This article is from WeChat official account:Tencent Research Institute (ID: cyberlawrc) , author: Xusi Yan, Qin Qing, Zhang Caiwei, the original title: “NFT will be the beginning of the digital assets you? “, the title picture comes from: Visual China
In the sports world, it is not uncommon for paper star cards to be sold at sky-high prices. Dapper Labs, the company that has developed the famous chain game “Crypto Kitties” (CryptoKitties), moved this gameplay to the Flow public chain to create an NBA Top Shot platform. Here, every star card containing the player’s highlight moment is sold in the form of NFT, and the user can choose to collect it or sell it in the secondary market. Six months after the open beta, the platform’s transaction volume has approached 500 million U.S. dollars, and its transaction volume and degree of “out of the circle” have surpassed its predecessor, CryptoKitties.
The unstoppable NFT has also successfully entered the art collection market. On March 11th, the artist Beeple’s work “Everydays: The First 5000 Days” was sold at Christie’s for US$69 million. Beeple also became the “third most expensive” among living artists. “. NFT art is favored and recognized by traditional giants, and is regarded by collectors as a major milestone in “out of the circle”.
NFT has repeatedly triggered carnivals. Is it a bubble or a new trend in blockchain? How to understand the behavior of buying digital collections with a lot of money, and how to understand the logic behind it?
(Picture: Beeple, Everydays: The First 5000 Days)
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How can a painting, a song, and a card that are available everywhere on the Internet sell for an amazingly high price after being “on the chain”?
First of all, every NFT is scarce and irreplaceable, and the ownership of the buyer and the copyright of the creator are also truly guaranteed by the blockchain-this is in line with the traditional law of supply and demand.
Secondly, the new crown epidemic has weakened people’s connection in the physical world. People have more time to stay and interact in the virtual space, and they are more open and recognized for the value of virtual goods and services. This may be an external factor that has promoted the rise of NFT in the past two years. [1] As the time of isolation grows longer and longer, art, the space reserved for human spirit and emotion, also It is inevitable to move towards digitalization.
The popularity of the cryptocurrency market since last year has spawned a large number of blockchain believers, and the attention of various digital assets has also increased. Because of its close connection with the physical world, NFT is easy for ordinary people to touch and understand. Coupled with the addition of many artists and celebrities, and the official recognition of traditional institutions such as Christie’s, NFT has entered the field of vision of more people.
NFT is called Non-Fungible Token, which means non-fungible token. Different from using Bitcoin to qualify tokens (Fungible Token) can be split and is not unique. Each NFT has its own unique logo, which is unique and inseparable. NFT was born to solve the problem that the traditional Internet era “copy and paste” cannot protect intellectual property rights.
Today’s NFT trading platform is already very user-friendly. On some open platforms such as OpenSea, everyone can upload pictures and video works through simple operations and make them into NFT, paying a certain “oil fee” (Gas fee, used to maintain the public chain) After , you can place an order for sale, and you can choose to sell at a fixed price, auction or package. For buyers, you only need to prepare cryptocurrency (usually Ethereum) and wallet (such as MetaMask) can go to the primary and secondary trading markets to buy NFTs. Once the payment is made, the buyer’s ownership of this NFT work is permanently and decentrally recorded on the blockchain.
The embryonic form of NFT can be traced back to the “Colored Coins” born in 2012(Colored Coins). Colored coins are built on bitcoin data blocks, which can represent small denominations of bitcoin, and can be used to trade a variety of assets, such as stocks, bonds, and other physical assets.
Beginning in 2016, the Rare Pepes project has used the blockchain protocol CounterParty to turn the frog emoji package that people love to see into a token. People can collect and exchange their own emoticons under certain rules and exchange them for Bitcoin.
NFT really received public attention from CryptoKitties in 2017. In this virtual pet development tour based on the Ethereum public chainIn the play, users can buy, nurture and sell virtual pet cats after opening an Ether wallet. The news that a virtual cat has sold for more than $100,000 is not uncommon.
The rapid popularity of NFT has become a new form of value-carrying industries such as art collections and games. NFT platforms and products have also ushered in a big explosion, and a relatively complete industrial chain has been formed. The entire NFT ecosystem can be divided into the underlying public chain, trading platform, and specific projects and their producers. The total market value is expected to climb to US$710 million in 2021.
The infrastructure of NFT is various public chains, such as Ethereum (ETH), Flow and WAX, etc. ETH is still the most mainstream public chain at present, with a relatively mature and powerful ecology. Flow public chain is a new public chain launched by CryptoKitties parent company DapperLab when ETH is congested, and it also carries the most popular NBA Top Shot at the moment. The main circulation platforms of NFT include the general issuance and trading platforms Opensea and Rarible, and the art trading platforms Nifty Gateway, manufacturersplace, Async Art, etc.
Currently, the NFT projects with high attention are mainly divided into art, games, meta universe, sports, insurance, and domain names. The representative projects are as follows:
Because of the dual characteristics of both art and technology, the upstream of the NFT industry is undoubtedly all kinds of content producers, first of all, the leading chain game development companies Dapper Labs and MixMarvel. With the reshaping of the art industry by NFT, people have also seen the potential for traditional art collection and trading companies, as well as film, entertainment, and media companies, to enter the NFT industry chain.
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Why NFT has gained such a high market popularity in a short period of time, we need to start with understanding the characteristics of NFT.
The primary feature of NFT is scarcity. Once NFTized, each work has a unique identity, and its ownership can only be “exclusively enjoyed” by one collector. The second is the authenticity of NFT. For creators, NFT’s absolute protection of copyright eliminates the possibility of piracy; for collectors, their ownership is also recorded on the blockchain, which is protected and verifiable, ensuring their properties as collectibles.
In addition, Just like other blockchain-based digital assets and digital currencies, NFT is also encrypted and cannot be tampered with. The version number, Mint number, creator, creation and link time, collector and other information in its metadata will be permanently sealed. Therefore, the owner of the NFT is no different from the collector of the physical art, and the former will never have to worry about buying a counterfeit, or the collection being damaged or stolen.
Based on the above characteristics, NFT may have unique advantages and broad prospects in certain fields. The most direct is to bring dividends to artistic creation-after NFT determines the ownership of digital works, it may replace centralized copyright certification agencies and content distribution departments. In this way, artists can directly sell their works for profit without going through third-party agencies such as brokerage companies, auction houses, etc., and can take a draw from every subsequent second-hand transaction-even if the works no longer belong to him, and eliminate the risk of piracy.
We might as well imagine more uses of NFT. First, because of uniqueness and tamper resistance, NFT can record individualInformation, instead of physical tickets to prove identity. For example, tickets can be made into NFT, and each virtual ticket records the individual’s unique identity information and seat number.
Yinsure.finance provides us with new ideas. Like earlier decentralized insurance, yinsure protects its policyholders from property losses caused by code loopholes and hacking in a certain smart contract. The difference is that yinsure makes every insurance policy into NFT under the ERC721 agreement, and every insurance policy can be resold, thus forming a secondary market-which can be understood as a kind of CDS(Credit Default Swap) The prototype. With reference to the scale of CDS in the financial market, it is conceivable that CDS products in the encrypted market also have broad prospects. Therefore, the application of NFT may promote the creation of more and more advanced financial derivatives in the encrypted market.
More importantly, NFT will accelerate the trend of digital assets. Compared with traditional assets, blockchain digital assets have many new advantages, including transparency and credibility, encryption security, programmability, reducing transaction costs and time, simplifying rights management, allowing partial ownership, etc. , Is regarded as an important foundation for the future development of the digital economy.
Digital assetization is through on-chain tokenization, so that digital items native to the Internet can be confirmed and protected. In the past, digital items such as game equipment and virtual gifts were stored on the servers of game service providers. Players did not actually own them, and faced problems such as damage, theft, and black market transactions. With the help of blockchain, developers can create rare virtual items and ensure their scarcity. Users can also store and trade their items safely and credibly. [3]
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At present, NFT itself faces several levels of challenges:
From the perspective of the current situation, although NFT has become a sign of the blockchain from the geek circle to the fan circle, the literary circle, and the consumer circle, it is really the iconic event beeples that people talk about The signal from $69 million is not healthy. Currently, the prices of NFT collections are experiencing huge fluctuations, and the influx of speculators has also caused the prices of collections to deviate from their true value, and even exist.The possibility of a substantial increase in prices by knocking on transactions. For the current NFT collections how to appreciate and how to price, there is still a lack of a unified value evaluation standard, which requires the market to spend a long time to find the price.
It is certain that there is still a big “bubble” in the NFT boom at this stage. After all, from the very beginning of NFT’s birth, it has attracted a large number of speculators who came to “get rich,” rather than collectors who sincerely appreciate works and have the purpose of collecting. Today, looking at those who paid thousands of dollars for simple emojis, it is difficult to tell whether they really care about the ownership of emojis or are eager to participate in this speculative game.
As far as the art market is concerned, the “middleman” has existed for hundreds of years not only to “make the difference”, but also to provide a set of credible standards for the selection, appreciation and pricing of artworks. When the tradition of art appreciation is broken by blind and frequent transactions, art itself may become the biggest victim.
More problems may lie at the level of policies and regulations. There is still no conclusion as to what kind of property rights the various digital assets, including NFTs, belong to in my country’s current laws. NFT’s protection of intellectual property rights still has loopholes. NFT cannot guarantee the originality of digital works-it cannot guarantee whether the work is completely original, nor can it control who is the first person to make a work into an NFT. For example, Swedish illustrator Simon Stålenhag did not publish NFT works himself, nor did he authorize anyone, but found that one of his works became NFT and sold by others. [4] At the same time, the existing technology cannot completely prevent the original author from getting the NFT work on another public chain For secondary sales, we believe that the transfer of the NFT does not mean the transfer of the intellectual property rights of the digital objects pointed to by the NFT. NFT has management possibilities, transfer possibilities, and objective value, and the holder has exclusive control over NFT. Therefore, blockchain digital assets conform to the characteristics of property rights and should be included in the property rights protection system. [5] The existing property right theory should be reviewed as soon as possible to protect the real right status of digital assets.
If the scope of NFT is larger than that of FT, it is actually worth thinking about some in-depth issues from a longer-term and healthy perspective:
First, based on the NFT technology, whether the works based on the NFT technology can really dig out completely different gameplay in the nft scene. Commonly known: the scene of the killer app is still in anticipation.
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Scenes that can be expected are the emergence of cross-game super ips: For example, the robots in the foreign “Star Wars” may appear in multiple movies and games. In the future film or game release, the nft energy of the essential elements Spread across the main body, linking more people.
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Further promote the linkage between the consumer market and the digital market: For example, if the Li-Ning sneakers purchased for 400 yuan offline can be used in the future to buy the same sneakers for 400 yuan + 100 yuan of digital world’s NFT Li-Ning sneakers, which can be worn on QQ Show or game characters.
Second, many application scenarios of NFT still need to pass the test of time. It is not difficult to imagine that more NFT application scenarios will appear in the future. If you put aside the hype and look at the gameplay, and pay more moderate attention to nft, it is not difficult to find that the future retail, consumer, and cultural and creative markets will bring infrastructure-level upgrades.
The true development of NFT requires healthy compliance and the face of the industry, as well as an active embrace of the regulatory attitude and the co-construction of the regulatory authorities with a broader mind.
A little imagination and hypothesis: If on a compliant and qualified blockchain, and a compliant payment method that meets regulatory requirements, build a transaction of digital goods that does not use speculation as the purpose to truly serve the needs of the scene, and at the same time Complete tax declaration based on smart contract.
This kind of orderly promotion will truly build a healthy NFT market. This will also allow everyone to face this new and new thing with a more relieved mentality. With the vigorous development of the digital world, more The subject matter will appear in digital native form. Although the current bubble is still in place, in a long-term perspective, NFT is expected to become more attractive with the development of the digital age. Let the bullet fly for a while and look at it with a more mature mindset.
In any case, through this craze, we have seen that the potential of blockchain surpasses a single digital currency such as Bitcoin. After more than ten years of development, blockchain technology has verified its use in the issuance and registration of digital assets. , Storage and trading capabilities. In the future, the changes brought about by asset form, digital assetization, and asset tokenization are expected. It may not be long before people become accustomed to digital ownership, no longer feel incomprehensible about holding digital assets, and naturally recognize their value-just like we accept Bitcoin today.
Note:
[1]Blockchain, a brief history of NFT: the encrypted art world,
https://mp.weixin.qq.com/s/IEnWmm0qKEWhd9C5TCxe5A
[2]L’Atelier BNP Paribas and Nonfungible.com, Non-Fungible Tokens Yearly Report 2020,
http://nonfungible.com/blog/nft-yearly-report-2020
[3] Tencent Research Institute, Tencent Si Xiao: How does blockchain reshape ownership in the digital world,
https://mp.weixin.qq.com/s/r0MhVhp6aiVu-5OMRtOZCA
[4]https://twitter.com/simonstalenhag/status/1369661661146193925
[5]Same as [3]
This article is from WeChat official account:Tencent Research Institute (ID: cyberlawrc) , author: Xusi Yan, et Qinqing