Disentangling the Relationship between Portfolio Homogenization and Transaction of Non-fungible Tokens

There has been an explosion in the popularity of Non-Fungible Tokens (NFTs), drawing attention from practitioners and scholars alike since 2021. Each NFT denotes a digital asset in the likes of an artwork, a tweet, or a video that is recorded on the blockchain with a unique identifying code. In turn, the emergence of NFTs has transformed the digital asset landscape. With the rapid growth of the NFT market, there is a concern that the market is becoming increasingly homogenized due to readily available blockchain technologies and relatively low costs of NFT mints. To this end, this study attempts to elucidate how NFT portfolio homogenization affects transaction volume and variation in the marketplace. Particularly, we collected and analyzed a dataset of 2,004 collections comprising 7,151,515 NFTs from OpenSea, a leading NFT platform. We discovered significant inverted U-shaped relationships between NFT portfolio homogenization and transaction variation and transaction volume