NFT, where might the next flash point be?
Hey guys, welcome back to the first week of June🔥🔥🔥
The currency circle has undergone a “5·19” reshuffle, but the pace of NFT has not slowed down significantly.
The current practice of NFT is still continuing in various fields. The following are just the breaking behaviors of the NFT since May:
On May 28, as soon as the season ended, NBA Charlotte Hornets guard Lamelo Ball released his NFT.
On May 27th, Gucci displayed its first NFT artwork, which will be auctioned at Christie’s with a starting price of US$20,000. The auction ends on June 3.
On May 27th, Chen Huanren released the second NFT “The XXXX Is An NFT” through the NFT platform Treasureland (Treasure Island). 77 albums were sold out in one minute, and the total price was about US$190,000. In April this year, Chen released the first Chinese music NFT.
May 26 game Inn GameStop has been discovered under construction based on Ethernet Square of NFT platform, the news led to the game post headed by a public WSB (US retail investors forum) stocks soaring. At the close of the day, Game Station rose more than 15%, AMC Cinemas rose more than 19%, and Express rose more than 25%.
On May 24th, Premier League champion Manchester City launched their NFT to commemorate their victory, and their works were sold on MakersPlace.
On May 21, China Guardian first auctioned the NFT artwork “Peony Pavilion Peony Pavilion Rêve’s Headline Butterfly Love Flower — Information Technology Penetrates “I””, which was sold for 667,000 yuan.
On May 20th, Taobao Ali Auction Gathering Haowan 520 Auction Festival launched the NFT digital art special.
On May 18, it was reported that Fox Entertainment Group established the NFT studio “Blockchain Creative Lab” to plan and sell digital products. Fox will use the new animation series “Krapoplis” planned on the blockchain to promote NFT creative sales.
On May 18th, Go player Li Shidong released the NFT of the Go game against AlphaGo in OpenSea , which was sold for 60 ETH (approximately US$212,000).
On May 12, 9 CryptoPunk NFTs were sold at Christie for nearly US$17 million.
On May 11, e-commerce giant eBay became the first e-commerce company to take advantage of the NFT boom, allowing the sale of digital collectibles NFTs such as trading cards, pictures and video clips on its platform.
The popular story of NFT is still going on, but the overture of NFT’s outing this year started with burning paintings. Li Dan once joked in a certain period of “Wonderful Flower”: the best attribute of the painting is to burn it, and the Mona Lisa is the burning Mona Lisa, which is more beautiful than Mona Lisa. In 2021, the burning of paintings really happened.
On March 8 this year, the famous street artist Banksy’s work “Morons” was burned by its holders and the whole process was broadcast live. On March 25, a work by Leng Jun, a leading figure in contemporary Chinese ultra-realism painting school, was also burned.
However, the two paintings were already digitized before they were burned, and after being processed by blockchain technology, both digital works have a unique identification, namely NFT. The purpose of burning the original painting is to make the digital work corresponding to the NFT have complete rights, otherwise the NFT can only correspond to the digital copyright of the work, and the value is not high.
It is only an extreme situation to burn the physical artwork to increase the value of its NFT works. Although burning the performance art of painting, NFT out of the circle to a greater extent. Most of the works currently undergoing NFT transactions are native digital works.
This is just the beginning. Since then, NFT has continuously broken the dimensional wall of the currency circle and entered the public eye, and the saying that everything can be chained for a while is rampant. Will the landing in the art industry be the beginning of the landing of blockchain technology in various industries? Where might the next stop for boarding?
1. What’s the most fashionable thing in the NFT world?
The tipping point of this round of NFT is a painting called “Every Day: The First 5000 Days”. It is by digital artist Mike Winkelmann (also known as Beeple). Since May 1, 2007, for the next 13 and a half years, he has created and uploaded a new digital work every day, totaling 5,000. A 316MB JPG file is stitched together.
On March 11, 2021, Beeple’s NFT work was sold at Christie’s auction house for US$69.346 million (approximately RMB 450 million). In contrast, the auction price of “Water Lilies” created by French Impressionist Monet in 1906 in 2014 was 31.7 million pounds, or about 54 million U.S. dollars. “Every Day” set a record for the auction of NFT works, and in one fell swoop made Beeple the third most expensive in the single art auctions currently alive.
Beeple’s “Every Day” was sold at a high price, which became the starting point for NFT to attract media crowds and publicity. However, the popularity of NFT in the currency circle can be traced back to last year.
Beeple’s other work “Crossroad” (Crossroad), has been sold on the encrypted art trading platform Nifty Gateway for US$66,000 in October 2020. Also in October last year, Christie’s completed the first auction of NFT works by a traditional auction house — Portrait of a Mind (21 block) by Ben Gentilli, priced at $130,000.
In early 2021, Justin Roiland, one of the creators of the famous animation “Rick and Morty”, released his NFT work on Nifty Gateway; at that time, the daily turnover of NBA Top Shot (NBA authorized NFT star card) had reached 1 million US dollars.
Twitter CEO Jack Dorsey sold his first tweet for $2.9 million. Japanese artist Takashi Murakami has launched an NFT collection that combines Sunflower and CryptoPunks elements.
The list to keep up with the trend is more than this. In April this year, the famous rapper Eminem sold NFT collections on Nifty Gateway. Snowden, a former CIA employee, also released the first NFT on the NFT trading platform Foundation, shouting for freedom of the press. His works were sold for 2,224 ETH. The wine estate founded by Yao Ming also launched a limited edition NFT collection “THE CHOP”.
On April 27th, Binance, the world’s leading blockchain ecosystem and encrypted asset infrastructure provider , announced that it will launch its NFT platform. The current date is June 24th.
Among the world’s three major art auction houses, in addition to Christie’s plans to adjust the organizational structure and set up special projects for digital auctions, Sotheby’s is also promoting NFT art auctions.
With the celebrity effect and the endorsement of well-known auction houses, the enthusiasm of the NFT trading market has further promoted the creation of NFTization of everything.
According to the “NFT Industry Development Report 2021 Q1” written and released by Cabin VC in collaboration with Flow and The Sandbox , the NFT market’s transaction volume in the first quarter reached US$2 billion, which is 8 times the 2020 annual transaction volume. According to CNBC data, the scale of financing for NFT start-ups has increased significantly this year, reaching USD 35 million in 2020 and USD 90 million in the first quarter of 2021.
2. A brief history of NFT
In fact, this wave of NFT attention with Beeple’s works is the second wave in history. The first wave of NFT discussions occurred at the end of 2017. The crypto game CryptoKitties is the initiator.
In 2014, a large number of card games and Meme transactions were suddenly consciously promoted and spread by people on the blockchain platform Counterparty . In 2016, “Rare Pepes” was popular on Counterparty, “Rare Pepes” is a meme about Pepe frog. Card games and Meme enriched the early trading content and played a role in popularizing the early form of NFT.
In early 2017, with the rise of Ethereum, Meme transactions appeared on Ethereum, and many people learned about this unique digital commodity.
In 2017, CryptoPunks, which is regarded as the beginning of the CryptoArt movement, was launched on the Ethereum blockchain. The content of CryptoPunks is a program automatically generated patterns, and its spiritual connotation is the core of the current encryption art.
At the end of the same year, the first project, CryptoKitties, based on the ERC721 standard, was released, triggering the first wave of NFT attention. The core of this game is Ethereum’s smart contract. Each cat is a digital asset on Ethereum, and the transaction, gift and reproduction of each cat also corresponds to a smart contract on Ethereum.
At that time, CryptoKitties quickly became popular, and its popularity was so great that it once caused congestion in Ethereum. The game development studio Dapper Labs received tens of millions of dollars in financing twice in 2018, and the company’s valuation doubled.
In the second half of 2020, Dapper Labs once again released the NFT blockbuster project-NBA Top Shot to the public. As of the beginning of May 2021, NBA Top Shot had more than 260,000 buyers and the transaction volume exceeded US$560 million.
3. Based on blockchain, different from Bitcoin
NFT has been on fire for two waves, but what NFT is is still in most people’s doubts.
First of all, is it the same thing as Bitcoin?
The answer is no. Compared with FT (Fungible Token) such as Bitcoin, each NFT is unique because it has indivisible and non-interchangeable characteristics.
In layman’s terms, FT is like legal tender. It does not pay attention to the difference between tokens, but only pays attention to the balance of the user account. For example, one RMB 5 yuan can be exchanged for five RMB 1 yuan, and two RMB 5 yuan can be exchanged at will. NFT is different. Each token is complete and unique, which is like an idol’s To sign, a cherished childhood toy, and so on.
Secondly, why does NFT have investment value?
Unlike FT represented by Bitcoin, NFT has the attribute of “goods”, and its value is also based on the value of “goods”, rather than making money out of thin air. So in the eyes of some collectors, NFT also represents the work itself.
As a digital warrant, NFT is like a real-life “property certificate”, pointing to the “uniqueness” and “authenticity” of the work. It does not directly generate cash flow by itself.
The characteristics of uniqueness and authenticity of NFT coincide with the characteristics of art collections. This is the reason why NFT was the first to report good news in the field of encryption art.
Digital art creator Ellwood believes that in the pre-NFT era, the creation of digital art was mainly for commercial purposes; or it was the creator’s self-entertainment, which could not bring actual benefits. After the emergence of NFT, creators can create on the basis of complete autonomy, and at the same time can support themselves by this, so “the space for self-expression is greater.”
In the past, digital art creators posted a work on the Internet, and netizens could quickly copy thousands of copies. The traditional Internet has poor traceability, and it is not easy for users to know the source after using the work. For creators, the scarcity of works is not established, so it cannot generate value. This has led to results such as the previous Nyan Cat (Nyan Cat) being viewed hundreds of millions of times on the Internet, and it still fails to bring benefits to creators.
The NFT grants the ownership of the work. When the on-chain address of the work is created, each NFT work is unique and has the potential for circulation. In April of this year, Torres, the author of Rainbow Cats, remade Rainbow Cats into gifs, and its NFT sold for a high price of approximately US$560,000.
On the other hand, the iteration of the underlying technology of NFT continues to improve the convenience of use while maintaining the uniqueness and authenticity of the work.
The ecology of NFT can be divided into three parts: the underlying public chain, the trading platform, the specific project and the producer. Various public chains such as Ethereum (ETH), Flow and WAX are the infrastructure of NFT. At present, the protocol standard of Ethereum on NFT has undergone the evolution from ERC721 to ERC1155 and ERC998.
What is the difference between these three? For example, in the NFT game, the player wants to trade 1,000 knives in his hand. Based on the ERC721 standard, the user needs 1,000 transactions to achieve it, while the ERC1155 standard only needs to perform one transfer operation to complete, which greatly saves gas and improves efficiency. , And at the same time promote the circulation of NFT.
ERC998 (Composable NFTs, CNFT, combinable non-homogeneous tokens) is a concept proposed in 2019. Based on this standard, any CNFT can have other NFTs or FTs. When CNFT is transferred, it is to transfer the entire CNFT owned Hierarchical structure and affiliation.
4. How does the NFT transaction proceed?
At present, the main circulation platforms of NFT include general issuance and trading platforms Opensea and Rarible, and vertical trading platforms such as art trading platforms Nifty Gateway and SuperRare.
Take the OpenSea trading platform as an example. In the first step, the creator needs to import a cryptocurrency wallet to complete account registration, and the wallet needs to support Ethereum.
The second step is to mint the work that needs to be traded after the account is registered, and record it on the blockchain to become a contract. This contract is the “ontology” of the NFT, symbolizing the digital ownership of the work.
The third step is to add the relevant description and attribute information of the work, and at the same time add “Easter Eggs” to the work. Only the buyers who have successfully photographed can see the “Easter Eggs”, and there is unlimited room for imagination. For example, someone photographed a digital artwork of a house, and was surprised to find that a set of real houses was included as a gift.
After the work is put on the shelves, the NFT is sold on OpenSea, there are three forms of pricing, auction and packaging (for portfolios).
The first time you trade NFT on this platform, you need to pay a gas fee, which is actually an entrance fee. The fee depends on the size of the Ethereum transaction volume on the day. It is between 70 and 150 US dollars. Generally, the cost of large transaction volume on working days is higher, and the cost of small transaction volume on weekends is lower. OpenSea, as the platform, will collect a 2.5% handling fee when the product is sold. Creators can set a certain percentage of copyright fees for the second sale of the product, and receive revenue after each work transaction.
5. Pushing hands: the COVID, and the quantitative easing
Why will NFT become popular again this year?
The biggest driver is global quantitative easing, after the epidemic, the Federal Reserve implemented an unlimited quantitative easing policy. Many countries including Germany, Brazil, and Japan also adopted similar economic stimulus plans. The flood of liquidity caused investors to chase higher and higher yields. In addition to the stock market, the cryptocurrency market was also affected. Capital is aiming.
The value of cryptocurrencies has risen, making buyers look rich and powerful when trading high-priced works in U.S. dollars. The reflexivity of NFT is reflected in the sale of high-priced works: high-priced transactions attract traffic attention and user entry, resulting in louder voices, more people joining, and higher prices of works, and so on.
The value of the currently traded NFT works is based on a trust mechanism involving many people. If people’s attention is diverted by new projects in the future, the value of these works may face a cliff-like decline. Or maybe the price of digital currency fluctuates, and the value of NFT works will be affected.
Second, the massive increase in digital consumption by the global population during the epidemic is another major reason for the recent popularity of NFT.
NFT games or transactions that have become popular in the currency circle before have more or less the characteristics of network memes. In March of this year, when the NFT public opinion incidents were concentrated, NFT also became a network meme and became many fashionable people. The sought after object. Due to the integration of social and “stemming” cultural attributes, NFT completed marketing education in a short period of time.
In addition, the millennial generation of Internet aborigines has accumulated wealth, and NFT works have just met their value orientation.
Millennials who grew up in the Internet environment are far more accepting of virtual products than non-Internet natives, and they have long learned to pay for virtual products. At the beginning of the 21st century, they began to embellish QQ show characters; later, they bought and sold equipment in large-scale online games; in recent years, they also spent money to buy skins for hand tourists. The Statista report pointed out that by the end of 2022 , The “virtual skin” market will reach US$50 billion. Then, paying for the works of favorite digital art creators is also a coherent logic.
According to statistics, more than half of the buyers who participated in the auction of Beeple’s “Every Day” were millennials (born 1981–1996), and 6% belonged to Generation Z (born 1997–2012). Only 3% of bidders born between 1946–1964.
6. NFT has many merits: foam, compliance and high energy consumption
NFT has become popular, and the controversy surrounding NFT has also heated up.
People’s biggest doubt is: Why are the prices of digital works represented by “Every Day” so high? The auction reserve price of “Every Day” was $100, and the final transaction price was 690,000 times the reserve price.
First of all, are Beeple’s paintings worth so much money? Before selling NFT works, Beeple was already recognized as a pioneer digital artist. Its clients include top commercial organizations such as LV, Nike, and Apple, and world-class stars such as Justin Beiber and One Direction.
Even Beeple, the representative of the profiteers, said that the bubble in the NFT market is too big. After the auction ended, he converted the digital currency obtained from the transaction into legal tender. The other side of the coin is that most of the current high-priced NFT works come from big V creators who have a community and a fan base. Newcomers trying to enter the NFT face the dilemma of too many works on the trading platform that no one cares about.
This leads to the second level of doubt. To what extent is Beeple’s paintings so expensive?
In March, the buyer’s wallet ID for “Every Day” was auctioned at Christie’s as metakovan. In January 2021, this metakovan participated in the creation of the NFT fund metapurse, and issued a total of 10 million B20 (The Beeple 20 Collection) tokens to distribute the ownership of the 20 Beeple works he had previously auctioned. After the auction at Christie’s, the price of B20 rushed from the issue price of US$0.36 to the highest price of US$28, so Metakovan may not have spent money on purchasing “Every Day”, but made a lot of money instead.
The bubble is just one question that NFT faces. At the level of compliance, NFT is also facing controversy. More and more voices mention the similarity between NFT and ICO (Initial Coin Offering). Due to the high value of NFT works, the reality of small and medium investors concentrating resources to purchase NFT fractional rights and interests is being staged. This is very similar to past ICOs and involves many compliance issues.
The main question is, is NFT a security? SEC (United States Securities and Exchange Commission) Commissioner Hester Peirce publicly warned, “Put a bunch of NFTs in a basket, break down and sell fractional interest, or take away some of the interest. You are not creating an investment product, this is securities.”
In October 2020, the SEC issued an indictment against Ripple and its founders because of the securitization of the company’s operations. This led to the delisting of the token XRP issued by Ripple on many exchanges, and also made XRP lose its position as the third largest cryptocurrency by market value at the time. Ripple’s attorney proposed an anti-disclosure proposal, requesting the SEC to explain why Bitcoin and Ethereum are not subject to securities supervision.
Energy consumption is the third controversy faced by NFTs and various virtual tokens. In the context of the global sprint for carbon neutrality, this issue is particularly eye-catching.
Digital artist Memo Akten analyzed 18,000 NFTs and found that their average carbon footprint is equivalent to the electricity consumption of an EU resident for more than a month. If all things are advocated on the chain, they will face: excessive Ethereum gas fee, and maintenance of the power and energy loss generated by the operation of the NFT underlying network. At present, some artists have put aside NFT auction plans until a more sustainable and ecologically sound NFT operating environment emerges.
At the same time, there are currently more than 120 countries and two-thirds of the economies in the world have joined the “carbon neutral” transformation. It can be seen that the transfer of mining from fossil energy to clean energy is almost irreversible.
7. Next hot point: gaming, Metaverse or finance?
For most people, NFT as the hot money is the focus.
Art collections are currently the most popular application of NFT and may continue to develop in the future. Encryption art has social and interactive attributes, which can connect life on-chain and off-chain and extend the relationship between people and works. Most of the previous applications of blockchain technology were in the financial industry, focusing on big data, supply chain, logistics, and other low-level deployments, which people cannot perceive in life. The entertainment industry is something that the public loves to see and encrypted collectibles are in life. The acceptance will be very high.
2018–2021 early June sales data encryption and Art Market
If traditional artists want to adapt to NFT, they should take the initiative to log on and change the form of expression of their works. This is also the true value of NFT to the blockchain ecology-breaking the gap between the traditional industry and the encryption industry, and becoming a new traffic in the currency circle.
In addition to encrypted collectibles, where might the next explosion point of NFT be?
The more NFT features covered by the scene, the longer the virtual links and blockchain links contained, the greater its value. Specifically, NFT has three important characteristics, namely: uniqueness and collection value; essentially a token, which can reduce transaction costs and friction; inherits the characteristics of the blockchain and prevents counterfeiting and traceability. Based on this, we can rank the current mainstream NFT types in order of value, including encrypted collectibles, spatial domains (such as Cryptovoxels), game props, and various IP and physical uploads.
The virtual world built by blockchain technology has the attributes of creation, entertainment, social interaction and business. Just like the virtual world of “Oasis” shown in the movie “Top Player”, classic IPs of film and television games of different dimensions coexist, social systems and economic systems operate in an orderly manner, and various digital content and objects can circulate freely. NFT has a huge imagination in the application of meta-universe.
In the game scenario, NFT will ensure that players have ownership of game assets. Enjin Company is the proponent of the ERC1155 standard. The company is committed to building a game multiverse, enabling the same game props and characters to interact and trade in different game universes. In contrast, the data in traditional Internet games belong to the game publisher, which is a legacy that has continued from the era of online games to the present day.
In April of this year, Tencent Games sued the online game trading platform DD373, claiming that the game account and the products in the game belong to Tencent. Players only have the right to use it and cannot buy or sell privately. DD373 buys and sells DNF (the game “Dungeon and Warriors” represented by Tencent) Account profit infringes Tencent’s interests.
Game players paid a lot of time, money and emotions to their game characters, but they were told that the virtual assets on the Internet were not owned by the players, and the players were working for the game company, which made most players unacceptable and reversed. Highlights the value that NFT brings to the game industry.
In addition, the NFT platform has social potential and may become a social platform like TikTok. products can be cross-chain and open for casting, and the underlying NFT protocol will protect the rights and interests of creators and collectors; on the platform, users can Realize UGC (user content production), comments, likes and even more forms of social interaction; with the increase of users, the NFT platform will also experience an information explosion, and personalized recommendations will be reproduced in the blockchain world.
At that time, the introduction of the NFT dimension will uniquely identify all content, increase the circulation value of the content, and conform to the economic development of creators. But on the other hand, we can all observe the noise and meaninglessness of the current Internet environment. In order to create a better world on the chain, builders may need to make more useful explorations.
Compared with the above several scenarios, the biggest use scenario of NFT may still be in the financial field. NFT is a virtual mapping of value assets. From this perspective, the conceptual gap between NFT and financial transactions is not large.
For more information and details please join our Telegram community and Twitter for more happy discussions.
We will launch our application in the testing network soon, and explain more details in a real demo in the near future, please stay tuned!
