participate in surveys, voters must contribute tokens to the token pool of a survey. These can either be obtained by winning polls or purchased from Trendhub. As already mentioned, it is important to find a middle ground between too cheap and too expensive.

At some point, you could also charge coins for premium features, e.g. to allow platform users to create their own surveys.

Issue of coins for the voting participation of owners

There will be a small number of free surveys. However, to allow many of their NFTs to participate in surveys, owners (creators and buyers) must contribute tokens to a survey’s token pool.

Sale of the NFT valuation to owners, stores or marketplaces

To increase buyers’ trust in NFTs, owners, marketplaces or stores can buy the NFT ratings of the respective NFT to publish them next to the NFT as a trust signal when selling.

In addition, Trendhub will be able to offer some of its services without charging its users: According to current data, there are well over 50 different NFT marketplaces, and aggregators, and the number continues to grow. As mentioned above, analysts at SkyQuest Technology expect the NFT market to reach a value of USD 122 billion by 2028, with a CAGR of over 34% from 2022 to 2028. In line with this, Research and Markets forecasts a CAGR of 35% (4.5x) for the period 2022-27. It has been debatable whether this is feasible, but the team behind ACYC is convinced that it is possible – if effective social controls such as Trendhub and NFTtrust.it are installed. Assuming this development (and also assuming a much lower growth rate), it is likely that there will be a rapidly growing number of NFT marketplaces and that there will be strong competition between them. Platforms such as Trendhub and NFTtrust.it will be important comparison platforms with a significant number of users – and as such important traffic sources for marketplaces. Commissions for NFT marketplaces are typically between 0% and 15%, with anything below 5% likely to be loss-leader offers that are not viable in the long term and will rise to at least 5%, more likely 10%.

As shown earlier in this article, buyers and collectors of NFTs struggle to find enough structured, reliable and independent information to estimate the value of an NFT. To obtain this, they turn to Trendhub. In addition, Trendhub community members are also people who have a vested interest in NFTs. Therefore, the platform will have a lot of traffic from potential NFT buyers who are highly pre-qualified before making their purchase decision, which opens up two more revenue streams:

Affiliate income from NFT shops/marketplaces	Affiliate income can be generated through referrals to NFT partner stores and marketplaces.
Advertising	In addition, user traffic can be monetized by displaying advertisements. Since ads are less targeted than affiliate links, the effective click prices are lower, but they remain an important source of income.

Last but not least, Trendhub will generate a wealth of data on NFTs that can be analyzed and sold to interested market participants.

One prerequisite for monetization is a large number of users on the platform. Three things need to be achieved at once:

Customer acquisition	Customer loyalty at Trendhub	Customer loyalty away from Trendhub
Search engine optimization (technical and content-related), paid search engine marketing, optimization of the AI chat assistant, social media presence and PR activities	The key factor is content, i.e. valuable information and features to evaluate NFT creators and influencers. This should lead to the creation of user accounts and installation of the app – which in turn enables effective customer relationship management (“CRM”).	Maintaining contact with users by serving them outside the platform, e.g. by displaying the trust rating on third-party websites or by informing them about current developments, special offers and new information/features through newsletters, social media, push notifications, etc.

Tokenomics

Two types of tokens are issued: Utility tokens and governance tokens.

Utility tokens

In general, utility tokens provide access to products or services. At Trendhub, they are called uNFTC and grant holders the right to participate in surveys and purchase advertising and NFT scores from Trendhub. uNFTC tokens have no decision-making power. In detail:

Token name: uNFTC (NFT Choice)
Token Type: ERC-20 compatible for easy integration into the Ethereum ecosystem and marketplaces
Total Supply: 88.8 million uNFTC will be created. There will be a limited supply of tokens to maintain scarcity and value.
Token Distribution:
1. Initial Dex Offering (IDO): 20 % of the tokens are sold as part of an IDO to raise funds for further development and operating costs.
2. Community rewards: 20% of the tokens will be reserved for community rewards to incentivize participation in voting and rating NFTs. They will be distributed to Trendhub users as follows:
  1. Initially by airdrop to encourage early participation in the platform.
  2. They can later be acquired by winning surveys and by purchasing them from Trendhub.
3. Team and consultants: 20% is allocated to the team and consultants for their efforts in creating and maintaining the platform.
4. Partnerships and integrations: 20% is retained for partnerships, integrations and extensions to other platforms.
5. Marketing and sales promotion: 10% is used for marketing and advertising activities to attract more users to the platform.
6. Reserve: 10% can be used as a reserve for future developments, partnerships and unforeseen expenses.
Token Utility:
1. Voting: uNFTC tokens are used for voting on the value of NFTs.
2. Rewards: The winners of the votes will receive uNFTC tokens as a reward, creating an additional use case and demand for the tokens.
3. Access (optional): Holders of a certain amount of uNFTC tokens could be granted premium access to features such as early access to surveys, private surveys, self-created surveys, etc.
4. Staking: Users stake their uNFTC tokens to earn rewards, which increases demand for tokens and provides liquidity.
Monetization:
1. Transaction fees: A small fee is charged for each query.
2. API access: Marketplaces and platforms will charge for access to NFT valuations via the Trendhub API. This will generate a steady stream of revenue.
3. Premium features: Trendhub could charge users for access to premium features (see 5c) in the form of uNFTC tokens, which would further drive demand for the tokens.
4. Affiliate fees from NFT shops/marketplaces and advertising must be paid in uNFTC.
Security: NFTC tokens are secured by standard procedures such as smart contract audits, bug bounties and wallets with multiple signatures for team tokens.
Transparency: All transactions and voting results are made transparent and verifiable in the dNFTs, which contain the metadata for each NFT. This will promote trust in the platform.
Partnership and collaboration: uNFTC will also be used for NFTtrust. In addition, strategic partnerships for the integration of uNFTC into other platforms are being explored to further increase its utility and value.

This model incentivizes active participation in the platform, creates a vibrant and engaged community, and helps preserve the value of the NFTC token, making it attractive to investors. By aligning the interests of users, artists and investors, Trendhub could usher in a new era of transparency, trust and growth in the NFT market.

Governance tokens

At the suggestion of the management, developments of major importance are voted on by the owners of gNFTC. For example, the change of important parts of a survey or the development of a new value score would be of such importance.

All types of product changes can be proposed and voted on by governance token holders. All token holders as well as Trendhub users (“Community”) will be informed about all product changes of medium or high importance, once when they have been voted on and once when they are implemented.

In addition, the Trendhub community – even without owning gNFTC – will be able to submit their own suggestions for product changes, which can then be voted on Trendhub. If these proposals are successful, they will be included in the product change process as described in the previous point.

“The development of new solutions and platforms based on decentralization has massive communities at its core.” Of course, this will not be the case from the outset. But the continuous expansion of the Trendhub community will mean that the importance of the management team in product selection will gradually diminish. By exercising their privileges in the development of the platform, gNFTC token holders will prevent the management team from shaping the product in a fraudulent or manipulative way.

This is how it will work in detail:

888 million gNFTC will be created and can be continuously purchased by Trendhub users.
To submit a proposal for a product change, a gNFTC token must be deposited.
The product change proposal is submitted. It must be justified by describing the following aspects (which must be easy to understand and, if possible, supported by structured research data):
1. the problem of the status quo (underpinned by structured data),
2. the task to be fulfilled with the new functionality, and
3. the intended effects of the new functionality.
Three further gNFTC holders review the proposal, i.e. they check whether the proposal fulfills all the quality criteria mentioned under 2. and either reject it for resubmission or release it for decision-making by the gNFTC token holders.
1. This is a simple majority decision: 2 out of 3 experts approve = approval, 2 out of 3 experts reject = rejection
2. A proposal can be rejected and resubmitted twice. A third rejection leads to a complete rejection and the deposited gNFTC (see 1.) is burned.
Decision of the gNFTC holders
1. The proposal can be voted on within a time frame of seven days.
2. Each gNFTC token represents one vote that can be delegated to other parties.
3. If the proposal is accepted, it will be collected by the Trendhub management team and the deposited gNFTC (see 1.) plus an additional gNFTC will be transferred to the proposer.
4. If the proposal is rejected, the deposited gNFTC (see 1.) will be burned.
Each approved proposal must be reviewed by the Trendhub management team and enters the Trendhub product development cycle (problem validation, testing, implementation)

Market entry

When starting TrendhubTrendhub.one, only certain creators are allowed to import their NFTs:

still own their NFTs
have roughly the same social commitment
NFTs belong to the same “art style”.

This is due to the fact that our system does not yet create meaningful surveys fully automatically. The qualifying factors are added to the algorithm in ongoing updates. Once the algorithm adds NFTs with equal odds based on certain factors, Trendhub is open for all to import in the second phase. Categorization is then based on the NFT creator’s art form and social engagement. The NFT creator must connect their social media channels in the second version of the algorithm after opening their account in order for their NFTs to qualify for voting.

What makes trendhub a decentralized, community-driven rating system?

First, we need to understand what a centralized rating system is.

There is an urge from the Web3 community to drive and support the Web3 Internet Layer, particularly because the middleman in the central system can be manipulated. This is because the projects for the Web3 Internet Layer have, at least in their idea, the claim to provide a decentralized system for their use case.

This means that the party on trendhub, which is valued, is value-driven and not financially influenced.

The system described in detail

Hub creation: A hub creator has the option of defining the title, description and a specific question for the hub that relates to the individual elements within the hub. In the further course of the online creation process, the hub creator creates the items or elements of the hub. Each of these elements has a comprehensive description, a title, various attributes and a kind of “gift container” in which the creator can insert various elements such as images, audio files, code, etc. The elements in the hub can be created in different ways. The elements in the hub can be diverse, e.g. images, videos, video URLs, HTML codes, iFrames, PDFs, Google Maps or audio files that open in a lightbox within the hub when clicked. The descriptions of these elements are detailed and provide a clear understanding of their purpose, their relevance to the hub’s theme and their potential appeal to participants. Using a checkbox, the creator decides whether the hub remains private (only visible to users with an invitation code) or is publicly accessible. They then set the start and end time of the hub. In a final step, the creator can top up the hub’s balance with CRED tokens. After CRED has been added to the hub’s balance, this balance is used for distribution in addition to the CRED paid in by the users. Another option is the checkbox “HUB credit to all”. If it is activated, there is only the “PERSONAL like” button in the hub, and the users who vote on it will also receive the CRED paid in by the hub creator in addition to the points distributed. This is particularly interesting for company surveys where participants are to be rewarded. In addition, the creation form can be switched to multihub, allowing virtual rooms or hubs to be placed directly next to each other. Users can then navigate between the hubs in the multihub using the “Back” and “Next” buttons. The hub can thus be designed for different application areas and target groups.

Community engagement and rewards: The hub creator can distribute gifts and money to their community via the hub, depending on which article a user has liked. Each article can contain a gift that is automatically transferred to the user’s account at the end of the hub. Each article offers the possibility to receive two types of likes: the “PERSONAL like” button, where the user stakes a point for their vote, and the “EXPERT like” button, where a CRED token is staked for the vote. The “PERSONAL like” button is used for subjective votes, while the “EXPERT like” button provides an objective voting perspective to determine which item is likely to be trending for all participants. This voting method is based on scientific findings in order to achieve more meaningful results. When voting with the “EXPERT like”, a CRED token is transferred from the user’s account to the hub account. At the end of the Hub, the total amount of tokens deposited is distributed to the winners according to a fair distribution formula, similar to horse betting. The winners are those who voted for items that received more than 50% of the total votes. Users who use the “PERSONAL like” button gain or lose points and thus rise or fall in a ranking list whose highest rank is “Trendsetter”.

Data access and use:

The system enables the hub creator to collect accurate data on what is trending with users. A hub can be created by individuals, companies, organizations or teachers. Private individuals can use hubs for surveys with friends or family on everyday topics, while companies can use them for product management or marketing surveys. Influencers can use the hub to engage their community and earn money depending on participation. The community also has the chance to win gifts hidden behind the articles. These can also include a link to the next exclusive hub. Educators such as lecturers, teachers or students can use the hub to present topics in an engaging format or discuss them directly in the hub. Possible uses for Trendhub hubs include presentations, shows, challenges, games, stories, discussions, events, ratings, contests, puzzles, sweepstakes, reviews, education and more.

Display multiple content and swiping on Trendhub:

In the middle of the page is a 3D carousel that displays the articles. Users can rotate the carousel with the mouse or swipe it on a mobile device. The content of the carousel is displayed in the same way on both desktop and mobile devices. The carousel displays the content dynamically and ensures that all elements are visible. When the carousel stops, the selected element is displayed in the center above the two like buttons “PERSONAL” and “EXPERT”. Above the carousel is the hub title, below which is the hub info button, which displays the hub description. To the left of this is a link to the hub creator’s profile and to the right is a timer showing the start and end time of the hub. Below the hub info is the hub question. The title and the two Like buttons are displayed below the carousel. Further information about the elements, such as properties and descriptions, are displayed in two differently sized fields below the carousel. The left field dynamically shows the properties of the frontmost item in the carousel, the middle field its description and the right field comments on specific content or general comments on the topic. Users can select the content they wish to comment on via a drop-down field in the comments area. Below these fields is a share button that can be used to share content from the hub on other social media platforms. Below the share function, the total number of points and CRED tokens used in the survey is displayed. At the end of the poll, the points or tokens are distributed according to a fair distribution key, starting with the users who voted for the least popular content and ending with those who voted for the most popular content. At the end of the hub, the hub balance sheet lists who voted for which content and how the prizes were distributed.

Monetization:

Hub creators can earn money from their community with a subscription model and a gamification model. The subscription allows the creator to create different subscriptions. Each subscription can have different subscribers so that different communities can be created. When creating a hub, the subscription created can be selected, and when the hub is created, all subscribers receive a notification that there is new content for their subscription. The hub creator can set an individual price for each subscription, which is regularly charged to the subscriber. trendhub receives 15% of the subscription amount from each subscriber as commission. In addition, the hub creator always receives a percentage of the total amount of all CRED tokens used in the hub.

How trendhub can change the social media landscape

Financial participation in the value creation of content

In the dynamic landscape of social media, user engagement and sustained interaction are of paramount importance. trendhub harnesses the power of gamification to significantly improve user experiences and make interactions not only exciting but also rewarding. The key elements of gamification on trendhub and its revolutionary impact on the social media landscape are explained below.

Understanding gamification

Gamification integrates game elements such as points, leaderboards and challenges into non-game environments to increase user engagement and satisfaction. It uses intrinsic motivations to make activities more engaging and interactive and to get users to be more active and thoughtful.

The advantages of gamification

Increased user engagement: Gamification elements such as points and leaderboards motivate users to engage more deeply with content, leading to more meaningful interactions and a richer user experience. Rewards for contributions encourage users to invest time and effort, providing a sense of accomplishment and recognition.

Improved content quality: Incentivizing thoughtful contributions encourages the creation and sharing of high-quality content. Users are incentivized to provide valuable insights and engage in in-depth discussions, enriching the platform with substantive contributions.

Stronger community bonds: Gamification promotes a sense of community and collaboration. The more engaged users are, the stronger connections they build, which strengthens the overall sense of belonging on the platform. Both collaborative and competitive features contribute to a more cohesive user community.

Increased user motivation: The competitive aspects of gamification drive users to participate more actively. Sustained activity helps to maintain high user participation rates over longer periods of time and ensures a lively and dynamic community.

Gamification elements on trendhub

Reward mechanism: trendhub’s unique reward mechanism differs from traditional platforms that simply count likes or shares. It evaluates the quality of interactions and rewards users for in-depth engagement with content. Users earn tokens based on the likes they receive, which encourages them to engage deeply with posts. This approach not only rewards high quality interactions, but also encourages a more thoughtful social media experience.

Points system: Users earn points by receiving likes on their posts, which contributes to their overall score on trendhub. This serves as recognition and motivation to make consistent and thoughtful contributions.

Leaderboards and challenges: trendhub offers leaderboards that display the top users based on their engagement and points. This competitive feature motivates users to participate more intensively in order to rise in the ranks. Periodic challenges encourage participation in specific activities and create a sense of accomplishment.

Interactive polls and quizzes: trendhub integrates polls and quizzes to engage users. While participation in these activities is encouraged, only likes contribute towards earning points, ensuring that the focus is on high quality interactions.

Community feedback: trendhub allows users to provide feedback on posts through likes, maintaining high standards of engagement. This fosters a collaborative environment where valuable insights are recognized and rewarded.

The impact of gamification on trendhub

The token system is a fundamental part of trendhub and acts as a currency for voting and engagement. Tokens are used to vote on items within hubs, with each vote representing a user’s support and commitment to the outcome of the hub. This system promotes fairness and community-driven success by ensuring equitable distribution of rewards based on user engagement.

By integrating these gamification elements, trendhub creates a sophisticated and interactive social media environment. These features encourage user engagement, improve content quality, strengthen community bonds and maintain user motivation. While trendhub continues to innovate, these elements will play a critical role in shaping the future of social media interaction and ensuring a confident and engaging user experience.

If we now consider how important financial participation is for the community and the promotion of content with the fact that no social media platform currently involves the end users in this sense, it looks like the power structure is unevenly distributed on the platform and creator side, which is not unusual in Web2. However, we do not currently see any improvement, as an ecosystem like trendhub is needed in which the money can circulate in such a balanced way. It requires a kind of distribution of votes among several components that are in competition with each other, and algorithms that control that the money is distributed fairly and equitably among the participants. trendhub has fundamentally geared its system towards involving the community financially and thus making the community responsible for determining the trend of the content and ensuring the corresponding financial reward.

trendhub is fundamentally changing the way in which financial participation in the success of content is distributed among all participants in the social media landscape. This way of thinking about technology is firmly rooted in the entire DNA of ACYC. We didn’t set out to break the power structure in the social media landscape with trendhub’s financial ecosystem, nor was it our primary goal; it’s an important part of something even bigger. It is a component that people in collaboration with the future AI abstraction have a platform like trendhub, where they have a new place for their experience and humanity, with which they can make a living in the long term.

Slow consumption of social media content

In a world where speed and efficiency are often prioritized above all else, consuming social media quickly has become the norm. Users scroll through feeds at lightning speed, like with a double tap and move on in a matter of seconds. This fast-paced interaction can lead to superficial engagement, information overload and digital burnout. But a new movement is challenging this status quo: the slow social media movement. This approach advocates a more conscious, mindful and meaningful way of engaging with digital content. In this article, we look at the slow social media movement and how trendhub is promoting this mindful approach to social media content consumption.

Traditional social media platforms are designed to keep users engaged for as long as possible, often with the help of algorithms that prioritize content designed to attract attention quickly.

Right up to content where negative sensationalism is rewarded, fake news is irrelevant and true objective reporting is undermined.

Although this model may seem enticing, it also has significant drawbacks. Fast scrolling and the emphasis on likes and shares encourage users to engage with content superficially, often without fully understanding or appreciating it. The constant influx of new content can overwhelm users and make it difficult for them to recognize valuable and important information. The incessant pace of social media can lead to stress and anxiety, contributing to digital burnout and a decline in wellbeing. Constantly switching between posts and platforms can undermine users’ ability to focus and engage deeply with a single piece of content.

The slow social media movement offers a refreshing alternative. It encourages users to engage with content in a more conscious and meaningful way, prioritizing quality over quantity. This approach is in line with the principles of mindfulness and promotes a healthier and more enriching digital experience. Applying the principles of slow social media offers numerous benefits. Spending more time with content allows for deeper understanding and more meaningful discussions. Slowing down content consumption can reduce stress and anxiety, leading to better mental health. Meaningful interactions foster stronger, more supportive relationships within the digital community. Deep engagement with content and conversations can lead to a more fulfilling and satisfying social media experience. Especially in today’s fast-paced world, we need an increasingly sensitive approach to content.

trendhub stands out in this movement with unique features that support and encourage the slow consumption of social media. In this way, trendhub is transforming the way we interact online. On trendhub, trends are determined by the community and not by algorithms. This ensures that the content that gains prominence is actually valued by users and fosters a sense of belonging and deeper engagement. trendhub encourages users to spend more time with each piece of content, engaging in discussions, polls and meaningful comments. This fosters richer understanding and substantive interactions. To make the process of slow consumption engaging, trendhub integrates gamification elements. Users can participate in contests that reward thoughtful interactions and content ratings, making the platform both entertaining and intellectually stimulating. trendhub allows users to participate financially in the value creation of content. This not only incentivizes high-quality contributions, but also allows users to share in the success of the content they support.

The slow social media movement marks a significant shift in the way we interact with digital content. By prioritizing quality over quantity and encouraging meaningful interactions, it offers a healthier and more enriching alternative to the fast-paced digital world. Trendhub is at the forefront of this change, providing a platform that embodies the principles of slow social media. As more users and platforms adopt this approach, we can look forward to a digital age where less is more and our interactions are more meaningful and fulfilling.

This realignment of the social media landscape by trendhub encourages a conscious and deeper connection between users and the content they consume, ultimately leading to an improved digital experience for all.

Sweepstakes have a long history and often serve as an effective marketing tool to drive engagement and interest. Historically, these games have often been based on the principle of chance, making them more susceptible to manipulation. In the past, accusations were often made that the results of prize draws were not always fair, whether by influencing the draw or giving preferential treatment to certain participants. This problem has become even more acute on social media, as companies and influencers are often suspected of manipulating competitions in their favor or in favor of those around them. This practice has severely affected user trust and often leaves the impression that the winners are not the actual participants, but friends or acquaintances of the organizers.

Trendhub’s approach: A game of skill (Game of Skill)

trendhub addresses this critical point and offers a tamper-proof distribution system for digital goods that is based on the skills and active participation of users. This approach transforms sweepstakes from a pure game of chance to a competitive, skill-based system (Game of Skill) that emphasizes transparency and fairness.

transparent mechanisms: trendhub uses advanced technologies such as blockchain to document every transaction and vote in a traceable and secure manner. This prevents results from being changed retrospectively and ensures that all participants have equal opportunities.
skill-based competitions: Instead of random selection mechanisms, trendhub relies on competitions in which users have to demonstrate their knowledge, creativity or analytical skills. This creates a platform where performance, not chance, counts.
no room for favoritism: By automating the awarding of prizes and eliminating human decision-makers, the potential influence of bias or favoritism is eliminated. This ensures that it is not the organizer’s “friend or colleague” who wins, but the participants who actually deserve it.
strengthening user trust: The clear structure and traceability of the competitions on trendhub strengthen users’ trust in the integrity of the platform. Users know that their skills and commitment are the true criteria for success.
new opportunities for companies and influencers: With trendhub, companies and influencers can not only run transparent and fair competitions, but also offer innovative access to new content and digital goods. These can be awarded as rewards in a clearly defined and fair competitive environment, increasing the value of the content on offer while encouraging engagement on a deeper, more meaningful level.

Trendhub’s further development: A manipulation-free puzzle system

Building on its robust system for skill-based competitions, trendhub is adding an exciting, interactive component to its offering – the tamper-free puzzle system. Here, the creator creates specific puzzles within a hub that allow users to discover the item with the hidden gift through analysis and deduction.

Effective implementation through innovation and fairness:

clearly defined puzzles and objectives: Each puzzle is presented with clear instructions and objectives, giving all participants an equal chance.
Gamification elements: A motivating and transparent competition is created through points systems, progress indicators and ranking lists.
educational component: The puzzles are designed to be informative and offer learning experiences that go beyond simply winning.

reward system: In addition to main prizes, there are also smaller rewards for achieving intermediate goals, which ensures ongoing motivation.
Security and fairness: Advanced technologies such as blockchain guarantee the security and fairness of the competition by ruling out manipulation.

Conclusion: By integrating a skill-based puzzle system, trendhub not only provides a fair and transparent platform, but also encourages active learning and creative engagement. This strengthens user trust and revolutionizes the way sweepstakes are perceived and conducted on social media. Trendhub thus makes a significant contribution to the development of a responsible and interactive social media landscape.

trendhub is revolutionizing the concept of sweepstakes on social media by creating a system based on skill, fairness and transparent rules. This reorientation shifts the focus from random selection processes to a merit-based system that motivates all participants to get actively and creatively involved. This will not only increase trust in the platform itself, but also create a more sustainable, engaged and responsible ecosystem that will change the social media landscape in the long term.

Trend determination by the Community for the assessment of market values

In a world where traditional media and central platforms often dominate opinion-forming and trend-setting, trendhub offers a revolutionary alternative that puts the power to evaluate and set trends directly in the hands of the community. According to the trendhub motto “CREATING TRENDS TOGETHER”. This decentralized approach makes it possible for products, services and places to be evaluated not by purchased opinions or the influence of well-known personalities, but by the authentic interactions and evaluations of the users themselves.

Creation of trends by the community

On trendhub, trends emerge organically through the active participation and engagement of users. Each participant can rate, discuss and recommend content, providing an authentic picture of its popularity and quality. This way of determining trends is deeply rooted in trendhub’s platform structure and enables users to directly influence the visibility and rating of content through votes and comments.

interactive features: By using interactive surveys, discussions and rating systems, every user becomes a potential trendsetter. This encourages active and conscious engagement with the content and leads to more well-founded, representative ratings.
Transparency and authenticity: Since the ratings and trends come directly from the community, they reflect a genuine and unadulterated opinion, free from commercial pressure or editorial intervention.

Validation of market values by the community

trendhub not only enables the creation of trends, but also their validation in real time. By directly connecting community-based reviews with marketplaces, stores and magazines, a dynamic feedback loop is created that enables companies to receive direct and immediate feedback on their products or services.

influence on marketplaces: By integrating community feedback into online stores and e-commerce platforms, products that receive high ratings on trendhub can be displayed and promoted preferentially. This leads to a direct influence on sales figures based on popularity and acceptance within the trendhub community.
feedback loops: Feedback and ratings on trendhub flow back to the providers, who gain valuable insights into customer perception and satisfaction. This enables agile adaptation of products and marketing strategies that are closely aligned with the needs and wishes of consumers.

Creating a value-driven community

The way in which trendhub involves the community in the evaluation and trend-setting process promotes the creation of a financially independent and value-driven community. The platform not only supports the creation of market value through transparent valuations, but also enables users to benefit from their activity and influence.

financial participation: Users can benefit financially from their contributions and ratings on trendhub, which creates an incentive to produce high-quality content and actively participate in the community.
Independence and autonomy: The community itself determines and validates the trends, reducing dependence on external influences. This strengthens the autonomy of the users and promotes a critical examination of the content.

Through these mechanisms, trendhub is revolutionizing the way reviews are created and made available to the market, representing a new type of review system that is not only more democratic and transparent, but also creates a closer and more trusting relationship between consumers and consumers.

Outlook for the improvement and growth of the platform

A beta version of Trendhub with a limited range of functions is already in operation. The next steps are to scale the platform and to test and add features as described to bring the platform to full development. In a second step, the functions need to be further refined, in particular the tagging process, the survey algorithm and the NFT ratings.

Survey algorithm

The selection of NFTs is crucial for the survey algorithm, as they must be reasonably similar in their characteristics. If they are too different, the surveys could become meaningless. For example, if a Bored Ape (which often sells for tens or even hundreds of thousands of dollars) is only pitted against new NFTs from unknown developers, the winner is easy to predict. Therefore, the poll algorithm must take this into account to ensure fair competition.

In addition to algorithmically generated surveys, many other types of surveys are conceivable, e.g.

self-created surveys (created and curated by users in a separate area);
private surveys (created in a separate area where participation is by invitation only).

The former in particular would lead to a further democratization of surveys: As users can create their own polls, there is no room for the results to be biased by Trendhub’s algorithm. However, the results of all surveys should always be made public to give others the opportunity to criticize them.

Tagging

This in turn has an impact on tagging and NFT ratings. Tagging depends heavily on the quality of the tags assigned. While some tags such as name, creator or price are easy to obtain, others are more difficult to assign, e.g. the art style in which the NFT was created. At the same time, the sheer number of existing NFTs prohibits doing this manually. It will likely require image recognition technology and artificial intelligence to reliably tag NFTs with high precision and recognition.

NFT rating

However, this aspect of fairness must also be taken into account in the evaluation. Assuming a new NFT from an unknown creator wins a poll against known, valuable NFTs, this poll win is worth more than a win against other new NFTs from unknown creators. NFT valuation will have to take this into account in the future. This can be achieved, for example, by introducing “leagues” that NFTs have to go through.

Additional growth levers

In addition to an improved range of functions, user satisfaction and growth of the platform could be increased by applying the following growth levers.

Predicting scores for NFTs that have not been surveyed:
Using the attributes of NFTs and their survey results, it is possible to predict the survey results of NFTs that have not yet participated in a survey. Using the survey results in the community and the underlying attributes of the surveyed NFTs, an artificial neural network can be trained to predict their survey results (within a certain margin of error). This would enable Trendhub to provide instant NFT ratings, making the service even more useful and opening up new revenue streams.

Voting bots

To give experienced voters the opportunity to vote outside the platform, AI-supported voting robots can be used. These bots learn from the behavior and success of the respective voter in completed polls and transfer this to ongoing polls by voting on behalf of the voter. Only expert votes should be semi-automated in this way. Comments or popular votes should not be AI-generated.

White labels and use cases outside of NFTs

NFTs are just one use case, and the product idea can be extended to other areas, such as reviews of products (music, movies, games, services, events, physical products, etc.), celebrities, political parties, etc. There are countless other markets to which the product can be extended. This can be done by NSN, but also by others, in which case NSN could license white label solutions.

NFTtrust.it – A token-based rating system for NFT creators

Problem-Solution fit

NFT Creator & Influencer Trust Rating

As described above, not only NFT creators but also influencers play an important role in the NFT space – and sometimes they act in their own interests rather than the interests of their followers. Therefore, understanding the trustworthiness of an influencer is crucial when considering their advice. However, there are very few resources that allow NFT buyers to do this. This shortcoming is addressed by NFTtrust.it.

NFTtrust.it is a token-based rating system that can be used to assess the reach and trustworthiness of NFT creators and influencers. The rating provides a quick and easy-to-understand overview of the creator’s or influencer’s level of awareness in the NFT community and their trustworthiness. NFTtrust.it has set itself the goal of becoming the number one source of information for all research on creators and influencers.

How will this work? NFT creators or influencers create an account and provide links to their social media accounts such as Twitter, Instagram, etc. in their account dashboard on NFTtrust.it. NFTtrust.it’s algorithm evaluates the historical engagement data such as likes, followers, following, comments, retweets, posts, etc. to assess the likelihood of fraud on their social media presence. This is supplemented by other public data such as search volume and mentions in reputable sources to check the social media presence for accuracy and look for instances of misconduct. In addition, user comments and ratings on NFTtrust.it will also play a role. Overall, NFTtrust.it calculates the rating for each creator or influencer and displays the rating in the context of comprehensive creator and influencer profiles:

Creator profiles:
- Artist description (by artist) and trust rating (according to NFT trust.it)
- Data on their artworks (number of NFTs, liquidity, sales prices, etc.)
- Display of works of art
- Links to and data about their social media accounts
- Press reports and links to relevant articles
Influencer profiles
- Description of the influencer (according to Influencer) and trust rating (according to NFT trust.it)
- Data on their advertising activities (overview of the NFTs advertised and their trading history)
- Links to their promotions and advertised artworks
- Links to and data about their social media accounts
- Press reports and links to relevant articles

In addition, NFTtrust.it will offer value-added services such as

Notifications and summaries of new developments from tracked creators/influencers and new creators/influencers
Like-for-like comparison of creators/influencers
Summaries of trust winners/losers
etc.

The rating is not only displayed on NFTtrust.it, but also where people rate and buy NFTs. For this purpose, a widget code can be retrieved for each account, which is then implemented on a website or activated on one of the NFTtrust.it partner marketplaces. Where the code is implemented, the current rating for the respective account is visible. This function can be booked for a fee.

At a later stage, the creator/influencer rating is also saved as a dNFT, which is constantly updated – similar to Trendhub’s NFT ratings. This makes it possible to track the development of a creator/influencer rating over time and protect it from manipulation.

NFTtrust.it token incentives

Creators and influencers earn tokens for increasing their trustworthiness: After an account holder has connected their social media channels, an algorithm regularly determines the increase or decrease in trust ratings, at least once a week. Depending on how much the trust rating has increased compared to the previous measurement, tokens are allocated to the account.

The tokens earned can be used in the following ways:

Self-promotion: Pay the fee to display the NFTtrust.it rating on third-party websites.
Surveys: Take part in expert surveys or create your own surveys on Trendhub (see above).
Data exchange: Pay the fees for the exchange of data via the NSN protocol (see below).
Withdraw: Withdraw tokens to transfer them to an external wallet. The value of the tokens results from the purposes mentioned above.

Product-Market fit

1. The business model is based on various sources of income

The monetization of NFTtrust.it can be achieved as follows:

Providing affiliate links to the artworks of creators/influencers on NFT marketplaces and aggregators.
Advertising for NFT and cryptocurrency-related content.
Analyze and sell data to interested market participants.
Create lead-outs to TrendhubTrendhub.one and monetize users there.
Provide jobs to creators and influencers.
Take a fee for displaying the NFTtrust.it rating on third party websites.

For the sake of brevity, please refer to numbers 1-4, which are very similar to the Trendhub.

What’s more, #5 comes naturally: not only will NFT buyers turn to NFTtrust.it for data on creators and influencers, but so will businesses looking for ways to promote their products and services. NFTtrust.it can help them find suitable influencers for their purposes and arrange the assignments for them at a lower fee than agencies usually charge influencers.

Market entry begins with the supply side of the platform and takes place in vertical areas.

To run a successful platform company, two things must be fulfilled at the same time:

Enough valuable information and features available on NFTtrust.it to grow the user base.
A significant number of users visiting NFTtrust.it as an incentive for creatives and influencers to join the platform.

However, it must start with the content (information and features) provided on the platform. Therefore, the profiles of creators and influencers need to be pre-populated by NFTtrust.it. In order to achieve strong growth of the platform, incentives are likely needed for them to join the platform. Free display of their trust ratings on third-party websites could be one of these incentives.

Once a significant amount of content is available on the platform, the demand side of the business can be tackled. To reach this point quickly, it makes sense to work in “verticals”, i.e. focus on small definable parts of the NFT space and build them up gradually (e.g. start with manga NFTs only and then add more art styles). This approach allows for a rapid introduction of the supply and demand side within the vertical, which allows for quick insights to be gained and adjustments to be made as needed.

Outlook

First and foremost, it is important to successfully establish the product in the NFT sector. Given the urgent need for more transparency and trustworthy data in this market, this is likely to happen. After successfully proving that the continuous provision of reliable data on the trustworthiness of creators and influencers works in the NFT space, the technology and product can be extended to other markets. This will likely happen first for the cryptocurrency and gaming markets, as the user base of these markets has significant overlap with the NFT market. However, it can also easily be extended to all other markets where the creators of products (manufacturers, brands) and influencers are digitally active.

In more mature markets, other ways of monetization can also be used. In e-commerce, for example, the tokens earned by influencers can be used to purchase an NFT voucher collection from NFTtrust.it:

Coupon collections contain coupons (i.e. discount promotions) for products or services from manufacturers or service providers. They are issued as NFTs, which enables a controlled transfer of ownership.
NFTtrust.it works with these manufacturers and service providers to obtain vouchers for their products and services. These vouchers are used to create the NFT voucher collections.
Depending on the social media engagement of the respective NFTtrust.it account, the creator/influencer receives access to the appropriate NFT voucher collections, which can be sold to followers.
An example: A coupon from Adidas contains a discount of USD 50. The follower buys the NFT voucher from the influencer for USD 20. If 150 coupons are sold, the turnover amounts to USD 3,000, for example. The price of the NFT Coupon Collection paid by the NFTtrust.it user varies between USD 250 and USD 1,500 depending on the value of the coupons.
The ACYC Utility Token is used to purchase the NFT Coupon Collection.

NSN protocol – ensuring a seamless data flow

Problem-Solution fit

The aim of ACYC is to promote trust in NFTs. Trendhub and NFTtrust.it are making valuable contributions to achieve this. But they are not the only ones, and hopefully more organizations will join the effort with their own solutions.

All of these players have one thing in common: they need data to provide meaningful information about NFTs. There are already numerous providers of data relevant to assessing the value of NFTs and some of these providers make their data available on other platforms. As the market is expected to grow significantly and more players enter the market, the provision and collection of available NFT data will become increasingly complex:

Let n be the number of market participants that provide or receive data from others. As n increases, the number of possible n-to-n connections increases exponentially, more precisely as follows:

Instead of establishing and maintaining n-to-n connections, it is more efficient to install a central data connection node. In this case, the number of connections is equal to n, the number of participants joining the data exchange, as shown in the following diagram.

The compatibility of the data is also important. Standardized data is of greater value as it is easy to import, compare and process.

To facilitate this process, the ACYC will establish the NSN protocol. This is a central interface between entities that create and provide metadata about NFTs and entities that use this data – e.g. companies that sell NFTs. Metadata about NFTs includes, for example, ratings of NFTs and creators, certificates, related NFTs, geodata, vouchers, etc. With the NSN protocol, operators of metadata tools for NFTs have easy access to bring their data to where NFTs are sold or applied without providing technical connectivity and cooperation. All in all, this will lead to a more efficient, scalable and low-carbon infrastructure.

NSN protocol as a decentralized NFT metadata infrastructure

If the NSN protocol were implemented as a centralized data collection and distribution solution, NSN would collect data from data providers, process it, store it in a central database and distribute it from that database. However, this is associated with considerable security concerns for the participants:

The data can be withheld by the body that operates the central infrastructure.
If the central infrastructure collapses or is dismantled for any reason, the data may be lost. This can be the case in the event of bankruptcy, for example.

To prevent this, dynamic NFTs (“dNFTs”) can again be used to store the data. They have already been mentioned in the chapter on NFT ratings. For the NSN protocol, however, it is important to understand them in a little more detail: A dNFT is an NFT “with coded smart contract logic that allows it to automatically change its metadata based on external conditions.” This is done through a smart contract that triggers changes in the dNFT’s metadata and thus changes the attributes of the dNFT: When the smart contract is fulfilled, it instructs the respective NFT when and how to change its metadata. As always, everything is stored in the blockchain and therefore the data can hardly be withheld from the public, compromised or destroyed. Incorrect data entries can be reset to previous versions at any time.

Thus, at the core of the NSN protocol, a continuously minable collection of dNFTs is created on a blockchain, e.g. Ethereum or Polygon. A smart contract is opened that instructs the dNFT to change as soon as the underlying data changes. NFT marketplaces or stores receive the dNFT and display it alongside the underlying NFT for which the dNFT contains the data. This ensures the longevity, security and accessibility of the data.

Product-Market fit

Business model still to be defined

There are various ways to earn money with the NSN protocol:

One possibility is that the providers of metadata pay for the provision of their data if clicks on the data lead to visits to their website.

Another possibility is that NFT marketplaces and stores pay for access to the data, as this can lead to more sales through increased trust and transparency. In this scenario, the NSN protocol could emerge organically from the Trendhub API.

Finally, setting up a foundation to fund data collection could be a viable option, with access to the data being granted to selected members or the general public. This follows from the following train of thought: It could be argued that the NSN protocol has some characteristics of a public good, which are characterized by:

Non-excludability: As soon as the good is made available, it is difficult to exclude anyone from using it.
Non-concurrent consumption: This means that the consumption of the good by one person does not affect the availability of the good for others.

Both of these could apply to the NFT metadata once it is stored in dNFTs (depending on whether the metadata is public or restricted) and would make it difficult for a private company to offer the NSN protocol service as it may not be able to recover the costs of providing the good due to its inability to exclude non-paying users and non-rival consumption. Therefore, public goods are usually provided by the government or through collective action by individuals or organizations. The latter could be realized through the establishment of a foundation funded by NFT companies. The Signal Foundation is a well-known example.

Even if the specific financing model has not yet been determined, there are several potential options that could help to maintain and grow the company. Customer and market research must be carried out in order to find a final answer.

Tokenomics

The approach will be very similar to the gNFTC token: NSN will issue a governance token for the NSN protocol to vote on product changes. It will be burned after use. For the NSN protocol, they will be called gNSN and will grant holders the right to influence the future direction of the NSN protocol. However, the exact procedure has yet to be determined once the business model has been decided. A precise description of tokenomics would therefore be dubious at this stage of development and is therefore omitted here.

Market entry

As already mentioned, the NSN protocol can be seen as a further development of the Trendhub API. While the Trendhub API delivers NFT ratings to NFT marketplaces and stores, the NSN protocol goes beyond this.

Therefore, it is a natural first step to start with the Trendhub API and deliver NFT ratings to NFT marketplaces and stores. This step will also show whether marketplaces and stores are willing to pay for the NFT metadata – and to what extent. The next development step would then be to switch to dNFTs with hidden metadata (i.e. access only for paying customers) to ensure data security and transparency. In a final step, the NSN protocol would then be implemented.

Whitepaper

Table of Contents

The Whitepaper of

Abstract

A view on the current state of the NFT space

NFTs and the ownership problem for digital assets

The NFT trading surge-and-collapse in 2021-22

Reasons for the 2022 NFT trading collapse

Overview

NFT investor demographics

Political and macroeconomic factors leading to the 2022 NFT trading collapse

NFT market-specific aspects leading to the 2022 NFT trading collapse

Deep Dive: Deal Fever

Deep Dive: Fraud

Implications for the future of NFTs

Summary

The history of NFT development to date

NFTs and the digital asset ownership problem

The NFT trading upswing and slump in 2021-22 and the further development to date

Reasons for the collapse of NFT trading in 2022

Overview

Demographic data of NFT investors

Political and macroeconomic factors that led to the collapse of NFT trading in 2022

NFT market-specific aspects leading to the collapse of NFT trading in 2022

Accessibility and scalability

Effects on the environment

Usefulness in real life

Concerns about security, fraud and valuation

Deepening: Business fever

Deepening: Fraud

Impact on the future of NFTs

ACYC

Introduction

Vision ACYC

Brand identity

Token value and influence on the ecosystem

Introduction

The professional user and the calculation of market capitalization

Conclusion

trendhub.one – A token-based NFT valuation system

Initial situation

Why is trendhub doing this social media topic now and why not directly with NFT?

But why no NFT yet?

What makes trendhub a NEXT-GEN survey tool

What makes trendhub a decentralized community-driven rating system?

Vision trendhub

Problem-Solution Fit

Overview

Surveys at the heart of the evaluation system

NFT ratings as a strong condensed valuation indicator

NFT search and comparison as a powerful research tool for buyers

Trendhub benefits everyone involved

Product-Market fit

The business model

Tokenomics

Utility tokens

Governance tokens

Market entry

What makes trendhub a decentralized, community-driven rating system?

The system described in detail

Data access and use:

Display multiple content and swiping on Trendhub:

Monetization:

How trendhub can change the social media landscape

Financial participation in the value creation of content

Understanding gamification

The advantages of gamification

Gamification elements on trendhub

The impact of gamification on trendhub

Slow consumption of social media content

Trendhub’s approach: A game of skill (Game of Skill)

Trendhub’s further development: A manipulation-free puzzle system

Trend determination by the Community for the assessment of market values

Creation of trends by the community

Validation of market values by the community

Creating a value-driven community

Outlook for the improvement and growth of the platform

Survey algorithm

Tagging

NFT rating