Recently, the NFT market has been extremely frenzied. Many well-known companies have released NFT products one after another, keeping up with the trend of the Internet era and attracting a lot of traffic. Overseas Audi released a series of NFT art works, which were cast and released in limited quantities in the form of NFT art blind boxes, and presented to Audi owners; Burberry cooperated with American game companies to launch limited-edition game characters, which players can collect and sell in the game NFT dolls. In addition, Louis Vuitton, Marvel and even the International Olympic Committee have launched limited NFT products...

Domestic Ali Taobao launched auctions for digital art NFTs; Alipay launched a new payment code skin NFT on AntChain, which was sold out in a short period of time. Among them, the highest price on the "Xianyu" second-hand trading platform was 1.5 million yuan per piece Hu Yanbin released the 20th anniversary commemorative vinyl NFT of "The Monk" limited to 2,001 copies, attracting nearly 80,000 fans to make an appointment to draw lots.

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What are NFTs?

Regarding "what is NFT", there have been many explanations on the Internet before, and this article will only briefly explain it here. NFT is the abbreviation of Non-Fungible Token. It is called [Non-Fungible Token] in Chinese. It usually refers to the tokens issued by developers on the Ethereum platform according to the ERC721 standard/protocol. Its characteristics are indivisible and indivisible. Alternative and unique, simply put, tokens issued using the ERC721 standard/protocol are called NFTs.

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Digital ownership, with or without

Since Internet technology led mankind into the "digital age" in the 1940s and 1950s, the value of digital elements has taken on a new form, gradually forming data assets. In recent years, with the widespread popularization of the mobile Internet, more and more people have begun to pay attention to their own digital information in the virtual space, and even caused widespread controversy and discussion. From a conceptual point of view, although digital assets have been widely mentioned, neither the academic circles nor the government have given a clear definition of digital assets. This time, Shenzhen City proposed "data asset rights" for the first time, which can be said to be a concern for the public. A response to this is also a prelude to the establishment of a data order in the future.

NFT has scarcity and asset attributes, and after mapping relevant data content, it becomes a digital collectible. Like traditional collections, users' participation in the collection of collections is often out of love, social needs, cultural identity, and investment needs. Users can often reach a consensus in the same cultural circle and are willing to pay a price beyond the imagination of outsiders for the collection. But unlike traditional collectibles, NFTs are digitally owned.

Digital ownership is exclusive, with only NFT holders entitled to own the underlying asset (usually in digital format, although it may also be tied to a physical asset). At first glance, ownership of NFTs is secure, as token ownership is recorded in an immutable and irreversible distributed ledger. However, owning an NFT is not quite the same as owning the underlying asset itself, especially in digital format. The blockchain can only manage the ownership of NFTs, but the underlying assets must be managed by an agent. That is, when someone buys an NFT from the creator, they gain ownership because it becomes their property. NFTs are digital certificates of ownership representing the purchase of digital assets, which can be tracked on the blockchain.

The buyer of the NFT has a blockchain digital certificate that specifies exclusive ownership of the underlying asset, but the certificate itself cannot enforce the display, use, and possession of the underlying asset in itself, which prevents the general public from noticing it. Just like Stephen Curry, a popular NBA star, spent $180,000 to buy an NFT as a Twitter avatar. When the news broke, "I use the same avatar as Curry", "Is my avatar also $180,000?" "Such discussions filled the Internet that day. If everyone can copy the exact same avatar, who cares about the real owner? Probably just Curry himself.

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What is the utility value of NFT

In neoclassical economics, utility is "desire", which is "as a noun related to desire or desire", and utility is understood and used in a subjective sense while maintaining theoretical coherence. That is, utility is a kind of psychological satisfaction that people get when they consume goods, and it is a subjective evaluation of people's ability to satisfy people's desires. In simple terms, utility represents the preference of a single consumer, and different consumers have different preferences. Utility is a subjective measure that varies from person to person. Some people bet a lot of money to buy the rights and exclusive ownership of NFT, and bought NFT; of course, some people don't think so. "People who spend millions of dollars on a JPEG are stupid, what's the use of spending $2 million on a pixel block?" This rhetorical question must have been heard a lot.

Some people may not understand, we directly use the most common phenomena in life as examples. In various cultural industry circles (such as fan economy, equipment enthusiasts), consumers can often reach a consensus in the same cultural circle, and are willing to pay a price beyond the imagination of outsiders for collections. The NFT market is no exception. On the one hand, it is driven by "utility", and on the other hand, it is the characteristics of NFT itself. When it comes to NFT, adjectives such as "non-homogeneity" and "scarcity" come to mind. In economics, fungibility refers to a characteristic of commodities, which means that each individual can be substituted for each other and cannot be distinguished, while non-homogeneity can be understood with the opposite concept. Scarcity refers to a state when the amount of resources that people have in a certain period of time cannot satisfy people's desires in reality. It reflects the contradiction between the infinity of human desires and the finiteness of resources.

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Limitations of NFTs

1. NFT copyright disputes

Since the birth of NFT, copyright issues have always been with it, and in the subset of encrypted art, copyright issues have always been mentioned but never resolved.

In July this year, when the mine in Sichuan was cleared, a photo titled "Summer Dora Moving the Mining Machine" became popular on the Internet. In the photo, the expression of the Tibetan woman is full of narrative sense, the cable in her hand resembles a wheat ear, the whole picture is full of warm yellow tones, and the rich colors of Tibetan costumes are dissolved in it. This picture records the historic moment of the closure of the Sichuan mine with a very artistic atmosphere, and it reminds people of the French painter Jean-Francois Millet's "The Gleaners".

It is worth pondering that such a moment to record the closure of the mine has become a hot NFT in the encrypted asset circle. This photo was named "Woman Holding a Bouquet" after secondary creation, and was uploaded to Opensea in the form of NFT. The painting was fired up to 2021 ETH. The second creation came from a mysterious creator with the account name username2021, and the original creator's consent was not obtained in the process.

This kind of secondary creation without the consent of the creator, or even direct copying and making as NFT for profit is not uncommon. Digital artist Weird Undead has published several digital paintings, but the works were stolen and sold as NFTs on OpenSea. In addition to encrypted artwork, the tweets of some "reputable" celebrities in the encryption industry have also been secretly made into NFT auctions. Since Twitter CEO Jack Dorsey auctioned his first tweet and sold it for a high price of 2.9 million US dollars, many thieves began to extend their claws to the Twitter of some famous people.

2. The NFT market is chaotic, and internal transactions need to be vigilant

With the rapid development of the market and the exorbitant prices of NFT sales recently, market manipulation is also a big risk. NFT markets can be subject to fabrication by manipulators, leading to potential fraud and claims. Because NFT is a non-homogeneous digital asset, people do not have a unified standard for measuring the price of NFT assets. Nowadays, there are many NFT styles in the market, the trading venues are mixed, and the trading environment such as on-exchange and off-exchange transactions is chaotic.

As early as mid-September, someone broke the news on Twitter: Nate Chastain, the product manager of the largest NFT trading platform OpenSea, was suspected of insider trading. He bought some NFTs before they were listed on OpenSea, and then sold them to make a profit after the hype. Subsequently, OpenSea responded on its website to the previous incident in which its product manager was questioned about insider trading, conducted a thorough investigation of the incident, and will implement two new policies: prohibiting OpenSea employees from promoting collectors or artists in the company Buy their NFTs at the right time, and prohibit OpenSea employees from buying and selling NFTs through insider information (not limited to the OpenSea platform).

Although there is no corresponding law on "NFT internal trading" at this stage, the incident of insider trading involving Nate Chastain, the product manager of OpenSea, has also attracted the attention of regulators to the supervision of the NFT industry.

3. The survival of the project depends on the centralized organization

At this stage, most NFT projects still have a serious dependence on centralized institutions, which is mainly reflected in two aspects: on the one hand, the data content (pictures, videos) pointed to by NFT internal links is often stored in the organization's server, and the chain certificate The link in the contract cannot be changed, but the content of the link can be replaced; on the other hand, the data of NFT is interpreted and executed by a centralized organization. According to relevant sources, if the creator directly creates an NFT without the consent of the original author, or even directly copies and makes it into an NFT for profit, the centralized organization will directly remove the work. In other words, the content corresponding to NFT largely depends on the centralized organization.

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So is NFT really a castle in the air?

In 2017, when the first-generation NFT work CryptoKitty was born, the price of the most popular CryptoKitty reached more than 200,000 US dollars. However, as the market heat subsided, the transaction volume of CryptoKitty plummeted, and many practitioners also gave NFT has a death sentence.

However, the iteration of the industry has not stopped. In an environment where the blockchain infrastructure is becoming more complete, the digital market is becoming more and more prosperous, and the DeFi gameplay is becoming more and more diverse, the iteration speed of NFT will exceed market expectations and affect a large number of people. The main participants in the current NFT market are high-risk appetites in the encrypted world. If you only trade artworks, industry bubbles are inevitable, but NFT is by no means a so-called castle in the air.

1. The links of NFT circulation, collection and use are perfect and expandable

NFT collectibles have a complete, transparent, reliable, low-cost and high-efficiency secondary market. Thanks to the data openness of the blockchain and the programmable asset attributes of the pass, users can easily trade and transfer NFT, and can use Collection auctions are realized at extremely low cost. At present, the hottest thing in the industry is the sale of NFT blind boxes, which stimulates market circulation and price increases. This business model itself has been verified by the market for a long time, which can stimulate users' desire to buy and collect, and can also greatly stimulate market circulation.

2. NFT as the "entity" of digital art", driving new market transactions

Digital art generally refers to works of art created using electronic equipment, and its form of expression is not fixed. Unlike traditional artworks, the carrier of digital art is data from the very beginning. The data carrier of digital art is easy to reproduce and disseminate, but lacks asset attributes. This feature leads to the biggest difference between digital art and traditional art business models: traditional art can trade works of art itself, while digital art is difficult to trade physical works.

On the one hand, the characteristics of NFT are highly suitable as a carrier of digital art, and become a trading "entity" of digital art by mapping the corresponding files of digital art works. In the current market, we can see that the combination of NFT and digital art has brought about a brand new trading model, that is, NFT is regarded as the ontology of digital artwork for trading. In this type of transaction, NFT can not only be traded as copyright and ownership, but also a unique bond between artists and collectors. NFT is the ontology of works recognized by artists.

On the other hand, NFT transactions have their particularities. How to provide a better user experience and lower the threshold in terms of digital asset wallets, price oracles, revenue aggregators, and market software will become the key.

3. NFT is the "key" to confirm rights in the digital world

NFT is the "key" to confirm rights in the digital world. NFTs are digital goods (including digital art, game items, domain names, etc.) with completely new characteristics. They are unique, provably scarce, liquid, user-owned, and can be used across multiple applications. Simple but powerful, This new native event is ushering in a revived digital world.

At present, most rights confirmation processes use centralized registration to confirm user rights. This method often has complicated processes in the process of rights transfer and execution. The solution provided by NFT essentially provides a digital "key" ", can be easily transferred and exercised, and a series of corresponding permissions can exist outside the centralized service or centralized database, which greatly enhances the efficiency of data asset transactions and circulation.

On the one hand, NFT provides proof of ownership of digital products, specifies the owner's address, and can program and design product attributes to achieve interoperability between different programs. On the other hand, NFT realizes value flow across ecology. NFT can realize cross-ecological value and the transaction needs of different participants. Whether NFT-related information is sufficient and whether the blockchain technology it relies on is reliable and stable are important factors that determine its value.

4. NFT lays the foundation for the Metaverse

According to the NFT industry development report, NFT transactions such as games, metaverse, sports, and music account for 20% of the $20 transaction volume, and projects that fit the logic of the metaverse, such as Sandbox, Decentraland, and Axie Infinity, will have a lot of room for growth . Metaverse deeply integrates the constructed virtual world with the real world, realizes digital twin, digital native, and virtual-real integration, and greatly improves the immersive experience and interactive experience of the Internet, as well as the operational efficiency of individuals and society.

NFT can become the materialization of metaverse rights, just like physical keys. The program can confirm the user's authority by identifying NFT, and NFT has also become a token for confirming rights in the information world. NFT provides the underlying support for the generation, confirmation, pricing, circulation, and traceability of digital assets in the Metaverse. In addition, the unique non-homogeneity of NFT will further promote the mutual mapping of the Metaverse from real to virtual, and from virtual to real, and accelerate the implementation of the Metaverse economic system.

【Interstellar Observation】

In fact, we all think about what NFT brings us? Change OR bubble?

At this stage, the entire NFT market is very hot, and there are all kinds of NFTs, which can be said to be extremely hot. However, the excessive premium of a small number of high-quality NFT works may induce tulip fever, and a large number of low-quality works flood the entire NFT market. This will inevitably lead to "bad money driving out good money", which will inevitably lead to the collapse of Atari, that is, the cooling of industry enthusiasm.

But I don't think the direction of NFT's development is wrong now, but I think that if you continue to maintain this direction, the limitations of development will become larger and larger, and it may really become a bubble. At this stage, the NFT infrastructure is still unable to support high-performance network deployment, and the degree of decentralization and security has not yet met expectations. NFTs are mixed in good and bad. But I believe that only when the enthusiasm cools down can we develop better.

Editor: Interstellar Vision IPFSNEWS Sue

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Editor: Interstellar Vision IPFSNEWS Sue

Author: Bethany

This article is an article contributed by the Interstellar Vision community partners, which only represents personal opinions and does not constitute any investment advice.