Behind the controversy of Antchain’s “Dunhuang Flying Sky”: How to understand the real value of NFT

Recently, the four “NFT payment code skins” such as Dunhuang Flying Sky and Nine-Colored Deer, which were on sale for a limited time on Alipay’s small program “Ant Chain Fan Grain”, were sold out instantly upon launch and sparked widespread concern in the community.

The concept of collection was redefined and digital art was injected with vigorous vitality. More importantly, from NFT, we see more imagination about the future.

NFT is once again “out of the loop”.

Recently, the four “NFT payment code skins” such as Dunhuang Flying Sky and Nine-Colored Deer, which were on sale for a limited time on Alipay’s small program “Ant Chain Fan Grain”, were sold out instantly upon launch, while triggering widespread attention from the society.

Among these concerns, there are surprises, questions, and perhaps more curiosity.

Although frequently breaking the circle, NFT is still a popular new thing in small circles. Many people may have had a one-sided or even many-sided relationship with this simple combination of letters, but it is difficult to understand the meaning behind it.

In the eyes of outsiders, NFT, which was bred in blockchain technology, has always been sharp and mysterious.

When the layers of jargon and technical terms are removed from the packaging, what is NFT? What is its value? Why should Antchain launch NFT products? These questions are still worth thinking about.

I. The NFT that frequently breaks the circle

NFT (Non-fungible Toke) refers to non-homogenized pass, which is a concept relative to homogenized pass (FT) with uniqueness and inseparability.

Homogenized products are very common in life, such as gold, bitcoin, and the same model and configuration of cell phones. For example, a 100 gram gold bar can be exchanged for another 100 gram gold bar. If there is no special mark, the gold bars before and after the exchange are indistinguishable and their market value is equal, people can hardly distinguish the difference between the two, and of course, they can be exchanged for each other in equal value, which is the characteristic of homogenized products.

Non-homogenized products are just the opposite, each one is unique and irreplaceable, the most typical is the collection and artwork. If these products with non-homogenized genes are digitized and pass-through using blockchain and other technologies, they become the NFTs discussed today.

The concept of NFT first gained a lot of attention in 2017 with the explosion of a cloud-based cat game called “CryptoKitties”.

Figure: CryptoKitties

Behind the controversy of Antchain's "Dunhuang Flying Sky": How to understand the real value of NFT

But for the next few years, NFT remained in a semi-lukewarm state. It was not until the second half of 2020 that NFT began to circle frequently and its market size began to grow explosively.

By 2021, this growth continued and was accompanied by new “price” shocks.

A pair of socks from the Uniswap platform fetched $150,000; five of the first words sent by the founder of Twitter fetched $2.5 million; and American digital artist Beeple’s NFT Everydays: The First 5000 Days sold for $69,346,250 at Christie’s, one of the world’s top auction houses. It set the third highest price for a living artist’s work at auction and pushed the NFT concept to a new climax.

According to incomplete statistics, in March 2021 alone, the transaction scale of the NFT market reached $205 million, exceeding the sum of all previous NFT transactions; by April 2021, the total market value of NFT works in the public chain exceeded $30 billion, hitting another record high; in the extreme market of cryptocurrency in May, the trading volume of NFT still maintained its growth trend.

Figure: NFT monthly sales trend

Behind the controversy of Antchain's "Dunhuang Flying Sky": How to understand the real value of NFT

Source: nonfungible.con

More and more celebrities, brands, and organizations are getting involved in the NFT space. The NBA and Dapper Labs, the founding team of CryptoKitties, have partnered to launch NBA Top shot, a digital asset collection that has become one of the hottest NFT products in the market, thanks to the existing fan base of NBA stars and the low barrier to registration.

Photo: NBA Top shot

Behind the controversy of Antchain's "Dunhuang Flying Sky": How to understand the real value of NFT

In addition, many well-known artists and singers have also released NFT works. The participation of these companies and celebrities who are well known in the physical world is an important guarantee for NFT’s “emergence”. With their huge influence and wide fan base in the physical world, more people started to learn about NFT through channels that their idols were passionate and familiar with, which in turn drove the NFT ecosystem to explode.

The sudden epidemic in 2020 was the catalyst for the outbreak of NFT. The more turbulent the economic times, the more rare or unique the goods with unique attributes buck the trend. Jason Bailey, founder of analytics database Artnome and digital art expert, has previously stated in an interview that the New Crown epidemic is one of the main reasons for accelerating the shift of the world’s culture and center of influence from the analog to the digital world.

Indeed, the impact of the epidemic has reduced contact and collision in the physical world. In the process, people are gradually accepting and integrating into digital virtual spaces, spending more time staying and interacting in virtual spaces, and becoming more open and accepting of the value of virtual goods and services. This has laid a good user base for the development of NFT.

In addition, the entry of various investment institutions has provided solid capital support for NFT. According to the incomplete statistics of Zero2IPO – Zero2IPO Intelligence, since the first half of this year, more than 80 NFT projects around the world have been favored by capital, with a total financing amount of more than 780 million USD.

The “real value” of NFT under the bubble

The addition of various celebrity IP, coupled with strong capital support, so that the concept of NFT continues to heat up.

In this process, the bubble in the NFT market is gradually accumulating and seems to be becoming another speculative orgy in the cryptocurrency circle.

The existence of a bubble in the current NFT market is something that no one can deny. Many so-called public chain-based NFT projects have used the hype logic of homogenized tokens on NFT once again, and a large number of speculators have poured into the market, making the prices of many NFT works out of their real values, and the market is mixed. In addition, the existence of the black and gray industry has fueled the flames of the “over-the-counter market” and continues to disrupt the normal development order of the NFT market.

In this grand orgy in the name of “art,” the original pricing logic of art is being broken: the same work, outside of the art in a shell of technology, in telling a futuristic “uniqueness” story, seems to be The same work in a technological shell, telling a futuristic “uniqueness” story, seems to be different.

To develop and view NFT with such logic is undoubtedly to open Pandora’s Box.

Behind the frequent emergence of NFT, the solidification of the circle in this field is also gradually revealed. At some NFT art exhibitions and auctions, professional technical words such as Ether, meta-universe, cryptographic algorithms, smart contracts and transaction confirmation appear frequently, even far beyond the appreciation of the artwork itself.

The digital artworks are still there, but the criteria for appreciating them are no longer limited to the use of light and brushstrokes, but more of a new technological narrative cloaked in NFT.

For the average investor, despite seeing a piece of NFT work being sold at a sky-high price in the news, and the ears may be ringing with early participants talking about the value and future of NFT, but NFT is still mysterious, inaccessible and difficult to understand.

How to make the market correctly perceive NFT and its value, become the key to promote the continued development of NFT.

First, how to understand the nature of NFT? Blockchain and other new technologies have given NFT many characteristics that make it a great vehicle for today’s digital artwork. Each NFT represents a specific digital artwork or a single replica of one of its limited offerings, recording its tamper-evident on-chain rights. To understand NFTs, it is important to first understand that NFTs are essentially on-chain rights certificates for various digital goods, including artworks.

However, the market is still accustomed to translate NFT as “non-homogenized tokens”. In this regard, Wang Yongli, former vice president of the Bank of China, said in a June 26 post that “NFT, as a non-homogeneous, indivisible thing, cannot be a general equivalent or a unified unit of account (NFT cannot be summed up and reflected), so it absolutely cannot be a currency or token.”

According to him, NFT is actually a kind of cryptographic proof of interest with irreproducible and indivisible unique digital (code) derived from blockchain technology based on several rules and information, which is used to indicate the ownership of interest in a digital item. Therefore, NFT is more appropriately translated as “non-homogenized warrant”.

Indeed, directly linking NFT to tokens has largely limited the imagination of NFT. Even in the hottest digital art field today, the biggest change brought by NFT is not the introduction of a token mechanism, but the redefinition of the concept of collecting in the digital era, allowing more artists to be seen and giving more digital artworks a vigorous life.

More specifically, what NFT actually changes is a logic: using scarcity, traceability and tamper-evident, the artist’s work is preserved and circulated on-chain, and the sharing agreement is written into the smart contract in advance, increasing the liquidity of the artwork while enabling the artist to get a share in the countless resales that follow and enjoy the growth value brought by his or her art creation.

Under this logic, art creators can leverage blockchain technology and NFT’s existing exploration to find a brand new channel to strengthen the interaction with collectors and fans, and to realize their creative achievements in the digital world.

Take the four NFT payment code skins such as Dunhuang Feitian, which are available for sale in limited quantities by Antchain fan grains, as an example. These NFT works are based on the technical substrate of Antchain, which realizes the credible deposition of digital artworks with the help of blockchain technology. Each NFT work is mapped with a unique serial number on a specific blockchain, which cannot be tampered with or divided to ensure the authenticity and trustworthiness of digital artworks.

Figure: Ant Chain-Nine Color Deer and Flying NFT

Behind the controversy of Antchain's "Dunhuang Flying Sky": How to understand the real value of NFT

These NFT payment code skins snapped up by users are allowed to be used in specific business scenarios interface for corresponding digital works display, study, research, appreciation and downloading compressed images and other application services, for example, they can be used as skins for Alipay payment codes. However, these NFT works are required not to be used for other commercial purposes, nor can they be used for speculation and price inflating.

Despite this constraint, the launch of the ant chain NFT product was met with market frenzy, and there were even hundreds of thousands or even millions of second-hand transactions on Idlefish, with the highest Dunhuang Feitian NFT being speculated to 1.5 million yuan a piece.

The idle fish platform quickly stepped in to stop the market hype and took down all NFT-related goods, but the overheated market response still made many people question the NFT products of the ant chain.

The questioning mainly comes from two aspects: for many people who do not know about NFT, the issuance of NFT by Antchain is no different from “issuing coins”, which is hard to understand especially under the current situation of tightening regulation of domestic cryptocurrencies; while those “insiders” in the NFT native circle have accused Antchain of being “insiders”. The “insiders” of the NFT circle have accused that the NFT of the ant chain can only be seen but not traded, and that the copyright of the work is not transferred, and that it is “called NFT but actually JPG”.

For the first point of doubt, it can be quickly eliminated with a little understanding of NFT. NFT itself is fundamentally different from cryptocurrencies such as Bitcoin. What cryptocurrencies need is the transaction value of the market and the transaction flow of the secondary market, and most cryptocurrencies themselves lack the value of the underlying assets to support them; while the value of NFT is supported by the actual value of digital goods, and its price is derived from the market consensus on the value of the work, which is supported by the sovereignty, scarcity and uniqueness of the creator.

In the eyes of Antchain, NFT is an effective and reliable technical means to solve the problem of confirming the rights of digital artworks. Therefore, Antchain NFT is only allowed to be appreciated, collected and displayed in a limited scope this time, and cannot be bought and sold in the secondary market like commodities and cryptocurrencies, which largely cuts off the opportunity of market speculation and price inflation.

The main reason for questioning the copyright of NFT is that different people have different understandings and perceptions of NFT, that is, they have different definitions of the concept and nature of the “property” being traded. However, in fact, Article 18 of China’s Copyright Law stipulates that “the transfer of ownership of original works of art and other works is not considered a transfer of the copyright of the work. Therefore, when users buy NFT digital artwork, they will actually get only the ownership of the artwork, not the copyright. Therefore, the non-transfer of the copyright of Antchain NFT digital artworks is not a maverick, but a legal provision that should be observed both in the traditional art field and in the blockchain NFT art field.

It is also important to be clear that NFT is only a vehicle, not the content or the art itself. The most important concern for any digital artwork, or digital goods in a larger sense, should still be the attribution of value to the goods themselves. In the creation of digital art, what technology is used to create, whether or not to choose to put it on the chain after the work is completed, and in what form the transaction is finally completed, should be three separate things, and should not be mixed up and used as a gimmick for hype.

The person in charge of Antchain has also repeatedly emphasized in response to relevant media that Antchain’s move to launch NFT aims to encourage and promote the protection of intellectual property rights of digital creations, and does not involve any hype.

Third, the future imagination of NFT

Time is the biggest enemy of bubbles. As the market matures and investors become more fully aware of NFT, the bubble created by NFT will gradually subside.

First, NFT will change the way to perceive and share value in the digital era. The traditional “copy and paste” habit of the Internet era cannot effectively protect intellectual property rights, while NFT technology can clarify the relationship between rights owners and users by tokenizing digital files on the blockchain. and trading platform.

In addition, NFT fully protects the interests of creators and allows them to enjoy the value of the growth of their works. By including the author’s share in the underlying agreement, creators are able to track their works and continue to earn from the resale of their works. This will lower the barrier to entry for NFT and inspire digital creativity. NFT redefines the concept of collecting in the digital age, and will change the way we perceive and share value.

In addition, the influence of NFT will gradually extend to traditional industries. nft is the most beautiful landing of crypto technology. Everything from digital goods (such as items that exist in the virtual world) to real-world property rights to physical assets (such as clothing or real estate) can be represented by NFT. Currently, NFT is already being explored in physical property rights and business models, and is showing potential for great power.

On June 9, 2021, Propy successfully minted and auctioned the first real estate NFT, proving that real estate NFT can confirm property rights and enhance real estate liquidity; Antchain previously launched Alipay IP commercial platform, using blockchain technology to enable IP licensing on a volume-based basis, which also gradually changes the traditional high threshold licensing fee situation. In addition, the digital copyright protection platform “Magpie Chisel” has “civilianized” copyright, with services ranging from Taobao merchants’ anti-theft map to the copyright of small and medium-sized videos “going abroad”, providing original works from creation, dissemination, registration to maintenance. It provides the whole process of original works from creation, dissemination, registration to rights protection.

Behind the controversy of Antchain's "Dunhuang Flying Sky": How to understand the real value of NFT

Although NFT application scenarios are currently mainly in vertical fields such as games, collectibles and artworks, and have not yet appeared on a large scale in the real economy, the potential shown by NFT may realize a change in the development mode of traditional industries.

The future NFT will be able to be widely used for real-world assets and digitally produced assets, and tokenized with the help of blockchain technology to accelerate the process of digitization of physical assets and data assetization.

The development of the NFT market should not be separated from the value of the underlying assets, but must respect digital property rights, turn “intellectual property” into assets, and stimulate greater market vitality.

This process requires the joint participation of many parties: the relevant parties should take the responsibility of the industry, do a good job of measuring “decentralization” and “centralization”, build a good firewall, and formulate solutions for the bubble crisis in advance; big organizations such as Ant Chain should take up the responsibility and make use of their own perfect technical infrastructure and ecological infrastructure. The regulators should strengthen investor education to the public, popularize the correct concept of NFT, guide the correct development of the industry, encourage NFT to better integrate with China’s digital commodity market, and strengthen the whole process management of NFT while strictly regulating cryptocurrency mining and trading speculation such as Bitcoin. In addition to strictly regulating bitcoin and other cryptocurrency mining and trading speculation, strengthening the whole process management of NFT, strictly prohibiting all kinds of false propaganda and “rubbing concepts” and “speculation hot spots”.

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