CITIC Securities: NFT Value Analysis Report

At this stage, the most representative application value of NFT lies in the field of digital copyright operation. NFT-based digital artwork solves the problems of confirming the copyright of its works, controlling the number of works distribution and circulation, and preventing piracy, and provides richer interactive and Commercial way. More importantly, NFT realizes the digital assetization and circulation transactions of virtual items, which drives the revaluation of digital assets. It is expected that the landing scenarios of NFT will be more diverse in the future, and it is expected to become the cornerstone of the Metaverse era.

What is NFT

● Discussion on the definition of NFT

A non-fungible token (NFT) is an indivisible and unique digital certificate. NFT marks a user’s ownership of a specific asset, making NFT a recognized tradable entity for that specific asset. Compared with homogenized tokens (FT, such as real currency, virtual currency), the essential difference between NFT and its is that NFT anchors the value of non-fungible assets.

CITIC Securities: NFT Value Analysis Report

● NFT underlying protocol standard

ERC-20

Homogeneous tokens, all token units are of equal and divisible value, compatible with Ethereum wallets and wallets that support Ethereum.

ERC-721

A non-fungible token, each transaction contains only one item, and two transactions are required to purchase two items.

ERC-998

Combinable non-fungible certificate CNFT, an ERC-998 CNFT can contain multiple items in the form of ERC-721 and ERC-20 and exist according to a certain hierarchical structure, transferring CNFT is to transfer the entire hierarchical structure and affiliation.

ERC1155

Accommodates and manages collections of various types of tokens/tokens. Items are stored in a central smart contract. Any item Token can be combined and packaged into a “Token package” with an independent id. Multiple items can be sent to a single transaction. The designated party improves transaction efficiency and reduces transaction costs.

CITIC Securities: NFT Value Analysis Report

● NFT transaction principle

How to realize NFTization?

Deploy NFT contracts on NFT-enabled blockchains, point to data content or assets through external links, and NFT owners can customize the storage content.

How does NFT circulate?

Sell: NFT owners can customize the price, sell on a public website or app, or use an auction model.

Purchase: First, you need a digital wallet that can store NFTs and cryptocurrencies. After purchasing NFTs, the key for the proof of ownership will be stored in the wallet. The NFTs are still stored on the blockchain, and everyone can see their ownership information.

CITIC Securities: NFT Value Analysis Report

 The development status of NFT

●   NFT market situation: explosive growth in 2021

The fields involved in NFT include collectibles, games, artworks, domain names, financial products, virtual worlds, etc. In 2020, the top three application areas of the global NFT market are virtual worlds, artworks and games, accounting for 25%, 24% and 23% of the market respectively. In 2021Q2, the proportion of collectibles increased rapidly to 66%, art accounted for 14%, and sports accounted for 7%.

CITIC Securities: NFT Value Analysis Report

● Popular NFT projects

According to Nonfungible data, in 2021Q2, collectibles are the most popular area of ​​NFT, with sales accounting for 66%, in addition to art accounting for 14% and sports accounting for 7%.

CITIC Securities: NFT Value Analysis Report

● NFT trading platform

According to Nonfungible data, the transaction volume of NFT secondary market in 2021Q2 shows a growth trend. Among them, the primary market is trading in the asset issuance stage, and the secondary market is mainly P2P trading. The dominance of secondary market transactions reflects the maturation of the NFT market.

CITIC Securities: NFT Value Analysis Report

Domestic NFT development and future prospects

●   NFT value

At this stage, the most representative application value of NFT lies in the field of digital copyright operation. The core function of NFT is to realize the digital assetization and circulation transactions of virtual items, and drive the revaluation of digital assets.

①NFT-based digital artwork solves the problems of confirming the copyright of its works, controlling the number of works distribution and circulation, and preventing piracy.

②Provide a better way of interaction and commercialization; realize the liquidity of IP value, and at the same time write the sharing agreement into the smart contract to enjoy the sharing income in the process of resale of digital artworks.

●   Prospect of NFT

We believe that in the future, digital works, virtual plots, game skins, equipment, etc. produced by more content creators will be expected to become digital assets and be traded in circulation. With the continuous enrichment of digital technology and applications, the landing scene of NFT will be more diverse. At the same time, NFT is expected to become the cornerstone architecture of the future Metaverse era.

CITIC Securities: NFT Value Analysis Report

NFT itself has far-reaching value. At present, the domestic NFT market is still in the early stage of development. With reference to the rapid development of the overseas NFT industry, the domestic NFT industry is also expected to usher in development dividends in the future. With the development of related technologies, content, users, and transaction ecology continue to grow Mature, and the introduction of relevant laws and regulations to regulate the development of the industry, the development potential of NFT is worth looking forward to.

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