Author| Chen Lishan Editor-in-chief | Yu Baicheng Typesetting | Wang Jilongyan

• As a product of blockchain technology, NFT is the carrier of IP culture.
• The current productivity and production relations in the NFT market are not compatible.
• Misunderstanding of NFT: NFT is a kind of "issuing currency" behavior, and NFT is a "financialized product".
• It will not last long to hype NFT to make quick money, and only by standardizing can it develop healthily.

2018 is the first golden period of NFT development: a niche market, mainly artists and collectors. The development model during this period was more like a community than a profit-making enterprise. Participants devoted themselves to exploring the combination of physical art and digital technology, trying to build a new cultural world, clean and pure.

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crisis of prosperity

NFT, that is, Non-Fungible Token, is called non-homogeneous token in Chinese. "Token" is to establish verified and publicly proven ownership of photos, videos, audio and other types of digital files through blockchain technology.

"Non-homogeneity" makes this digital asset lack of interchangeability and can provide unique proof for it. The originally infinitely reproducible digital world has now formed a "valuable" digital asset through NFT.

It is not equivalent to virtual currency or blockchain, but a new technology on top of blockchain. By exploring the possibility of combining physical assets with digital technology, NFT opens up a new digital world.

In this digital world, NFT carries the unrealized value of IP in the past: "unique right confirmation" solves the problems of digital asset right confirmation, collection, and transaction; "smart contract technology" helps creators share subsequent value-added benefits and becomes a cultural Accelerator of industrial innovation and development.

For example, the policy environment and development background of blockchain technology are consistent, and NFT has formed a domestic market dominated by "alliance chains" and a foreign market dominated by "public chains". The public chain is an open network, and anyone, anywhere can participate in the consensus, and the "token mechanism" is the most essential feature of the public chain. Public chains such as Ethereum and Flow have become the mainstream of overseas NFT technology, but the public chain system with no access threshold, no real name, and no risk control mechanism leaves opportunities for some people to take advantage of.

According to Nonfungible data, there is a big difference between the NFT market in 2018 and 2021. The number of transactions this year did not exceed the peak of 2018, but the transaction value increased by a maximum of 1 billion times. In contrast, the current productivity and production relations in the NFT market are not compatible.

In a narrow sense, productivity refers to reproductive productivity, that is, the ability of human beings to create new wealth. But at present, the NFT primary distribution market is slightly weak, high-quality works are limited, and the threshold for creators participating in distribution is getting lower and lower. The quality and quantity of NFT works failed to show the vitality that should be in line with this period of explosive growth.

Production relations refer to the mutual relations formed by people in the process of reproduction, including production, distribution, exchange and consumption. Under the comparison of the NFT two-level market, the production relationship characterized by profit-seeking is more obvious. The secondary market is showing a trend of crazy growth, which reveals the mentality of the current participants, that is, to make profits through changing hands, rather than based on the value of IP itself.

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Data source: Nonfungible.com

Back in China, technology companies dominated by Tencent, Ali, and Byte bind high-quality IPs. On the basis of not touching tokens and alliance chains, they focus on the concept of "collection" and promote the cultural IP industry with technology confirmation develop. Prior to this, Tencent launched the NFT trading platform "Magic Core" App, and the digital art collection NFT of the audio "Thirteen Invitations" and the Wanhua Mirror digital national illustrated book were sold out in an instant.

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Are you a collector or a gambler?

NFT is crowded with people, but "hype" is disrupting the order of the market.

Because there is no real name and risk control, some people imitate and adapt other people's paintings into new digital works through the public chain, and even distribute products through plagiarism and plagiarism. The phenomenon of counterfeit and piracy is endless. Many celebrities' tweets, photos, etc. were copied and distributed without permission. In this process, buyers and sellers no longer care about the existence of the IP party behind the work, and no longer think about the "true value" of the work.

In the alliance chain scenario, off-market transactions are proliferating, and some people buy and sell in spite of the "restricted transactions" rules. The technology originally used for digital content protection has been "demonized" by a group of gamblers known as "collectors".

NFT is fledgling, and the wrong development idea may be the biggest crisis that NFT will face at present.

One of the wrong ideas for the development of NFT is to regard it as a kind of "issuing currency" behavior. NFT is characterized by "non-homogeneity", that is, it endows the underlying digital assets with uniqueness and authenticity, and allows digital assets to be used to measure value and circulate. However, there are many speculators who are eager to hear the news and regard it as a financing opportunity for "issuing coins".

Pass the crude digital paintings, audio or video, and issue them to earn income. Speculators have joined hands to place bets, while onlookers are waiting for the final loser. In the market, a pair of pixel-level works or "nonsensical" works are traded at sky-high prices. However, the threshold for creation has never been low, and a wrong attitude towards NFT may make it a cheap industrial product.

Another misunderstanding of NFT is "financialized products". NFT can be used as the underlying asset of mortgage loans, allowing lending to obtain income. The copyright of NFT is built into the smart contract, and the owner can realize cash flow income and asset value-added through NFT. Fragmented NFT can split the underlying rights of NFT, allowing players to partially hold it. The logic of various structured financial products is set on NFT. Although the original intention of building these NFTs is to improve liquidity and lower entry barriers for participants. But on the other hand, this has indeed changed the nature of NFT, and digital works have changed from a palace of Yangchun Baixue to a market for lower Riba people.

"An art dealer is no different than a gambler. They study the basic forms of art, read magazines, listen to other people's comments, and then start to take their chances."

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Defending NFTs

On the cusp of the NFT market, speculators and speculators are indispensable. In the face of huge profits, they look forward to setting off a new wave and profiting from it. But at the same time, there is another group of people who are well aware of the dangers of NFT hype, and they also know that the end of crazy growth is extinction. They called for the market to return to rationality, and NFT to return to the value of IP itself.

On September 24, a user with the ID "Hip-hop geek" released relevant bidding information on the "Asian Games Torch" on the auction platform. At the auction, the auction price of the "torch" once reached 3 million yuan. Immediately afterwards, AntChain and Ali Auction jointly removed the corresponding illegal products from the shelves and dealt with the users accordingly.

In the subsequent "Solemn Statement", AntChain made clear its attitude towards the hype and chaos, calling for the benign and healthy development of the industry:

"We firmly oppose all forms of hype on digital collections, resolutely resist any form of illegal activities related to virtual currency in the name of digital collections; resolutely resist any form of malicious hype on digital collection commodity prices, and use technical means to ensure that commodities The price reflects the reasonable demand of the market; resolutely resist any form of illegal activities such as equity transactions and standardized contract transactions of digital collections, and oppose the financial productization of digital collections."

——AntChain statement

Whether NFT will be a flash in the pan or become an immortal innovation is at the moment. NFT is a new thing, and the model in the early stage of development has established its future growth space. Hyping it up to make quick bucks doesn't last long.

But as mentioned in the AntChain statement, "hype goes against the basic law of value, and the rise of false fires is harmful to society."

AntChain's "three don'ts" statement is like a thunderbolt, which stopped a group of speculators and consumers who insisted on going astray, reflecting its determination to resist NFT hype. However, it is far from enough to rely on a few companies to turn the tide. This requires the regulation and cooperation of the entire market. Participants need to improve self-cultivation, industry associations and enterprises also need to maintain market order, establish a market ethics system, and guard against fraud or financial risks.

"Painting is not seeking fame, why seek profit? Every time I see people in Wu painting, they have to pay for money, and they regard the amount of money as ugly. It is so despicable that it is better not to have paintings."

——Hua Yilun's "Painting Talk"

NFT is the product of the digital world moving towards civilization. When numbers come to reality, NFT will inevitably be contaminated with social greed, profit-seeking, impetuousness and noise, but as a product of future world civilization, it needs to be defended, continuously enriched and developed.