ICO, IEO, STO, Defi… and now NFT !? Would Blockchain Reshape the Art World? Part I
by 3Ar.T
Summary
NFT, the vehemently-discussed non-fungible token evidently belongs to the same structure of the blockchain-based application. This article walks us through various types of coin offerings, tokenized IPO, to Defi and brings us to the main focus: NFT. The core concept behind NFT can be summarized as what AppWorks founder Jamie Lin described: an O2O application, but why is — or whether — this legendary ‘decentralized’ technology more important, or even necessary, than the preexisting, let’s call them ‘centralized’ cloud-based storage?
The rapid changes in the crypto world can dumbfound any outsider. Whether with its technology or the iteration of its business models, the rapid development in the blockchain world evolves as quickly as a flash. Bitcoin merely existed for roughly twelve years, and yet its evolution has been phenomenal. Besides the dramatic fluctuation in Bitcoin prices that had caught public attention in recent years, the application of its technology, blockchain, has become what every industry wants to take part in. Although the major part of these engagements predicted a short-lived bubble, it is likely that there are hidden gems in the market — let’s say 10% — with their heart at the right place, testing out a meaningful innovative solution that can revolutionize the existing industries. Although, frankly speaking, given how wildly the hype has grown, the actual percentage of these scarce gems is probably much less than 10%…
What most people understand about blockchain application is various kinds of tokens, which include utility tokens used for specific occasions such as Initial Coin Offerings (ICO), security tokens used to trade real financial assets, payment tokens with its currency-similar nature, and, finally, non-fungible tokens (NFT), which has attracted hyper attention since the end of 2020. And yet, at their roots, these kaleidoscopic variations of tokens are, putting it in a nicer way, to explore more business models alternatives, or, to be more upfront, to paint a grandiose vision and sell it to the general public and so-called FFF (family, friend, fool). At the same time, in response to the increasing need for digital pivots, enterprises tend to consider adding a blockchain sector in their organizations, hoping it would enhance their corporate identity, sometimes even neglecting whether it is necessary at all.
…enterprises tend to consider adding a blockchain sector in their organizations, hoping it would enhance their corporate identity, sometimes even neglecting whether it is necessary at all.
The startup scene is like that. Young teams boast of their grandiose visions even when many of them have not yet figured out what they are boasting of as if a mere name-drop of tech jargon is enough to take them to the moon. Blockchain is just one of these examples. The same situation happens with AI, big data, IoT, AR/VR, just to name a few. As long as they find a professional writer to help them with a sound White Paper, these heroes on the journey are already ‘changing the world’ or ‘disrupting the traditions’. It is true, though — dreams are often bubbles, and yet it is not necessarily always a negative thing. Just like the tulip mania bubble in 1637 which has established the billion-euros exportation to date for the Dutch and the late-90s dot-com bubble that had left us with Google and Alibaba, whose services are still benefiting our day-to-day lives, timeless transformations will inevitably persist, once the wheat is separated from the chaff.
Blockchain surely has some ‘bubbles nature as well, with its ‘bubblization’ development and evolution even shorter. From initial coin offering (ICO), initial exchange offering (IEO), which we can see as a variation of IPO, to security token offering (STO), a type of, simply put, private equity that avoids regulation. With the increasingly strict international surveillance of financial institutes and government monitoring, security acts are putting up more restrictions against these fundraising projects that try to avoid central governance. As to blockchain-based payment systems, not only the early-emerged coins such as Bitcoin, Ether, and Tether have received bigger tractions and are seen as alternative paying means, but governments and central banks also entered the game. CBCD, Central Bank Digital Currency, is one of them, with different backend technology and bookkeeping logic. Nevertheless, these alternative paying systems are not going to affect an end consumer’s daily life on any large scale. If a customer is already accustomed to digital wallet services such as ApplePay, their consuming behaviors wouldn’t change much with adding cryptocurrency or blockchain in their lives.
Defi is another topic around blockchain. Decentralized finance, as its name suggests, aims to decentralize the existing financial system. Banks and various financial institutes are willing to play the mediating roles in between Defi services mostly because, to some degree, they want to overthrow the central banks’ opaque decision-making procedure and control over currencies, such as releasing quantitative easing programs or printing currencies. This is another topic we can spend days discussing. Given the time and word limit, we will examine this topic on another day.
Let’s get into our main focus today: NFT, the vehemently-discussed non-fungible token. Originated from the abovementioned technology, evidently, NFT belongs to the same structure of other blockchain-based adaptations, be it the various types of offerings or Defi. Jamie Lin, the founder of the leading accelerator AppWorks, brilliantly points out the core idea behind NFT’s function in an interview: it is an online-to-offline (O2O) application. Experienced veterans in the e-commerce industry are already aware of the importance of harnessing the two-way flow between the online and the physical world. Deploying digital tools can increase revenue growth for the enterprises and benefit the customers with conveniences and lower commodity prices. Similarly, NFT not only can be deemed an extension of the O2O applications, but it has even broadened its scale. Technically Any object in the physical world is now tokenizable, be it the assets tokens at STOs (real estate, stocks, or bonds), or scarce collectibles for crypto collectors (NBA sports cards and nostalgic audio tapes). Needless to say, it is the same with virtual assets, such as crypto treasures in video games, and online materials and content (text, videos, music, animation). Surely, there are more potentially tokenizable objects to be explored.
…it is an online-to-offline (O2O) application. Experienced veterans in the e-commerce industry are already aware of the importance of harnessing the two-way flow between the online and the physical world…
Sounds cutting-edge? Not necessarily. Let’s revisit a long-explored concept, Traceable Agricultural Product (TAP) certificates, which emerged with the raising production source awareness. Simply paying a visit at the supermarket, you can see vegetables attached with a QR code that shows you the background information of them, which are also ‘unique’ with thorough documentation of the farm’s location, farmer’s name, shipping company, and date of arrival in the stock, etc. Another example is red wine. Many high-end vineyards have been issuing digital identity certificates for their bottled wine. Now, if they are also tokenized and minted on the blockchain, they may as well be labeled with a series of, believe it or not, additional values to their product, such as ‘immutability’, ‘decentralization’, and ‘transparency’, etc.
‘immutability’, ‘decentralization’, and ‘transparency’?
NFT is more or less like that: A physical object now issued with digital identity information. You also can look at it as a digital ownership certificate. The so-called ‘non-fungible token’ basically indicates that these tokens ensure uniqueness and irreplaceability and are anti-forgery. They are different from their counterpart, fungible tokens, which can be understood equivalently as dollars. Let’s say you have a one-hundred-dollar bill and I also have a one-hundred-dollar bill. The attribute and value of these two bills are completely equal. But if I fold my one hundred dollars into a paper sculpture, even when you can imitate my artwork and create the same work, the collectability of the two is inequivalent. Once the artwork I invested time and energy to create creates investment value, its attribute becomes different, since it is now added with some (self-declared?) art collecting value.
Now, we’ve come to the most important application of NFT. That is to generate digital certificates of ownership or to bestow the artwork originated in the crypto space with an identification to secure its uniqueness. This can prove that the asset you are holding is the original despite others’ imitation or any form of copying through various digital avenues.
So what is the role blockchain plays here? Surely, its distributed ledger and encryption technology can construct a mechanism that is decentralized and immutable, and this will provide a space to display and store these original NFT files for everyone to consult at any time.
Is decentralization that legendary? Frankly speaking, just by taking a step outside of the crypto world, one can hardly advocate its irreplaceability. Not to mention that, when the mainstream majority faces the need for digital data security, people will most likely choose to entrust big tech, such as Google and Amazon, who have control over data. An artist can definitely rely on the preexisting technology and work with an accountable third-party authority, such as Christie’s, Sotheby’s, to encrypt the digital files and place them in cloud-based storage, and the authorized users can also access the data. If we only look at the outcome and do not think about centralization, for now, Google and Amazon can in fact do this better than blockchain.
Like the ripple effect, the whirlwind rise of NFT business ideas that mushroomed along with the hype certainly was concomitant with artificial manipulations. Observers can already predict its fade as the hype comes to an end. But it is worth it, and perhaps wise, to keep an open mind and reevaluate what will be the valuable residues in the market once the bubble vanishes. If art and collectible of the niche markets and all the online and offline assets (personal data can be a form of asset, too) of the mass market can all be digitized, cryptized, or tokenized, we can expect enhanced liquidity in the market and can even reduce time and cost owing to the more straightforward trading and licensing procedures. Think about this: Wouldn’t these benefits be a future developing direction that can revolutionize the existing market?
Do you really need blockchain or I-something-O, or NFT? Maybe, but maybe not.
👉 Part II: click here.
