Pavel Alimov, Director of Mach Fund, talks about the market and prospects of non-fungible tokens (NFT).

VIDEO [Russian; Translation Support]

Coherent exposition of the presentation

1. Hands-On NFT Market Experience. Pavel Alimov positions himself as a market practitioner with direct, long-term exposure to the NFT ecosystem, including personal collecting activity and participation in digital asset management projects. He emphasizes two years of continuous, hands-on market observation, covering both profitable and failed monetization models. This experience enables a sober, non-speculative understanding of NFT dynamics. From the outset, he frames NFTs not as a vehicle for quick returns, but as a structurally complex and evolving market.

2. Origins of the NFT Concept. The speaker explains the nature of NFTs as non-fungible tokens, clearly distinguishing them from fungible cryptocurrencies. He notes that the NFT concept predates the recent hype cycle and originated during early Bitcoin experiments aimed at embedding additional data into the blockchain. Early initiatives such as “Colored Coins” were primarily technical explorations rather than commercial ventures. Monetization emerged later as a secondary outcome.

3. Engineering and Artistic Foundations. Mr. Alimov highlights that early NFT adopters were predominantly engineers and experimental digital artists. Engineers viewed NFTs as a technical challenge, while artists explored new modes of digital expression. Financial incentives were not the primary driver at this stage. This intersection of engineering and creative experimentation laid the structural foundation for the NFT industry’s subsequent expansion.

4. Ethereum and Smart Contract Enablement. The speaker underscores the pivotal role of Ethereum in enabling NFTs through programmable smart contracts. Ethereum was the first blockchain to support complex, autonomous logic executed without ongoing author involvement. Smart contracts operate as immutable code once deployed, enforcing predefined rules automatically. This programmability fundamentally differentiated NFTs from earlier token models and enabled scalable NFT markets.

5. NFTs vs. Fungible Tokens. Mr. Alimov clarifies the structural distinction between fungible tokens and NFTs. Fungible tokens are interchangeable and additive, whereas each NFT represents a unique, non-replicable asset. NFTs can reference diverse digital content, including images, video, text, and 3D or immersive media. Functionally, an NFT serves as a unique cryptographic pointer to a specific digital asset.

6. Digital Asset Storage Risk. The speaker draws attention to a critical infrastructural issue: NFT content is typically stored off-chain using external systems such as IPFS rather than directly on the blockchain. This architecture introduces counterparty and availability risks if storage services degrade or disappear. Additionally, post-mint modification of content is generally impossible, limiting use cases that require dynamic or evolving assets. These constraints represent material technological risk factors.

7. Structural Technology Constraints. Mr. Alimov references conceptual NFT projects that intentionally leverage immutability as part of their artistic or conceptual framework. However, he acknowledges that current NFT infrastructure remains ill-suited for flexible, updatable digital assets. Alternative storage-focused blockchains have not yet achieved broad adoption. Despite its limitations, Ethereum continues to define market standards.

8. Core NFT Token Standards. The speaker outlines the key NFT standards: ERC-721, ERC-998 and others. ERC-721 supports unique, one-of-one assets; ERC-1155 enables semi-fungible or batch-minted digital assets; ERC-998 allows for composable tokens that aggregate multiple assets under a single parent token. He characterizes ERC-998 as a container for complex digital asset portfolios. These standards materially expand NFT application scope.

9. Fully On-Chain NFTs. Pavel Alimov highlights experimental NFT projects where visual output is generated entirely on-chain via smart contracts, eliminating reliance on external storage. He cites Larva Labs’ Autoglyphs as a notable example. Such projects maximize blockchain autonomy and permanence. From a market perspective, they function as stress tests for blockchain infrastructure rather than scalable commercial models.

10. Market-Level Structural Challenges. The speaker identifies three systemic NFT market challenges: data storage reliability, intellectual property enforcement, and asset discoverability. Digital content remains trivially replicable, undermining exclusivity narratives. Marketplace navigation and indexing are underdeveloped, creating fragmented user experiences. Collectively, these issues constrain institutional participation.

11. Emerging Infrastructure Solutions. In response, the expert discusses early-stage architectural solutions, including hybrid storage models and indexing-enabled smart contracts. These approaches often separate public metadata from private or controlled content layers. While promising, such solutions remain experimental and lack standardized implementation. The market has yet to converge on dominant infrastructure models.

12. Market Scale and Growth Phase. Mr. Alimov references multi-billion-dollar NFT transaction volumes accumulated over a relatively short time frame. He asserts that these figures represent real on-chain activity rather than purely speculative estimates. From his perspective, NFTs remain in an early exponential growth phase. He compares current blockchain infrastructure maturity to the dial-up internet era.

13. Leading NFT Blockchains. The speaker evaluates three primary NFT ecosystems: Ethereum, Solana, and Tezos. Ethereum remains the most mature and liquid but is constrained by high transaction costs. Solana offers aggressive scaling ambitions but exhibits technical instability. Tezos positions itself as energy-efficient and artist-centric, with a rapidly expanding creative economy.

14. Price Formation and Manipulation. Pavel Alimov addresses price distortion mechanisms driven by market makers and coordinated wallet activity. NFT prices can be artificially inflated through self-trading or wash transactions. Consequently, headline valuations may not reflect organic demand. He emphasizes that realized buyer willingness is the only defensible measure of asset value.

15. NFTs as Adoption Infrastructure. The speaker frames NFTs as a gateway mechanism for broader crypto adoption. NFTs make blockchain technology more tangible to non-technical users. However, he strongly cautions against narratives of effortless profitability. Sustainable returns in NFTs require the same analytical rigor, execution, and risk management as traditional asset classes.

16. NFTs as Digital Luxury Assets. Pavel Alimov interprets high-value NFTs, particularly CryptoPunks, as a new category of digital luxury goods. Their value derives primarily from social signaling, scarcity, and historical primacy rather than artistic merit. For crypto-native communities, they serve a role analogous to luxury watches or fine jewelry. Over time, select assets may achieve cultural or archival significance.

17. Artist Economics and Competition. A substantial portion of the discussion focuses on artist participation in NFT markets. Mr. Alimov stresses that NFTs do not eliminate competition or guarantee monetization. Digital artists face oversupply and intense attention competition, requiring sustained marketing efforts. Artists with established offline reputations tend to exhibit greater resilience and pricing power.

18. Legal and Regulatory Status. In conclusion, Pavel Alimov examines the legal treatment of NFTs. In most jurisdictions, NFTs lack clear recognition as property or financial instruments. The United Arab Emirates (UAE) stands out as a jurisdiction with emerging licensing and regulatory frameworks. Globally, NFTs remain classified as undefined or ancillary crypto assets, creating regulatory uncertainty for institutional actors.