NFT stands for Non Fungible Token, or non-homogeneous token, which is an asset type based on blockchain technology. The opposite in encrypted assets is Fungible Token (FT). Bitcoin or Ethereum are homogeneous tokens, similar to "standardized products" in traditional finance. Compared with homogeneous tokens, NFT is more "personalized", similar to "non-standard products" in traditional finance.
The difference between the two is:
The characteristic of homogeneous tokens is that each asset is indistinguishable and interchangeable. Each NFT represents the ownership of a unique and specific asset, such as digital artwork, virtual game items, rare collectibles, or other digital or physical assets. Therefore it cannot be directly replaced by another NFT. They cannot be exchanged for one, as no two NFTs are the same.
Homogeneous tokens can be divided into very small units for transaction circulation. A non-fungible token is an indivisible and unique token.
ownership:
ownership:Centralized institutions (such as game operators) can control or even take away virtual assets at will, while NFT is the real asset in the player's wallet.
permanent:Once an NFT is minted, it can exist on the blockchain forever.
Scarcity can prove:Since all records are publicly accessible, the number of NFTs in existence can be confirmed at any time.
The source can prove:It is possible to know exactly who held the NFT, all the way back to the creator of the NFT.
Programmability:Decentralization:
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1. The rise of NFT in 2021
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(1) Some landmark events in the outbreak of the NFT market
March 11, 2021, one of the world's largest traditional auction houses - Christie's, for the first time in history auctioned digital artist Beeple's NFT work "Everydays: The First 5000 Days" (Everydays: The First 5000 Days) in the form of NFT. It was sold for US$69.346 million, making it the third highest price for a work by a living artist in one fell swoop. This auction made NFT also begin to be understood by outsiders.
March 22, Twitter CEO Jack Dorsey (Jack Dorsey) has given a boost to the NFT boom, selling an NFT copy of his first tweet in 2006 for nearly $3 million.
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LARVA LABS《9 Crypto Punks 2, 532, 58, 30, 635, 602, 768, 603 and 757》
(2) The NFT market is on the rise
Entering 2021, the NFT market has started strongly, and the market transaction volume ushered in a peak from February to April. The transaction volume in the week starting from February 21 exceeded 197 million US dollars.
From late May to mid-June, the market entered a short-term downturn, and the transaction value dropped sharply. At that time, many people believed that the NFT market collapsed after experiencing a short-term bubble, and doubts about the development of the NFT market began to appear.
However, it is not. With the rise of the metaverse concept, driven by Axie Infinity, the NFT market has been singing all the way. At the same time, the veteran player CryptoPunks has also played a pivotal role in the rise of the NFT market.
According to DappRadar data, NFT sales in the first half of 2021 reached $2.5 billion, and since March, weekly NFT sales have remained between 10,000 and 20,000.
Entering July, the NFT market continued to climb upwards. The weekly transaction value of NFT in mid-July exceeded the peak in February, reaching 209 million US dollars. And the market didn't stop there. In the week starting July 25, the weekly transaction value of NFT soared to more than 339 million US dollars, a surge of more than 70% compared with mid-July. The transaction volume in the first week of August was about 443 million US dollars, and the NFT market transactions continued to sing.
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As of August 7, NFT weekly transaction data. (Graphic source: The Block)
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(3) The NFT ecology is more complete
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(4) The pace of NFT out of the circle is accelerated
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May 2021, the US e-commerce platform eBay announced that it will allow the sale of NFTs of digital collectibles such as trading cards, pictures or video clips on its platform.
In July of the same year,Facebook announced that it will form a metaverse product group, and said that Facebook will also transform from a social media company to a metaverse company.
Domestic Internet giants are also actively embracing NFT. In June 2021, Alipay, Dunhuang Academy of Fine Arts and the animation "Assassin Wu Liuqi" jointly launched the "NFT" version of the payment code skin based on the AntChain. At the beginning of August, Tencent launched the NFT trading app "Magic Core", and released 300 ""Thirteen Invitations" NFT digital collections" in the first period.
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2. The four pillars of the current rise of the NFT market
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(1) Formation of NFT value consensus
Consensus on the value of NFTs includes:
① NFT is a value carrier like any other homogeneous token including Bitcoin;
② NFT provides a brand-new, digital form of rights, a digital tool for ownership confirmation, and a tool for protecting the interests of creators. For example, every piece of virtual land in the metaverse project Decentraland can be traded in the form of NFT, and the owner of this NFT owns the ownership of the land;
③ All valuable things can be chained, and its form is NFT, including copyrights, artworks, cultural and sports collections, real estate, securities, virtual assets, emotional expressions, etc., can all be chained in the form of NFTs;
④ NFT can conduct point-to-point transactions extremely conveniently, and the liquidity is very strong;
⑤ Under certain circumstances, NFT can become a tool or target for value preservation and appreciation. For example, in the Axie Infinity game, Axie NFT can earn more income through breeding. The value-added function of NFT has been greatly sought after.
It is the magic of wealth narrative that makes the value consensus of NFT move from the niche to the public
First, start with the story of sky-high prices and start a series of wonderful market investor education classes. If one sky-high story isn't enough to grab attention, then two or even three. Over $69 million in NFT art, $17 million in NFT portraits of several Crypto Punks, $5.4 million in World Wide Web source code NFTs, and more. The sky-high price of NFT has greatly shocked the inside and outside of the circle, and it has also made NFT start to attract attention.
The new collection gameplay started by traditional stars has also attracted a lot of attention and funds from outside the circle. NBA Top Shot introduces the traffic of well-known NBA stars into the NFT market. Celebrities from all walks of life entered the circle one after another, which not only hyped themselves, but also brought a lot of attention to the NFT market. More and more people are beginning to recognize the value of NFT.
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(2) The completeness of infrastructure, trading platforms and service platforms in the NFT industry value chain
The technical foundation and market foundation of NFT include three aspects: the technical foundation of the public chain, LAYER2/side chain, and storage is more solid; the NFT trading platform is more powerful; and various service platforms are more complete.
① The foundation of public chain, LAYER 2 and side chain is more solid
In 2017, when CryptoKitties, one of the ancestors of NFT, was popular, the gas fee of Ethereum was expensive when the transaction was busy, and the transaction speed was so slow that the public chain conditions at that time could not bear large-scale NFT transactions and circulation. Times have changed, and the current public chain, Layer 2 and side chain foundations are fully prepared for large-scale NFT market transactions.
The base layer public chains include Ethereum, Flow, BSC and NEAR, etc. In addition, Efinity will be launched soon. Efinity is a scalable NFT cross-chain network built on Polkadot, built by Enjin.
LAYER2/Sidechains include WAX, Polygon, Enjin, Charged Particles, Tari, Ronin, etc. High-performance blockchain and layer 2 solutions continue to emerge, and various expansion solutions enable the casting, circulation, transaction, and settlement of NFT to achieve high throughput smoothly.
In terms of storage platforms, many major centralized NFT marketplaces use IPFS for storage. In addition, there is also a decentralized data storage system Arweave, which can help NFT owners manage their own data storage platform Pinata, etc., and various storage methods have gradually developed. Detailed analysis can be found in previous articles of the Blockchain Institute"NFT is hot, but storage is the most neglected important part"。
② Trading platform
The NFT trading platform not only has a wide range of options, but the user experience is also constantly being improved. On Ethereum, Rarible, OpenSea, SuperRare, Nifty Gateway, etc. are relatively well-known platforms.
One of the earliest and most established marketplaces is OpenSea, a one-stop platform for users to create and trade NFTs. Transaction data on Opensea has seen breakthrough growth in 2021, with data from Messari indicating that OpenSea's total transaction volume has exceeded $1 billion from the beginning of 2021 to August 5. In 2020, this figure was $24 million, in 2019 it was $8 million, and in 2018 it was $473,000.
Another important marketplace is Rarible. At the heart of the platform is the Ethereum-based token RARI. By owning RARI tokens, collectors can vote on proposals that impact the platform, vet creators, and curate featured artwork.
Centralized exchanges such as Binance have also begun to launch NFT platforms, launched auctions, and launched NFT "blind box" functions.
③ Soundness of NFT service ecology
All kinds of service platforms are more perfect. NFT badge platform Showcase; NFT data analysis platform NonFungible.com, etc.
In addition, there are financial service platforms that have greatly improved the liquidity of NFT. For example, NIFTEX, a fragmentation tool platform that releases NFT liquidity, and platforms such as Unicly. NIFTEX provides a self-service NFT liquidity solution that allows users to split an NFT into several fragmented tokens in ERC 20 format, which can be traded and swapped on the open market, thereby unlocking liquidity for unique NFTs sex.
NFT adopts a unified mainstream protocol standard, which provides a template for smart contracts and how users interact with NFT. At the same time, the NFT standard is constantly being updated and optimized to meet the needs of different types of NFT development. The ERC 20 standard is adopted for the homogeneous token, while the NFT usually adopts the ECR721, ERC1155 standard, and ERC-998 standard.
The ERC 721 protocol was born from CryptoKitties, which is the earliest NFT protocol recognized by the Ethereum community and is currently the most widely used standard.
Because under the ERC 721 protocol, a smart contract can only issue one type of NFT asset, which is difficult for complex game scenarios (for example, a game may have as many as a thousand types of props, etc.). Enjin proposed the ERC1155 (Semi Fungible) protocol, which can issue any type of NFT assets in the same contract, that is, store multiple tokens in a single contract, and is more suitable for NFT asset protocols in game scenarios. With ERC 1155, an item's ID no longer represents a single asset, but a class of assets.
In addition, NFT openers are constantly improving the basic standards of NFT, such as the ERC-998 (combinable NFT) protocol, etc., to make them more suitable for the development needs of NFT in the future.
ERC-998 is called Composable NFT (abbreviated as CNFT). Its design allows any NFT to own other NFTs or homogeneous tokens. When CNFT is transferred, the entire hierarchical structure and ownership owned by CNFT is transferred. Simply put, an ERC-998 item can contain multiple ERC-721 and ERC-20 items.
The community has played a pivotal role in the development of the NFT market. The NFT community collects and invests in NFT knowledge through mutual assistance, and also lowers the capital threshold for investment.
For example, NFT collector Whale Shark formed a community focused on the NFT field called "WHALE", which issued the social token WHALE. Backed by Whale's vault value, the token allows people to invest in NFTs without spending too much money. As an NFT, WHALE can also carry out liquidity mining, and creators can tokenize their talents.
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(3) The spillover effect of the crypto market boom
The spillover of the entire encryption market is another switch for the strong start of the NFT market this year.
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The statistics are all homogeneous tokens, excluding NFT; the source of the NFT market chart is the block, and it is drawn according to the weekly transaction amount (USD).
It can be seen from the trends of the two markets that the prosperity of the encryption market is just one step ahead of the NFT market. In 2020, the encryption market will slowly gain momentum in the second half of the year. Starting in December 2020, the encryption market will start strongly ahead of the NFT market, and the NFT market will start to gain momentum in 2021. The encryption market was in a peak range from mid-March to mid-May, and the NFT market was a step behind, reaching its peak in mid-to-late May. Since late May, the encryption market has begun to pull back sharply. Similarly, the NFT market has also experienced a downturn.
From a logical point of view, whether it is a homogeneous token or a non-homogeneous token, they are all assets based on blockchain technology and with decentralization as the core. The profit-seeking nature of capital always seeks more lucrative profits. While laying out homogeneous tokens, it seeks greater value depressions. The extension of investment to NFT is a very natural logical process.
Therefore, the spillover of the encrypted market is the financial condition for the NFT market to take off.
Of course, it is particularly worth noting that the spillover of the encryption market is certainly one of the opportunities for the NFT market to rise, but the NFT market has stepped out of its own independent market. After experiencing the market downturn in early May and June, the NFT market began to take off independently of the encryption market.
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(4) The implementation of application scenarios and the vigorous development of creative groups
The attractiveness of the NFT market comes from the landing of these types of NFT. According to NonFungible.com analysis, Q2 2021 set a new record: the number of active wallets (>175,000), and the number of buyers and sellers is still increasing. We noticed a very positive signal: the number of buyers (38% increase) grew faster than the number of sellers (25% increase), meaning that NFTs attracted more interest than they lost.
Recently, the volume of NFT transactions has continued to grow. According to The Block's data, in the NFT weekly transaction amount data in the first week of August, the transaction amount of Axie Infinity was about 185 million US dollars, the transaction amount of CryptoPunks reached 128 million US dollars, and the transaction amount of Art Blocks was 29 million US dollars. The scenarios of NFT application landing are unfolding in all directions.
① Types of application scenarios covered by NFT
The early application of NFT started from the first Ethereum-based NFT CryptoPunks (CryptoPunks) and Crypto Kitties (Crypto Kitties). NFT types can be refined into art, collections, games, DeFi, metaverse, sports, public facilities , Avatar, Music and other categories.
Digital Artwork (Art)
Artists use tokens to represent the ownership of their digital artworks, and make artworks into NFTs for circulation transactions. The sky-high NFT work "Everydays: The First 5000 Days" (Everydays: The First 5000 Days) falls into this category.
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Chart source: coinmarketcap
Digital Collectibles (Collectible)
As with physical collectibles such as golf cards and stamps, collectors of digital collectibles collect electronic items they deem valuable as a token of support for a company, brand or game. There are costs associated with shipping and maintaining physical collectibles. NFT collectibles are completely electronic, transferable in seconds, and never depreciate.
The leader in this space is Axie Infinity, which recorded a staggering $207 million in seven-day transactions as of August 7th. The second place is CryptoPunks, the 7-day transaction amount is also very impressive, about 170 million US dollars.
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Chart source: coinmarketcap
Game Items (Game)
NFT is the foundation of blockchain games, tokenizing, tracking and transferring unique game items without custody. NFT not only guarantees that gamers can fully control their game items, but also creates a brand new gaming experience.
Metaverse
Metaverse
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Chart source: coinmarketcap
Sports
Sports NFT mainly includes sports games, sports collectibles, and fan economy.
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Chart source: coinmarketcap
In addition, there are public facilities, Avatar, music and other types of NFTs fully implemented. You can refer to the articles of the Institute"Why is NFT popular, what are the opportunities and risks? "
② The NFT creation group is booming
Chris Dixon, a partner of a16z, a well-known investment institution in the blockchain field, believes that NFT can bring better economic benefits to creators. the reason is:
One is that NFT cancels the rent-seeking intermediary. That is, NFT based on blockchain technology avoids more sharing of creative rights by traditional intermediary platforms. Creators and users have full ownership of NFT. Creators and users can conduct point-to-point transactions without relying on intermediary platforms, and can retain more Creation income stimulates the enthusiasm of creators.
The second is that NFT brings granular price tiering to the creator economy. In an ad-based model, revenue generation is more or less consistent regardless of fan enthusiasm. NFTs allow creators to find the highest bidder by offering them special items at a higher price. This encryption granular price tiering will help creators capture greater value.
The third is that NFT users can reduce the cost of customer acquisition to a level close to zero by becoming "owners". That is, every user feels that he is an "owner". Under the joint promotion of the community, market enthusiasm and ownership, NFT can realize real P2P sales.
Da Hongfei, the founder of NEO, believes that: Beeple originally issued tokenized artworks on the chain, and these creators are trying to use technological innovation to expand the carrying limit of humanistic value. Based on the blockchain, creators complete a set of processes of production, circulation, pricing, confirmation of rights, and anti-counterfeiting traceability in their native digital environment and using their open network facilities, and avoid the ambiguity of these complex links zone.
epilogue
epilogue
With the formation of the NFT value consensus, the completion of the infrastructure layer and protocol layer in the NFT industry value chain, the spillover of the NFT encryption market, and the wider application scenarios and the vigorous development of the creative community, the NFT market will grow in 2021. The year entered a new stage of rapid development.
In the future, whether it is consensus, market and technical foundation, or landing applications and creators, there is a high probability that it will continue to strengthen. The prosperity of the NFT market will no longer be dependent on the encryption market. NFT itself is a sunrise industry with extremely bright prospects. Therefore, the strong rise of the NFT market will be a definite trend.
Disclaimer: This article is the author's independent opinion, does not represent the position of the Blockchain Institute (public account), and does not constitute any investment opinion or suggestion.
Disclaimer: This article is the author's independent opinion, does not represent the position of the Blockchain Institute (public account), and does not constitute any investment opinion or suggestion.
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