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What Do NFT Projects do With Ethereum They Get

Last updated: | 3 min read

The majority of ethereum (ETH) from primary non-fungible token (NFT) sales, at 52.3%, continues to circulate among non-entity wallets, while a notable amount of revenue from primary sales is reinvested into NFTs, according to a recent analysis by blockchain analytics platform Nansen.

Source: AdobeStock / GavrBY

Entity wallets are wallets that Nansen has labeled and attributed to a specific entity (e.g., OpenSea, Rarible, etc.), the team said for

Therefore, non-entity wallets are those that Nansen have not labelled and attributed to any specific entity – meaning that a non-entity wallet could be an individual wallet, or even just an entity that has not yet been labeled.

The analysis sought to provide insight into what happens to the crypto that is spent on NFTs, and how it affects ETH’s prices.

A 17.7% share of the ETH used to purchase NFT at primary sales has been injected back into NFT projects, including mints and marketplaces such as OpenSea or Rarible, according to the report.

Some 10.4% of the crypto has been used on decentralized exchanges, either as liquidity or for swaps, while 3.6% of the spent ETH has been deposited on centralized exchanges, Nansen said.

Source: Nansen

The analysis proceeds to remove the ETH flow to non-entities, and evaluate the ETH flow into the entity segment with more depth.

“Almost 22% of this flow is returned to OpenSea, presumably to purchase more NFTs,” the report said.

Furthermore, crypto exchange Binance “tops the list” in terms of centralized exchanges (CEX) deposits, capturing 13.75% of the Ethereum flow to entities.

Major decentralized exchange Uniswap (UNI) follows close behind with 9%.

“Around 6% is also used for CryptoPunk-related activity, possibly as capital to make a purchase,” said Nansen.

Source: Nansen

Nansen concludes that the NFT industry remains spotted by certain profit-seeking practices, with detected on-chain indication of founders buying up the floor for some projects.

“Such behaviour may indicate ongoing wash-trading. Nevertheless, the healthy distribution of NFT minters and rising number of unique buyers points to genuine, organic growth of the NFT community. Certain projects also stand out by reinvesting primary sales revenue into NFTs, under the governance of their own community,” according to the report.

Within the primary NFT market, Nansen notes 645 NFT projects, and estimate that around ETH 84,000 (currently USD 261.77m) has been deposited into ERC-721 NFT contracts since last June.

This constitutes the primary ‘sales revenue’ accumulated from addresses that are first to mint these NFTs, the report explained. Some ETH 75,000 (USD 233.72m) has been transferred out of such contracts. 573 projects have transferred ETH out, while 72 projects still haven’t touched the coins in their treasury, the analysis said.

This said, the company has identified only 80 NFT projects that achieved a primary sales revenue of ETH 300 (USD 934,872) and above, with a median revenue of ETH 10.2 (USD 31,786).

As for secondary sales, Nansen opined that:

“Plotting historical trading volume alongside the number of unique buyers since July, we can tell that secondary buyer interest in NFTs has begun to dampen in August. Dips in Ethereum trading volume which might be indicative of lower sales prices, while the decrease in number of unique NFT buyers might point to a lack of new participants entering the NFT space.”

However, since its low seem on August 19, there has been a strong rebound in NFT trading, concluded the report.


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