Author: Hashkey Research; Author: Cao Yixin, working at HashKey Capital Research; Reviewer: Zou Chuanwei, Chief Economist of Wanxiang Blockchain

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A brief introduction to the data element market

Data is the basic resource for the development and application of new technologies such as artificial intelligence. Under the general trend of digital economy empowering the development of real industries, the multiplication effect of data on the efficiency of technology and other factors has made it a competitive weapon. In the commercial application of recommendation algorithms particularly prominent. However, personal privacy data is abused, and data property rights (Note: property rights can be subdivided into "bundles of rights" such as ownership, possession, control, use, income, and disposal.) are not clearly defined, and data is isolated. Problems such as copying and misappropriation highlight the immaturity of the data element market in the production, collection, analysis and transaction process. The development of the data element market is still in a very early stage and needs to be nurtured by the simultaneous development of the legal system and technology.

In terms of law, the United States and the European Union passed legislation in 2019 to promote the open sharing of government data (Note: the United States' "Open Government Data Act" and the European Union's "Open Data Directive."), emphasizing that open data should be disclosed in a standardized and machine-readable form, and exploring Share real-time data through the API interface. Internationally, discussions on the data sharing methods between G2G and G2B and the rights and obligations of data managers, users, and data subjects have been carried out. In terms of data property rights and protection, in addition to the detailed definition of personal data property rights proposed by the European Union’s GDPR, there are still many obstacles. One voice is to shift from establishing ownership or intellectual property protection systems for data elements to seeking multiple interests on each data pipeline Balance; emphasizes the balance of data access, control and distribution of rights and interests. In terms of cross-border flow of data, the protection of data sovereignty is particularly critical in the context of geopolitics, which poses challenges to the globalization of the digital economy. The EU and the United States are promoting a data free flow circle based on bilateral or multilateral agreements. Other cutting-edge discussions such as the pricing mechanism of data elements and the digital tax system have also been launched one after another. In April 2020, the Central Committee of the Communist Party of my country and the State Council's "Opinions on Building a More Complete System and Mechanism for the Market-oriented Allocation of Factors" listed data and traditional elements such as land, labor, capital, and technology as one of the elements for the first time, and proposed to accelerate the cultivation of data The factor market, including promoting the opening and sharing of government data, enhancing the value of social data resources, and strengthening the integration and security protection of data resources, affirms the strategic development significance of this direction. In April 2021, the drafts of the "Data Security Law" and the "Personal Information Protection Law" were announced, laying a preliminary legal foundation for regulating the data element market.

In terms of technology, the main directions of efforts for the data element market are: 1. Data security; 2. Personal privacy protection and market configuration mechanisms in data open sharing, including data rights confirmation, fine-grained authority control and privacy calculations 3. Data production pipeline design for Internet of Things, edge computing, fog computing, cloud computing, etc. In the industrial world, Alibaba proposed the concept of "data in the middle" and carried out the practice of realizing data interconnection and generating insights in complex business formats.

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NFT smelts data into resources

The exploration around the data element market is inseparable from thinking about the characteristics, value and configuration mechanism of data elements. One of the characteristics of data elements is that non-homogeneity is relatively common, and the coverage and classification are not as clear as other elements. The micro-market structure is more diverse in the absence of classification standards. Trading in the form of over-the-counter derivatives transactions.

Another characteristic of data elements is their digital nature. Unlike land, labor, and physical resources, data elements have the uniqueness of microscopic atomic composition and migration resistance in physical space. The digital characteristics make it extremely easy to be tampered with or copied, and they are easily attacked and destroyed in the process of production and transaction to infringe data The value of the element itself. It brings more obstacles to the over-the-counter trading market, which is not as regulated as the on-exchange trading market.

On the one hand, NFT realizes the construction of standardized contracts for some digital assets, maps them to non-homogeneous tokens on the blockchain, and can rely on the blockchain to build a relatively more transparent and traceable peer-to-peer trading market; at the same time, NFT makes Digital assets have certain quasi-physical properties: in the digital world, NFTs cannot be copied, and NFTs that have not been certified by the issuer will be quickly identified, and their transfer is atomic, rather than copying and pasting in a centralized server. Therefore, NFT is expected to be applied to "smelt" data elements into resources in the digital world to strengthen protection of their value and promote the implementation of standardization.

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Enlightenment of NFT value capture form

From the perspective of the product life cycle where the data elements are located, some data elements can be directly used as final products to bring use or service value to buyers, such as digital artworks, audio-visual files, etc.; some data elements can be processed and refined as intermediate products non-noise information. According to the analysis framework provided by the DIKW model, based on some data, people can sequentially extract higher-order data elements such as information, knowledge, and wisdom, and these extraction processes are closely integrated with application scenarios.

The product categories on OpenSea, the NFT secondary trading market, include artwork, music, virtual world assets, trading cards, collectibles, domain names, etc. Under the above-mentioned classification framework based on value attributes, several mainstream application forms of NFT currently output final The products are mainly used to meet the needs of buyers for entertainment and speculation. The demand group is relatively small, and there are problems such as difficulty in forming fair pricing and poor liquidity, which hinders the further promotion of financial services based on NFT.

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Implications for NFT Interoperability

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Table 1: Classification of Products by Economic Characteristics

In the NFT market, one phenomenon we can observe is that some club products have been transformed into private products. For example, a popular game needs to give a virtual game item to each of one million users. Under the traditional business model, it corresponds to combining the data elements corresponding to the virtual game item in a centralized database in the form of a record book. One million game IDs are associated. This data element can be used by different people at the same time, and repeated use will not cause loss. It is non-competitive. In the implementation of NFT, game assets can be visualized in the form of NFT and assigned to each user for independent ownership, so that they can gain absolute control; these NFTs can start different life cycles under the control of users to capture differentiation value, and can be freely sold in some secondary trading markets. The exclusivity of the product is further ensured through private key signature certification. The copies of some creative works may have unequal value under the operation of buyers (such as binding Twitter comments, synthesizing with other NFTs, etc.), reflecting different value-added effects.

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The Enlightenment of NFT Programmability

Summary and reflection

Summary and reflection

• The blockchain technology and standardized smart contracts corresponding to NFT provide a realization path for data elements to transform from copy-pasted information to quasi-physical resources. However, it is worth further consideration to evaluate whether data elements need to participate in the transaction market circulation in the form of resources. For example, in a specific application scenario, specific time-sensitive data elements are circulated in fewer transaction links, and it may not be necessary to cast them into NFT. For data elements that are expected to undergo multi-link or repeated circulation, additional information in the circulation process, and value increasing over time, casting it in the form of NFT may better lock or capture value for it. However, the current blockchain and data storage technology based on NFT still need further iterations.

• The realization of influence is a form of value capture of NFT. Users can generate certain influence through processing and sharing data elements, so that users can obtain the value of influence. Currently, social tokens that output blogs, community culture and other content are the main forms of expression. . In this regard, NFT provides a new way to realize the Internet celebrity economy through short video live broadcasts and other means.

• The "privatization" and "customization" features of NFT make it easier for NFT to have social attributes and higher interoperability. For reference, in addition to data elements being sent to the recommendation algorithm as raw materials collected by merchants, allowing users to passively accept advertisements that may not be needed, can they also build their own feature sets by improving users’ subjective initiative, and have the right to expose themselves? Screened feature combinations (a data element) to actively obtain desired information (also a data element) push.

• The programmable feature of NFT provides some references for improving the flexibility of the configuration mechanism of the data element market.