What’s different about the NFT? Could it be the next Bitcoin?
Although bitcoin and other digital currencies have soared and plummeted, they have become a permanent hot topic in the financial circle. However, the real emergence of the currency circle is not based on Bitcoin.
A pair of Uniswap socks sells for $160,000, five words from the founder of Twitter sells for $2.5 million, crypto artist Beeple’s work at Christie’s NFT gets $9.75 million bid…
With NFT, the general public is relatively unfamiliar with the blockchain, successfully out of the circle.
What is NFT? What does NFT have to do with blockchain and bitcoin?
01
What is NFT?
NFT full English name is Non-Fungible Token, translated into Chinese is: non-homogeneous token, with indivisible, irreplaceable, unique and other characteristics.
On the blockchain, digital cryptocurrencies are divided into two categories: original coins and tokens. The former, such as the familiar bitcoin, ether, etc., has its own main chain, using the transactions on the chain to maintain ledger data; Tokens are attached to existing blockchains and use smart contracts to record the ledger, such as tokens issued on Ethereum. Tokens can be divided into two types: homogeneous and non-homogeneous.
Homogeneous tokens, FT (Fungible tokens), are mutually fungible tokens that can be split nearly infinitely. For example, if you have a bitcoin in your hand and I have a bitcoin in my hand, there’s essentially no difference. That’s homogenization. That’s homogenization.
Non-homogeneous tokens, or NFT, are unique, non-divisible tokens, such as crypto cats, tokenized digital tickets, and so on. It is equivalent to USD with a number. There will not be two USD with the same number in the world, nor will there be two exactly the same NFT.
Thus, the key innovation of NFT compared to FT is to provide a way to mark the ownership of native digital assets (that is, assets that exist in, or originate from, the digital world) outside of a centralized service or centralized library.
The ownership of the NFT does not prevent others from inspecting it or reading it. The NFT does not capture information and then hide it, it captures information and then finds its relationship and value to all the other information in the chain.
At the same time, NFT can be bound to some commodities in the real world due to its non-homogeneity and indivisible characteristics. In other words, it is actually a digital asset issued on the blockchain, such as game props, digital art, tickets, etc., which is unique and non-replicable. Crypto artists can use NFT to create unique digital art because of its natural collectibility and ease of trading.
02
How did the NFT come about?
The creation of NFT is based on a 2017 Ethereum project called CryptoPunks pixel avatars. These pixel avatars are capped at 10,000, and no two characters can be the same. People with an Ethereum wallet can get them for free, and then they can be traded in the secondary market.
Six months later, the popularity of Cryptokitties, a blockchain mini-game about cat feting on Ethereum, exploded.
Cryptokitty is a virtual cat. If buyers own two or more Cryptokitty, they can breed new cats, and the price of breeding rare features will be more expensive.
The virtual cat has gone through several rounds of price booms and busts, while also making NFT more widely known.
The starting point of Cryptokitty design is to popularize the gameplay of NFT. As a result, people started a zoo on the Ethereum blockchain. Virtual rabbits and virtual dogs became popular one after another, and then there were virtual trees. Mining, buying cats, selling cats for money buying mining machines and then mining may be a new way of life in the virtual world.
Not to be underestimated, Cat Fetish is widely believed to be revolutionary in the creation and practice of NFT — value can be carried not only through cryptocurrencies, but also in a new and unique way.
03
How did NFT get out of the loop?
A lot of people started paying attention to the NFT last week.
On March 6, Twitter CEO Jack Dorsey seemed to want to sell his first tweet from 2006 as a non-homogeneous token called NFT.
On the afternoon of March 6, Dorsey posted a link to the platform “Valuables,” where his first tweet from 2006, “just setting up my twttr,” was up for auction. The highest bid came from Sina Estavi, CEO of Bridge Oracle, a digital currency exchange company, who bid $2.5 million on the afternoon of March 7.
NFT had previously caught the eye of Catherine Wood, queen of the bull market. She said she was excited about NFT.
In the American art circle, more and more mainstream artists have also tied their works to NFT.
Last month, Mike Shinoda, founder and co-lead singer of the American band Linkin Park, auctioned off a piece of his music as an NFT and sold it for $30,000. Shinoda used the proceeds to set up a scholarship fund for art students in financial need.
The NFT app is now making its way to the N.B.A., too, to buy famous highlights from iconic basketball games, like Lebron James’s Slam Dunk.
04
What are the advantages of NFT?
When artists want to sell work, they create or “cast” an NFT, and from then on it will act as a claim to ownership of the work.
The NFT is registered on an open blockchain ledger that allows it to track ownership (or “provenance” as they say in the real world), previous sales prices and the number of copies that exist. The security provided by blockchain technology means it is almost impossible to sell fake tokens.
What are the advantages for artists, as well as the large number of we media, to begin to contact and use NFT?
In a recent opinion share, ARK wrote:
Today, to monetize digital content, content creators can upload it to Instagram, YouTube, TikTok, Spotify or other social media platforms. These centralized platforms then monetize the content through advertising or subscriptions, paying the content creator a percentage of the profits.
By contrast, digital creators can monetize their followers directly through NFT, selling unique digital content without an intermediary.
In other words, today, musicians who want to release new music must go through the record company, which receives a large portion of the profits; If you publish your work on a short video platform, it will eventually attract advertising and subscriptions, but in the end, the creator will not receive all the profits, of which the platform will certainly take a significant percentage — the same is true for other art and creative fields.
However, in ARK’s view, if NFT is popularized in the future, creators will not have to let the platform take a share. The amount of money their works earn on the blockchain will be the amount of money they will pocket.
05
Will NFT be used more widely?
What else can NFT be used for besides artistic creation?
There are many applications.
First, perhaps in the area of intellectual property.
NFT can stand for a painting, a song, a patent, a video, a photograph, or other intellectual property. In this area, the NFT acts as a Patent Office: registering Copyrights for each unique thing and helping it identify patents.
Second, physical assets.
Other physical assets such as real estate such as houses can also be tokenized using NFT. It can be used as a financial market such as the circulation of assets.
Third, records and identification.
The NFT is unique and, therefore, can also be used to verify identity and birth certificates, driver’s licenses, educational certificates, etc. These can be stored securely in digital form, preventing abuse or tampering.
Fourth, financial instruments.
All kinds of financial instruments carry a lot of information in the process of circulation and transaction. If combined with NFT, it can not only confirm rights, but also facilitate tracking. In addition, the future trading of various types of NFT assets can itself form a segmented financial market.
And finally, ticketing.
Concert tickets, movie tickets, theater tickets, and so on can all be marked with NFT — tickets that look the same but actually have different seat numbers, so NFT can be used here as well. All the tickets are the same, but the seat numbers are different.
06
What to make of the NFT craze?
Today, those relatively mature exchanges trading bitcoin and other digital currencies have begun to start the “spring layout”, actively layout NFT.
At present, traditional centralized digital currency exchanges such as Binance, Kubini, Huobi, OKEx, Matcha MXC and Bittrex have begun to participate in the layout of the NFT project.
In fact, the barriers to trading NFT assets are high because most users are not yet familiar with on-chain operations.
In addition, the current NFT is mainly based on Ethereum network for issuance, transaction and transfer, but the congestion of Ethereum network and high commission fee restrict the further development of NFT. At present, the application field of NFT is relatively simple, concentrated in such small circles as games, crypto art, card collectibles, and has not yet realized large-scale application implementation.
Lu Jun, a senior researcher at Huobi Research Institute, believes NFT has typical problems of early products in the crypto world, such as being prone to bubbles.
However, Lu Jun also points out that time is the biggest enemy of bubbles, and as the market develops and people become more aware of NFT, it will become difficult to generate a large bubble. The liquidity problem is similar. As people’s expectations of the value of NFT become stable and the risk of holding NFT decreases, more people will join the market and contribute to the liquidity.
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