Who created the miracle of NFT prosperity? NFT prosperity stems from the influx of funds, and the deeper level is its protection of digital property rights and human needs.

 

What is NFT?

To understand what an NFT is, one needs to understand the current standards for token development in the blockchain industry. We all know that Ethereum can issue tokens. From a technical point of view, these tokens can be divided into the following two types:

• Homogeneous tokens (Fungible Token, FT) : also known as interchangeable tokens, mainly produced by the ERC-20 standard, each token can be exchanged at will, split and integrated;
• Non-Fungible Token (NFT) : also known as non-fungible tokens, mainly produced by the ERC-721 standard, with a minimum unit of 1, which cannot be split or substituted for each other;

Table 1. The difference between various token standards, data source: OKEx Research Institute

For those outside the blockchain industry, NFT is still a novelty. But in fact, NFT has appeared very early --- the crypto cat game on Ethereum at the end of 2017. In this game, each crypto cat is a unique breed, and there is no exactly the same cat. After users buy a crypto kit with Ether, they can obtain exclusive ownership and cannot be copied, taken or destroyed. At that time, this game was all the rage after it was launched, which once caused the blockage of the Ethereum network.

Figure 2. Screenshot of the official website of CryptoMall

Although NFT and FT are defined as non-homogeneous tokens and homogenous tokens, it is more vivid to distinguish between the two by "standardized" and "non-standardized".

The so-called "standardization" is just like industrial streamlined products, the products are homogeneous. For example, the common consumer goods and toys in the market are all made with uniform standard molds, and their quality and characteristics are the same; while "non-standard" is like an independent store, pursuing high quality and individualization. , According to customer requirements for "private customization", all customized products are unique and are tailor-made products for high net worth customers. Therefore, NFT is widely used in fields such as artworks, domain names, and collectibles.

Who created the prosperity miracle of NFT?

With the complete rollout of NFT at the beginning of 2021, the NFT market began to grow rapidly. The previous five NFT platforms (NBA TOP Shot, OpenSea, CryPtoPunks, Raible, Sorare) as an example, since January 2021, the number of daily active users of the major platforms , Average daily trading volume (USD) exploded exponentially.

Figure 3. Changes in the number of daily active users in the NFT market in the past 8 months (a)

Figure 4. The average daily trading volume of the NFT market in the past 8 months (USD), source: OKEx Research Institute, DappRadar

Many people are surprised by the sudden rise of NFT, thinking that behind its prosperity miracle is nothing more than capital hype. Objectively speaking, there has indeed been a clear bubble in the current NFT market, but is this the whole story?

Before the advent of digital art, all artworks existed in physical form. Our ownership of a physical artwork means that we have the right to possess, use, profit and dispose of this artwork. We can hang it in the bedroom, exhibit it to the outside world, or even sell it to others; this This right is absolute, exclusive and lasting.

However, in the era of the digital economy, all this has changed: digital art does not exist in the form of physical objects, how do we reflect the exclusive possession of it? Anyone can copy and use it indiscriminately. How can we ensure that our sanctions and the right to profit from digital art are not infringed?

So what can NFT bring to digital art? ---Perfect proof of property rights!

The modern property rights theory of the new institutional economics tells us: a market with efficient resource allocation, its property rights must be clear, exclusive, transferable, and operable. The NFT in the digital economy era meets all the above characteristics: NFT provides a unique copyright certificate for the majority of creators’ works. Although it is still presented in electronic form, it is different from other copies. Owning NFT also has Excluding possession rights effectively protects creators’ copyrights; NFT's convenient and quick circulation and transfer on the blockchain network, and convenient practical operation, can sell these works at the most appropriate price, which inspires creative enthusiasm.

With the deepening of the digital economy today, it is not so surprising that the sudden outbreak of NFTs is surprising, but why we have not had NFTs to protect our digital property rights until today. So we can see that more and more artists are trying to create works in the form of NFT, and this day has been too late.

Of course, we will also find that behind the rise of NFT, there are many people in the "coin circle". This is another main reason why NFT is performing the current prosperity miracle.

This time, the Indian buyer Metakovan, the buyer who bought Beetle's works at a price of nearly 70 million US dollars, is the founder of the NFT fund Metapurse. He is a veteran in the field of encrypted digital currency; and at the second highest price, he bid 60 million US dollars. Like a buyer who took a picture of Beeple, everyone may be more familiar with it---the founder of TRON Justin Sun.

What’s more interesting is that after a domestic self-media writer wrote an article about NFT, people in the currency circle collectively ran to watch, and their behavior was also very peculiar---do not leave a message, do not like, do not follow, click on praise Make a sum of money and turn around and leave. This made this self-media writer confused and bluntly said, "I hope that the related personnel of film companies and publishing houses can find the gap between themselves and the people in the currency circle."

As mentioned in the previous article, NFT actually appeared as early as three years ago. The so-called NFT application is by no means as narrow as marking a picture or image. While outsiders are still curious and surprised about NFT, the so-called "coin circles" or blockchain practitioners are already thinking about how to use NFT in a broader field.

Then why are people in the currency circle willing to "watch" and even spend real money to promote the prosperity of this market?

In Maslow's hierarchy of needs theory, human needs are divided into five levels: physiological needs, safety needs, belonging and love, respect needs, and self-realization; and needs are formed and satisfied from low to high. Due to the continuous chaos in the "coin circle" and many objective factors, the "coin circle" has been repeatedly stigmatized in recent years. However, it is undeniable that after nearly ten years of development, the society has already There has been a group of new rich people who started with encrypted digital currencies. This is similar to the new wealthy group that emerged from the Internet twenty years ago.

For the many upstarts in the encrypted digital currency industry, the lack of needs such as physiological needs and security needs have been met, but they have not been respected. The need for respect includes not only the personal feeling of achievement or self-worth, but also the recognition and respect of others for oneself.

Although blockchain technology has gradually received attention from various countries in recent years, practitioners in the blockchain industry and "coin circles" have not truly gained social recognition and respect. It can be said that in the past few years, "coin circle people" and blockchain practitioners have been frustrated. Therefore, when the NFT is starting to go out of the circle and attract the attention of the world, the "coin circle people" are also willing to spend money to watch and shout for it. This is a touch of being recognized for being engaged in the industry, and it comes from the release after the need for respect is met.

Of course, this is also mixed with some "coin circles" who want to use NFT speculation as their own profit-making attempt. Just like Metakovan, who bought the paintings of Beeple above, he is also the issuer of Art Index Fund B.20. The operating model of the B.20 index fund is to use 20 works of Beeple as the underlying assets, and then issue fund shares. The auction of Beep's works directly raised the overall valuation of the B.20 fund; this is like Zhao Danyang, who bought Buffett’s lunch for $2 million more than ten years ago, and recommended his heavy stock to the other party during lunch. , Directly make its book profit tens of millions of dollars.

Although NFT does bring new opportunities for digital art, at the same time, a large amount of money has begun to flow into the NFT market, and NFT works have also risen, and a large number of inferior art works have begun to appear and sold in the form of NFT. The market is more crazy than In addition to the imagination of the artists, criticisms of digital art followed one after another. What’s interesting is that when Beeple, the biggest beneficiary of the current NFT, received the payment in Ether (ETH) after the auction ended, he immediately exchanged all Ether (ETH) for U.S. dollars; and said bluntly, "I I am not a pure cryptocurrency. I have been engaged in digital art creation a long time ago. If all these NFT things disappear tomorrow, I will still be engaged in digital art creation.” This remark directly made many NF fans think that NFT has suffered. It's Beeple's betrayal.

Did the NFT accidentally hurt the art, or did the art accidentally hurt the NFT?