Characterizing NFT markets through a multilayer network approach

Abstract

The rapid growth of Non-Fungible Tokens (NFTs) and the extensive trading activities associated with such an intriguing domain led to the emergence of large-scale and interconnected transaction networks involving the most prominent NFT markets. Despite such interdependencies representing an inestimable source of information for the proper understanding of the NFT landscape, previous studies treated each market separately, overlooking relevant phenomena. In this study, we explore a multilayer network modeling approach to analyze transactions in multiple NFT markets. We reveal previously unnoticed macroscopic and mesoscopic traits by investigating indicators that discern whether markets are independent or linked: users trading NFTs are organized in cross-market communities where multi-market users act as bridges across marketplaces, adapting to the diverse nature of the markets they operate in. We also conduct an in-depth examination of such multi-market users, studying their specific activity patterns that leave a distinctive mark on the system: the majority of multi-market users well differentiate their earnings and expenses among the markets, while a fraction of them is directed toward a more polarized money allocation based on the typology of the markets. By offering a fresh perspective on this intricate financial system and emphasizing the importance of perceiving the NFT markets as a unique and interconnected world, our study paves the way for further contributions aimed at unraveling the complexity of cryptosystems and understanding the latent phenomena across NFT markets.