The Future of NFT/DDC
BSN LONG STORY SHORT SERIES #23
In this latest episode of BSN’s Long Story Short Series, our experts will examine the origins of the non-fungible token (NFT), its current status, its underlying logic, prospective NFT use cases, the future NFT ecosystem, and how NFT will impact the producer-consumer relationship in this webinar. Yifan He (CEO of Red Date Technology), Jehan Chu (co-founder and Managing Partner of Kenetic), and Stéphane Zermatten (Partner & Board Member at CircleSquare) are the panelists for today’s discussion. Adam Farhat of TokenInsight Research facilitated the discussion.
To begin with, can you please give a brief introduction about yourself?
Yifan: He is the CEO and founder of Red Date Technology. Red Date is one of the founding members of the blockchain-based service network (BSN).
Jehan: He is the co-founder and Managing Partner of Kenetic, the first investment firm in Hong Kong founded in 2016. Kenetic is deeply involved in the NFT community and is a strong supporter and investor in Red Date. Jehan serves as a collector for NFTs and works with Beeple, Refik Anadole, etc. He is also an advisor to Cryptids auction house to develop strategies around NFTs, metaverse, and various other startups in the NFT space in which Kinetic has invested.
Stéphane: He is working at BlockFirst, a company helping large global clients to move to Web3 by providing a product strategy, compliance, and required tech services. He leads the marketing and product strategy for BlockFirst. He is also a partner at CircleSquare, a consumer marketing agency. He has been involved with the crypto and blockchain space since 2016.
Before predicting the future of NFT, we need to understand its origin and nature of the NFT first. Under what circumstances was NFT first created？ What are the underlying logic of the NFT technology and the foundation of its operation? And would you please describe some of the essential features of NFT?
Jehan: NFTs were first created as killer applications of blockchain. He believed that NFTs had been around in different forms even before blockchain. There have been various other technical formats since the inception of ERC-721, including several other features. However, the ERC-721 standard on the Ethereum blockchain is a gold standard. Beyond technology, NFTs offer a way to establish true sovereign ownership of digital assets. Before NFTs, any digital artwork could be copied infinitely, and it was not able to track the original creator. With NFTs, the person own the NFT with a private key can prove ownership over time. Moreover, NFTs have use cases in gaming, fashion, intellectual property, user, and financial data, which is advantageous for individuals and corporates.
How BSN-DDC infrastructure helps in the adoption of the NFT technology?
Yifan: NFT is a technology that is required to establish ownership of anything in the public system. It is like a new layer on the internet. BSN-DDC is beyond cryptocurrencies (rather an NFT-enabling infrastructure) though the current application of NFTs is all about speculation.
Based on your experiences that helped other companies adopt and deal with blockchain, NFT technology?
Stéphane: Beeple NFT was the first NFT that originated as the NFT for global consumers, through which people started to learn about the NFTs. NFTs include social features (other than tech features), as you can see the NFT images, relate to them, which becomes emotional, and then you start interacting with communities.
NFTs have use cases beyond art, including DeFi. Can you please shed a light on this?
Stéphane: People have a misconception about NFTs: they believe that NFT is an image, but it is a digital asset that cannot be exchanged for another one.
Yifan: I firmly believe that in 20 years, a national lottery system will be built on a public system, not a backend system. Currently, people always question how a random number is generated? However, with NFT technology, people can buy a digital lottery as an NFT with a private key, which means winners can be authenticated via the public system’s smart contracts. The traditional lottery only costs $1, which means that using a blockchain-based public system may not be feasible in the case of digital lottery NFTs. That’s where BSN-DDC aims to step in and fill the gap.
With the development of technology and the mass adoption of NFT technology, how will the rights and values change in the process of digitalization in the future? What kind of power and values will NFTs represent?
Stéphane: He thinks that mass adoption is coming, which will change every industry; in particular, disrupt older industries, including loyalty, music rights or any other rights for digital assets, and authentication. The value of an NFT is all about the utility or the experience it brings to the customers. For example, the value of a lottery ticket is $1, but the value of an NFT to the owner is much more as it depends upon the utility, i.e., the assurance that your lottery has a fair chance of winning against others. Also, with metadata, for instance, if you own a luxury bag, you can find out where the leather comes from and who’s been sewing and stitching it. You can also go further, such as tracing the bag’s history, which means another person can’t have the same bag due to its enriched history.
Jehan: NFTs represent a bridge between the physical and digital worlds through the notion of digital twins. For example, you bought a t-shirt in the real world, which can act as an NFT in the digital world. The only difference is you can’t wear it; however, your avatar can wear it in Decentraland or any other metaverse. It can also be your Twitter profile picture. The fair trade statistics of that t-shirt’s construction, such as metadata like farms, and plantations that raised the cotton, relate that to the supply chain. In essence, this way, it connects the physical world to the digital world, adding value to our physical experiences through a meta-layer that we can observe, read, learn from, and transact on. We can see this already happening in the retail world, which will accelerate the expansion of NFTs.
Yifan: In terms of metadata, as other panelists mentioned, Yifan summarizes NFTs as database technology. NFT is a good technology because it is decentralized, and you can link the small database to a big asset. For instance, someone builds a city on a public system, which has 1000 buildings, each building has 400 rooms, and each room has 2000 different objects. Pulling together, the city is built by using many NFTs.
BSN recently launched BSN-DDC Network to promote the mass adoption of NFT technology in China while complying with Chinese regulations. Can you tell us more about BSN-DDC in terms of functional attributes? How is the NFT ecosystem layered? What layers are included in the BSN-DDC ecosystem?
Jehan: In the public world, NFTs are built on a public blockchain. But in China, public chains like Ethereum and Solana are largely restricted. Therefore, the ability of NFTs to exist in China is a grey area. That’s where BSN comes in! BSN is China’s national blockchain infrastructure initiative on which permissioned Ethereum, permissioned Cosmos, or Wuhan Chain (Layer 0) sits at the top of it. But these are just permissioned Layer 3, which are actual applications such as DDC, which sits on top of these Layer 0s. In order to have a digital asset economy that achieves the goals of transparency, sovereign ownership, and compliance with regulations, DDC or Distributed Digital Certificate (a non-crypto solution to own digital assets) was created. Furthermore, DDC has implications for other economies too that are considering non-crypto blockchain assets. In contrast, in opaque systems, lost assets cannot be tracked. That said, DDC is a methodology or an alternative to thinking about a hybrid solution.
Yifan: It is called DDC because Red Date does not want to relate it to cryptocurrencies due to regulatory restrictions. Even public chains are not legal in China, so Red Date requires a big permissioned chain, and it basically works with public chains. Working with a public chain allows Red Date to make the system transparent and give the power of private keys to people (i.e., owners). Currently, minting an NFT on DDC costs 0.5 RMB (or $0.7 cents).
In August 2022, BSN International and three non-crypto public chains will be launched. Building a cryptocurrency on these non-crypto public chains is fun! (as long as you are compliant with local regulations). However, BSN is against building a cryptocurrency on Layer1 that will make the whole system speculative.
Stéphane: DDC is an amazing solution considering Chinese regulations. It helps get rid of speculation too. Moreover, regulations and compliance are coming outside China as well. The whole ecosystem of BSN is sorting out such requirements for new blockchain projects. That being said, costs are a bit controlled by the Chinese government; you get rid of the early stages of an unregulated market.
Switch to the NFT market, the companies, or the organizations that are involved. Do you see that there will be a few players like we see nowadays in the internet era to the last two decades? We will have very few players controlling the whole industry, or we will see a couple of diversified portfolios of companies that enhance this entire ecosystem thrived. So what role will NFT/ DDC play in this in particular? Whether we will see the case of a few countries would control the whole ecosystem?
Jehan: There is diversity already because of such a nascent industry. However, consolidation will be seen in this industry as time goes on. The future landscape of blockchain will be both public and private chains: The public chain will serve as a highway on which connected DLTs or permisisoned chains will exist. Large companies like Google cannot dominate the public space as they can do the private one. Outside of the permissioned context, decentralized Google may exist on Ethereum or Avalanche, and expansion of the permissioned ecosystem will be seen.
How will the BSN DDC network enhance this permissioned or public chains? How are they going to contribute in the near future?
Yifan: Firstly, it is very, very difficult; however, moving forward, explaining to people how important is public system is the goal of BSN. Moreover, tech companies cannot control the public system since such systems mean everyone has a voice. Also, governance is essential on the second layer of blockchain. Talking about data on Facebook, he mentioned that Facebook could do anything with that data unless the data is moved to a public chain and require the owner’s signature and private keys to access such data.
Stéphane: There will be some big companies, but the data ownership in a decentralized Web3 world will be quite different. Using your data for advertising will also require the consent of the users.
Compared to other blockchain applications such as Defi and enterprise blockchain, why has the NFT no longer been confined to the blockchain industry and attracted widespread attention? Who are the groups that NFT reaches, and how does it differ from other blockchain audiences? Do you believe NFT is the first step toward blockchain becoming a genuinely universal technology?
Stéphane: DeFi is more intellectual, and NFTs are more emotional and have social utility. The day the word “NFT” disappears will be the best day for NFTs because people won’t need to call them NFTs anymore.
Yifan: In China, people always refer to NFTs as an “art,” and he constantly contradicts that it is just digital merchandise. The difference is that for merchandise, there is always some utility.
Jehan: NFTs are the first real consumer product (retail-oriented) for Web3, and DeFi is the first financial platform. NFTs have introduced the people to the idea of digital asset ownership, and the next generation of NFTs will be less speculative and value-oriented. Indeed, that is true with DDC because the type of guidelines that this technology base has, i.e., not able to speculate which, will force creators to really think about fundamental value for digital assets. He hopes that the DDC environment in China will start to harvest the truest and pure examples of fundamental value in the digital assets space.