What is Flow NFT? A Complete Guide.

March 6, 2023

In conclusion

Intro

Image source: Gaia

On January 25th, Doodles announced Doodles 2 would be launching on the Flow blockchain. When asked why they chose Flow, the Doodles team said:

Because we believe Doodles should be able to live everywhere, we wanted a partner for Doodles 2 that could support our vision for where digital identities could go. Thanks to Flow’s powerful composability, holders can have Doodles that are portable and interoperable across social platforms, gaming worlds, live events, streaming content, retail activations and other imaginative moments.

I wanted to dive deeper into the Flow NFT ecosystem to better understand the reasons described by the Doodles team. I’ve researched the tech, created my own Dapper Wallet and purchased NFTs on Flow. 

At the end of my research, I feel more knowledgeable about this blockchain, and I am excited to share what I learned with all of you in this article.

History of Flow

Image source: CryptoKitties

In November 2017, a company called Aziom Zen created one of the first mainstream NFT projects, CryptoKitties. The team behind the project had no idea NFTs were going to take off as much as they did.

Almost instantly, CryptoKitties was one of the top three most active smart contracts on the Ethereum blockchain. Within a week over $5 million in transactions had been processed on CryptoKitties; this accounted for almost 25 per cent of Ethereum traffic at the time and caused massive network congestion. (Source)

The Axiom Zen team spoke to Ethereum developers about the congestion and Axiom Zen wasn’t satisfied with their answers for scaling solutions on Ethereum. As a result, they decided to relocate the CrytoKitties to a new chain. The team researched hundreds of other options and ultimately determined none of them met the criteria they were looking for. A new company called Dapper Labs was created with the goal of creating a new blockchain called Flow and with that, taking ownership of the CryptoKitties brand.

The Flow Blockchain

Image source: Flow.com

“‍Flow is a fast, decentralized, and developer-friendly blockchain, designed as the foundation for a new generation of games, apps, and the digital assets that power them.” (Source)

When building the protocol, the developer team prioritized the user experience. Their goal is to be a blockchain entertainment company and onboard the next billion users of NFTs. Dapper Labs believes having a seamless onboarding experience is at the core of that goal. 

There is a lot of scrutiny that the Flow blockchain is not decentralized. The reason people say this is because in order to run a Flow node, you need to be approved by the Dapper Labs team. In contrast with Ethereum, anyone with a computer can run a node. It is permissionless. Dapper Labs CTO, Dieter Shirley (“Dete”), would dispute that claim.

On a recent podcast with Carly Reilly, Dete said there are aspects of the security on Flow that aren’t done yet and so they’ve been thinking about choosing partners who are both willing and capable of operating effectively in this environment. It’s no secret that Flow and Dapper Labs have a long frame time horizon. I really like the way Dete explained this mindset in the podcast; he said, “Flow was built to be modular in the long term but integrated in the short term to get consumers easily onboarded.” Because of this, Dapper Labs and Flow are more intertwined than many would prefer.

The Tech Stack

Although this deep dive is focused on the NFT ecosystem it’s important to understand the underlying technology at a high level (don’t worry, I’m not a developer so I’ll use plain English as much as possible).

The flow blockchain has four different types of nodes with different responsibilities

  • Execution nodes
  • Consensus nodes
  • Verification nodes
  • Collection nodes

Image source: onflow.org

The key takeaway with this setup is to separate the process of ordering and selecting transactions from their computation. As a result, they don’t need any sharding mechanism (splitting one data set across multiple databases).

The consensus mechanism for Flow is called Hot Stuff which is a Proof of Stake mechanism.

Prospective nodes must be approved by the Dapper Labs team and the process to get approval is elaborate.

The programming language on Flow is called Cadence which is very developer friendly and based on the Move programming language.

Flow NFT History

Image source: NBA Top Shot

Flow is a top 4 blockchain in terms of total volume with $1.2B traded all time. This is behind ETH, SOL, and Ronin (for reference ETH has $36B of total volume).

Outside of Crypto Kitties, the first NFT project that took off on Flow was NBA Top Shot. The NBA licensed their IP to Dapper Labs for them to build out this project. The mainnet version of the project was released in October 2020 and it completely took off. At this time $BTC was trading at about $9k and shot up to $60k by April 2021. People were crypto-curious and NBA Top Shot’s release was the perfect outlet.

I believe it gained more traction than anyone at Dapper Labs expected. The Dapper team was building the product for long-term collectors but with the unpredictable traction the project gained, the net result was many more speculators coming to the project than collectors. 

Flow had $835k of total sales in October 2020 and by February 2021 the total sales volume had reached $224M (268x in 5 months)! However, since the Dapper Labs team was not prepared for this kind of volume, there were many issues. Collectors had trouble withdrawing funds from the site as the standard waiting period was 30 days. Additionally, customers could only withdraw $1,000 per day and it could take weeks to process the transfer.

Disgruntled customers left the site and moved into other NFT projects such as Bored Ape Yacht Club on Ethereum. By July 2021, Flow's sales volume dropped to $22M, a 90% decline in only 5 short months.

Top NFT Projects

Image source: NFL All Day Marketplace

According to Flowverse, the top 5 NFT projects on Flow are:

  1. NBA Top Shot ($1.2B total sales)
  2. NFL All Day ($95M)
  3. UFC Strike ($22M)
  4. Ballerz ($15M)
  5. Matrix World ($7M)

There are two main takeaways after looking at this data. First, NBA Top Shot is still the dominant project on Flow by a wide margin. And second, the top three projects are all sports related.

Dapper Labs has done a fantastic job of partnering with the largest professional sports leagues in the world. Whether you believe in Dapper Labs/Flow or not, this is noteworthy. According to Forbes, the NFL brought in $18B of revenue in 2022 alone. Exposing the NFT market to all of the NFL is a massive opportunity and lines up with Dapper Lab’s goal of bringing in a billion users.

Another thing to notice about this listing is that the majority of them are partnerships. You don’t see a lot of “start-up” NFT projects launching on Flow. I believe the reason for this is because of liquidity. If you’re a new NFT project and you’re deciding which chain you want to launch on, you want to go where there are buyers and sellers. Over the last 30 days, there has been $949M of volume on ETH compared to $7.5 on Flow. 

With NFTs it’s easier to be a small fish in a big pond than a big fish in a small bond. The reason for this is that buyers of ETH NFT projects can easily purchase other ETH NFT projects without having to bridge assets or learn about new software. Think of all of the steps it takes to purchase an NFT on a new chain. You have to set up a wallet, purchase the native token, and learn where to buy and sell. It’s a lot of effort!

If you’re someone like the NBA or NFL it can make sense to launch on Flow because the name brand will attract people and they’ll be willing to go through all of the steps. But, if you have no name recognition, then people won’t make the effort.

Flow NFT Marketplaces

One thing I noticed about Flow is that the larger projects have their own marketplace. For example, there is an NBA Top Shot marketplace and an NFL All Day marketplace. However, the largest comprehensive marketplace I found is Gaia.

I found Gaia had a good user design but unless you knew the project you were looking for, it was hard to find projects. There are featured collections on the home page but I didn’t see any listing of top projects or trending projects. This is a feature I’ve become accustomed to with OpenSea, Blur and MagicEden. 

Image source: Gaia

Once you click on a project it looks very similar to OpenSea with a listing of all available NFTs for purchase.

However, there were two tabs that were new: “About” and “Challenges”. The “About” tab does a good job of giving you additional information about the project. This is typically something I’d go to Twitter or Discord for so it’s great to see it integrated into the marketplace.

The “Challenges” tab is what differentiates Flow for me. This is a blockchain built for collectors, not traders. The type of person on Flow wants to “use” their NFT, not just have the price go up (although I’m sure that’s not something people are opposed to). Flow/Dapper Labs does a good job gamifying the experience. This can create long-term customers as people will be encouraged to come back, again and again, to see what new opportunities exist for their NFTs.

Image source: Gaia

One thing that I thought was missing from Gaia is some analytics. I couldn’t find any metrics around floor price over time or volume over time. I think this goes back to the point about Flow being something for long-term collectors and not traders. Still, it’s something I’d like to know. 

Flow Wallets

Image source: Blockchain Gamer

Referring to Flow’s developer documents I found a few wallet options:

  • Blocto is a custodial web, iOS and Android wallet
  • Ledger offers hardware wallets
  • Dapper Wallet is a custodial web wallet
  • NuFi is a non-custodial wallet with NFT, staking and Ledger support
  • Lilico is a non-custodial web wallet focused on NFTs
  • Finoa offers an institutional-grade custodial wallet
  • Flipper is a non-custodial browser extension wallet
  • Dapper Self Custody is a non-custodial mobile wallet (BETA)

I purchased two Bud Light Survivor Pool NFTs and I used the Dapper Wallet to purchase them. The experience was extremely easy. I only needed an email address to set up my wallet and I was able to purchase the NFTs with my credit card. From a user onboarding experience, this was much easier than creating a MetaMask wallet and purchasing ETH. 

Ticketmaster on Flow

Image source: LiveNation Entertainment

Creating on-chain tickets has long been considered one of the best use cases of NFTs. Imagine being able to verify how big of a fan of a team you are based on how many games you attended.

Ticketmaster is doing just that, and they chose the Flow blockchain to issue their NFT tickets. Thus far, it is said that 10M tickets have been commemorated as NFTs. The goal here is to bridge the digital world with the physical world. For example, having a digital ticket could give you access to behind-the-scenes player access or a 20% discount at the team store. 

The way this has worked thus far is that individuals receive an email after the game they attended that allows them to redeem their commemorative NFT ticket. It’s important to note that this is different from NBA Top Shot and NFL All Day in that this is not a partnership between Dapper Labs and Ticketmaster. Ticketmaster is building its own product on Flow.

Community

Image source: Finance Brokerage

This is an area where Flow struggles. You won’t find the passionate community that you see with ETH or SOL NFTs on Flow. I believe one reason for this is that many people who were first onboarded onto Flow had a poor experience with cashing out through NBA Top Shot and chose to not come back.

Given the goals stated by Dapper Labs, I don’t believe we’ll see the traditional NFT investor transition to Flow. However, Flow has the best chance of bringing in non-crypto native individuals. I believe this is where they’ll find their community. 

Doodles 2

Image source: Flow

Going back to Doodles making the big announcement that Doodles2 will be on Flow. The reasons stated for doing this aligns with the goals of Flow. The Doodles team wants to offer the best possible user experience. They want to create a product that has complex on-chain transactions. They want to create blockchain-based games, apps and social networks. Flow allows them to do all of these things and much more.

After doing my research, the announcement from Doodles makes complete sense.

Conclusion

Image source: Bitcoin.com

Like any chain, there are pros and cons associated with Flow. The question is do the pros outweigh the cons?

In my opinion, if you’re an established brand or focused on non-NFT native individuals, the Flow blockchain is a great choice. It will always receive a bad rap from the “traditional” NFT community because of the reasons mentioned. But, to be honest, that’s not the target audience for Flow. They’re trying to attract a different type of person and every decision they make is aligned with that goal.

I have no doubt Flow will be here for a long time and if they continue to attract big brands, then they will rival Ethereum and Solana for the top NFT blockchain.

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