Kraken, a large cryptocurrency exchange, is in the process of establishing its non-fungible token (NFT) platform. As of Tuesday morning, customers may sign up to be added to the line.
According to David Ripley, the exchange’s chief operating officer, the platform will provide unique services, including subsidizing Ethereum (ETH-USD) transaction expenses, such as gas fees, and the cost of paying for Ethereum, and other proof-of-stake blockchain transactions. Additionally, it would be responsible for the customer’s assets.
“Depending on how you measure it, cryptocurrencies went from seeing modest adoption to something that is a multi-billion dollar industry,” Ripley told Yahoo Finance. “We see over the next five to 10 years, the same type of trajectory and total market size could come to fruition for NFTs, so we are viewing this as a massive opportunity with a massive potential market.”
It is unknown how much Kraken would cover transaction fees, which in certain cases might be more than the NFT pricing itself. The marketplace’s new website advertises “zero gas expenditures for trading on Kraken NFT,” with the caveat that “*Gas prices will be levied for moving NFTs on and off the Kraken platform.”
“Since transaction (gas) costs on Ethereum are substantial, a marketplace that offers zero fees or subsidized costs could attract users from other marketplaces similar to how Robinhood attracted customers from other brokerages by removing trading fees,” Mason Nystrom, senior research analyst at Messari, told Yahoo Finance.
Ripley continued by stating that the platform will first support Ethereum and Solana-based (SOL-USD) NFTs before expanding to further chains in the future. Additionally, a framework for verifying listed projects, incorporating NFT-specific data such as a rarity metric, and allowing users to have custody of their assets with the exchange are included.
The rise of NFT platforms
Kraken’s introduction of its NFT trading platform comes only two weeks after Coinbase Global (COIN) launched its own, which includes a social networking component in an attempt to differentiate itself from competing marketplaces like Open Sea.
Coinbase’s platform, according to Dune statistics, has less than 1,000 users and a total trading volume of $443,100 since its launch. Open Sea witnessed $1.8 billion in trading volumes (ETH NFTs alone) within the same period, according to on-chain data tracker Nansen.
While cryptocurrency prices have declined in recent weeks and interest in NFTs has waned, the market’s trading volumes have remained relatively stable, thanks in part to returning consumers, according to Nansen.
Trading volumes for NFTs on Ethereum, the platform on which the majority of NFTs are created, have increased after a decline at the end of February. The preceding 30 days saw a 52 percent growth in volume, hitting 1.51 million ETH. Weekly volumes also indicate that the market has progressively strengthened, rising from less than $200,000 in the week of February 28 to moreover $450,000 in the last week of April – the third-highest trading week for crypto assets in 2022.
The Ethereum blockchain’s high transaction fees as a result of network congestion have been a recurrent concern for NFT users, most recently over the weekend when Bored Ape Yacht Club (BAYC) creator Yuga Labs held a record-breaking virtual land auction for its highly awaited metaverse, Otherside.
According to Etherscan, the auction generated over $320 million in revenue but also spurred a buying frenzy, with Ethereum transactions increasing from 1,140 to 104,999 in 24 hours. As a consequence, Messari estimates that expenditures climbed by 94 percent, from $11 to $200, resulting in approximately $180 million in transaction fees from the sale, with a portion of those payments not resulting in a purchase.
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