Evolution of the Ascension Metaverse of NFT

Summary

Previously, due to Meta’s unsatisfactory performance and unclear regulatory policies, the popularity of the Metaverse has declined, but recently, with the emergence of new NFT gameplay, the upcoming summits and product launches in April and May, the theme of the Metaverse is expected to reignite.

The acceptance of NFT by users has exceeded expectations, and secondary transactions have gradually dominated the market. The number of daily active users of Opensea reached new highs at the beginning of this year, and the platform transaction volume in January this year increased to 4.491 billion US dollars, a month-on-month increase of 102%.Judging from the overall data of the NFT market, the market transactions at the beginning of the year have not recovered to the high level in August last year, but the market transaction structure has shown a clear trend of change – the transaction volume of the secondary market is about 5 times higher than that of the primary market. It indicates that secondary circulation transactions among users in the NFT market have begun to dominate.

Celebrities entering the game will become the norm, and the NFT social outing effect will continue to strengthen.In January this year, Jay Chou tweeted Phanta Bear NFT, which attracted the attention of fans. 10,000 PhantaBears were sold out within 40 minutes after being released, with a unit price of about 6,200 yuan. It has become the norm for celebrities to enter NFTs, such as Curry, Wilber Pan, Edison Chen, etc. The fan base of celebrities has brought a greater out-of-the-circle effect to NFTs, and NFT collectors are no longer limited to early blockchain players. The identification and display of NFTs on social platforms such as Twitter also further strengthens the out-of-circle effect. We expect that NFTs will open up interactive scenarios such as games, social networking, and meetings in the future.

The outbreak of PFP NFT: a new paradigm of creator economy that begins with avatars, social media + copyright.The boring ape BAYC climbed to the top of the virtual image NFT, and the team behind it, YugaLabs, raised $450 million to build an NFT media empire. PFP NFT (Profilepictures, virtual image) has dominated the market in the past year of development. In March this year, the sales of collectible NFTs belonging to PFP accounted for 84% of the total sales of NFTs. Not just collectibles, the core of the PFP community lies in three points: 1) organizational system design based on blockchain programs, 2) cultural consensus based on IP image, and 3) interest community based on NFT single identity.There are two major trends in the development of NFT: open copyright community co-creation, allowing NFT to capture ecological value; the DAO treasury model allows NFT issuance to change from sales to community financing.

The development of domestic digital collections is gradually clear, the infrastructure is expected to be opened up, and the future of secondary transactions can be expected. Domestic NFTs will be de-tokenized and renamed “digital collections”, and the legal nature and supervision subjects will be gradually clarified. The official media has entered the digital collection, and the value of the digital assets of the digital collection and the confirmation value of the blockchain technology behind it have been affirmed. The domestic digital collection infrastructure is moving towards opening, and it is expected that a unified secondary transaction specification will emerge. There is an “intergenerational difference” between alliance chain NFT and public chain NFT gameplay, and the development characteristics have their own advantages and disadvantages. The alliance chain has more advantages in copyright protection, and domestic digital collections will be deeply integrated with copyright protection.

Investment suggestion : For the secondary market, the platform, IP resources and related targets of the Cultural Exchange can be emphasized. Digital collection platforms include: Tencent Holdings, Alibaba, Tianxia Show, and Tianzhou Culture. IP categories include: Visual China, Blue Cursor, Digital Video, China Literature Group, Tencent Music, Torsi, Miao Exhibition, Zhongqingbao. The subjects of the Wenzhou Stock Exchange: Sanxing, Xinhuanet, Borui Communication, Zhejiang Wen Internet, and China Media Holdings.

Risk warning : code vulnerability risk; blockchain policy supervision risk.

Evolution of the Ascension Metaverse of NFT

foreword

Digital asset protocols such as NFT (Non-Fungible Token) are widely used in digital collections, digital artworks, virtual land, game equipment and other virtual assets due to their inseparability and uniqueness. asset field. NFT enables digital assets to be separated from centralized server storage, decentralization of interpretation and control rights, and users have enhanced control over virtual assets, bringing a new dimension of value to the Internet.

Evolution of the Ascension Metaverse of NFT

In 2021, NFT was all the rage under the promotion of the Metaverse theme, and many teams at home and abroad participated, and the first round of introduction to the user market was also carried out. Since then, although the popularity has subsided, the trend of going out of the circle has not changed. With the development of infrastructure (such as Opensea, Magic Core, Whale Scouting, etc.) and the continuous enhancement of the out-of-the-circle effect, users are more interested in NFT, a “new species”. The rate of acceptance is much faster than expected. And PFP NFT (Profile Picture, virtual image picture) has become the most dazzling track in the direction of the Metaverse in terms of gameplay innovation and growth rate.

Evolution of the Ascension Metaverse of NFT

Domestic and foreign NFT markets: Continued out of the circle, diversified gameplay

NFT is rapidly being accepted by users, and the number of daily active users of Opensea reached a record high at the beginning of this year. According to Dappradar data, in January 2022, the transaction volume of OpenSea increased to 4.491 billion US dollars, a month-on-month increase of 102%, the transaction volume increased to 2.8163 million times, a month-on-month increase of 95%, and the daily active users reached 46,800, a record high and a month-on-month increase. 86%. Data shows that more and more users are beginning to accept NFT digital assets, participating in transactions and owning their own NFTs.

Evolution of the Ascension Metaverse of NFT

Judging from the overall data of the overseas NFT market, the market NFT turnover rebounded at the beginning of the year, but it still did not return to the high level in August last year . The transaction volume in January this year reached $2.75 billion, up 120.4% month-on-month, and the NFT market was rekindled after last summer. From the perspective of the average transaction price, the average transaction price of NFT has remained high since the end of last year, and the average transaction per lot is about $3,000.

From the perspective of transaction structure, NFT secondary market transactions show a dominant trend. The primary market of NFT refers to the issuance market of the project party, and the secondary market refers to the circulation and transaction of NFT among users. In March this year, the transaction volume of the NFT secondary market was 7.1 times that of the primary market, but it was only 1.5 times in April last year. Market transactions have gradually become the dominant market, and the head effect is obvious.

Evolution of the Ascension Metaverse of NFT

Evolution of the Ascension Metaverse of NFT

Evolution of the Ascension Metaverse of NFT

After more than a year of rapid development, the NFT application ecology is currently focused on 6 main tracks: collectibles, artwork, game equipment, virtual land, practical NFT, and financial NFT. As far as the current market development is concerned, collectibles, artworks, game equipment and virtual land belong to the mainstream track, with a large proportion of their transaction volume and rapid ecological development. The virtual asset NFT that the market pays attention to often refers to this category.

Evolution of the Ascension Metaverse of NFT

From the subdivision track data, collectible NFT has become the absolute core application scenario. According to Nonfungible data, the sales volume of collectible NFTs in March this year reached US$995 million, and the transaction volume of collectibles in the first quarter was US$4.134 billion, an increase of 67% from US$2.461 billion in the fourth quarter of the previous year. force. Since July last year, the proportion of the transaction value of collectible NFTs has increased continuously, from 28% to 84% in March this year. From the perspective of transaction value, collectibles have become the core application scenario of NFT.

Evolution of the Ascension Metaverse of NFT

Evolution of the Ascension Metaverse of NFT

The development momentum of the domestic NFT industry is also the same, and all parties have also entered the market one after another, and it has become the norm for digital collections to be sold out in seconds. “Whale Scout” was originally “Ant Fan Granule”, a small program launched by Alipay in June 2021, and was upgraded and renamed “Whale Scout” in December 2020. User transactions require real-name authentication. Currently, secondary transactions are not supported, and only the holder can be transferred to real-name friends for free after 180 days. The copyright of digital collectibles belongs to the publisher or the original creator, and the purchaser only obtains the right of non-commercial use. “Magic Core” is a digital collection trading platform launched by Tencent in August 2021. Its digital collections are issued based on Zhixin Chain. At present, users’ real names are used throughout the whole process, content is reviewed through the entire link, and transfers between users are not open. The “Under One Person” theme digital collection released by “Phantom Core” and Tencent Animation is limited to 6,000 pieces, priced at 98 yuan, and sold out in one second.

Evolution of the Ascension Metaverse of NFT

The road to NFT’s ascension: star entry, social out of the circle

On January 1, 2022, Jay Chou’s trendy brand PHANTACi and EzekClub jointly released the NFT project PhantaBear (phantom bear) in a limited number of 10,000 pieces with a unit price of about 6,200 yuan. It was sold out in about 40 minutes, with a total sales of 62 million yuan. . PhantaBear is 10,000 digital collectibles randomly generated by algorithm, issued on Ethereum and stored on IPFS network. Each fantasy bear is unique, and the holder not only owns this digital image, but also joins the community of the fantasy bear and has subsequent related privileges.

Evolution of the Ascension Metaverse of NFT

Not only “Jay Lun Bear”, but celebrities entering NFT will continue to be the norm. With the popularity of NFT, more and more stars are participating in the NFT ecosystem, and many stars have launched their own NFT series. The early star NFTs are mainly foreign stars, such as Justin Bieber and Curry. With the hot exit of Phanta Bear in early 2022, domestic stars have also launched their own NFTs, such as Wilber Pan, innocent cats, Edison Chen 2426C, etc. The fan base of stars has brought a greater out-of-the-circle effect for NFT. NFT collectors are no longer limited to blockchain players, and many star fans have also joined in, bringing a larger audience to the promotion of NFT; at the same time, stars The NFT project also tries to create an ecological application of web3.0, providing more possibilities for the development of the Metaverse.

Evolution of the Ascension Metaverse of NFT

And traditional social networks have also begun to be compatible with NFT digital assets. Twitter allows users to use NFTs as avatars, a new feature that is only available to Twitter Blue subscribers and supports Apple’s iOS devices. Just pay a $2.99 ​​Twitter Blue subscription. Users can connect cryptocurrency wallets and import their OpenSea collections while editing their profiles. Then you can choose one from the NFT digital art collection as an avatar. These users are easily distinguished from those who have not been encrypted by the shape of their avatars: the new NFT avatars are hexagons, not the traditional circles.

Evolution of the Ascension Metaverse of NFT

The outbreak of the PFP NFT track: starting with avatars, social networking and copyright

We believe that the development of virtual image PFP NFT (Profilepicture) has gone far beyond simple digital collections. The relationship between the community and PFPNFT is more like a virtual country and a digital passport: organizational system design based on blockchain programs, culture based on IP images Consensus, a community of interests based on NFT single identity. The model of PFPNFT is constantly innovating, and the infrastructure for community operations is also developing rapidly. Collectibles based on avatars have become the most eye-catching track in the NFT and Metaverse fields at the beginning of this year.

The Boring Ape reaches the top, and YugaLabs builds an NFT-centric media empire. The Bored Ape Yacht Club (BAYC) created by YugaLabs consists of 10,000 random ape avatars. It has surpassed Cryptopunks to become the most influential NFT. The current floor price is about $350,000. The rapid development of BAYC is inseparable from the team’s exploration of gameplay modes. In March of this year, YugaLabs announced the completion of a $450 million financing round at a valuation of $4 billion. Soon after, YugaLabs announced the creation of an NFT linked to the Metaverse project Otherside, and issued ApeCoin for financing. The current market value of the token exceeds 3 billion US dollars.

Evolution of the Ascension Metaverse of NFT

So what’s the use of having a boring ape? At present, BAYC is not just an NFT, it is an exclusive club, and the only way to join is to buy the boring ape. The Boring Ape’s powers currently include the following:

  • Community members own the commercial use rights of Boring Ape, which means making and selling prints, t-shirts, coffee mugs, etc.;
  • BAYC also released their own member-exclusive merchandise, requiring members to log in with their ETH wallet to verify ownership before purchasing;
  • You will receive exclusive NFT airdrops, including Bored Ape Kennel Club (BAKC), Mutant Ape Yacht Club (MAYC), etc.In the secondary sales market, the floor price of BAKC quickly exceeded $2,000;
  • BAYC members have a say in where project funds go, and the community has advocated for millions of dollars to be donated to various charities;
  • A recent roadmap update announced more members-only utilities, including scavenger hunts, BAYC project narrative updates, games, and more.

Evolution of the Ascension Metaverse of NFT

From the development path of BAYC and other virtual image NFTs, we have seen two trends in the combination of NFTs with social networks and creator economy:

1) NFT opens IP copyright, and community co-creation brings ecological and use value to NFT. Upon acquisition of CryptoPunks, Yuga Labs will transfer intellectual property (IP), commercial and exclusive licensing rights to CryptoPunks NFT holders. This will enable CryptoPunks owners to create artwork and products based on their NFTs just like BAYC owners. The current popular PFPNFT has been copyrighted, and its core value is that anyone can use the artwork (NFT) they hold for commercial or other purposes without belonging to the original artist, founding team or creator. Allow creators and entrepreneurs to use the project’s IP and bring great value to the original NFT project through network effects.

Evolution of the Ascension Metaverse of NFT

2) The pre-sale funds are converted into the DAO model of the community treasury, which turns NFT from commodity sales into public financing for community development. The entire ecology of DoodlesNFT (Graffiti) can be regarded as a DAO (Decentralized Organization), and each member can influence the development of the community.Doodles put the 420ETH of the initial sale into the community treasury, and charge half of the 5% fee from the secondary sale into the community treasury, and hand over the control of the treasury to the community. Each DoodleNFT has a voting right, and community members vote on the Snapshot to authorize, multi-signature by core members to enable the community treasury. This model was widely replicated by the follow-up PFPNFT, which made the sale of collectibles shift from a commodity sale behavior to a public financing behavior similar to community development.

Evolution of the Ascension Metaverse of NFT

How do you view the development of consortium chain NFTs under domestic policies?

Domestic NFTs will be de-tokenized and renamed “digital collections”, and the legal nature and supervision subjects will be gradually clarified. Domestic policies prohibit the provision of services such as trading and mining for cryptocurrencies, but NFTs are not exactly the same as cryptocurrencies. In September 2021, the central bank and other relevant departments issued the “Notice on Further Preventing and Disposing of Hype Risks in Virtual Currency Trading” to crack down on virtual currency trading speculation. In October 2021, the regulatory authorities interviewed some Internet companies, and the NFT platforms of related companies deleted “NFT” and changed to “digital collections”. The development model of domestic NFTs will be de-tokenized, focusing on the application of NFT digital property rights certification functions in the fields of copyright protection and asset confirmation, and establishing rules for the issuance, sales, and circulation of digital collections.

Evolution of the Ascension Metaverse of NFT

The official media has entered the digital collection, and the value of the digital assets of the digital collection and the confirmation value of the blockchain technology behind it have been affirmed. The digital collection issued by Xinhua News Agency on December 24, 2021 is the first set of “news digital collections” in my country, featuring selected photojournalistic reports in 2021, such as “Centennial Founding of the Party”, affirming its value as a digital asset; January 2022 On the 31st, CCTV-1 “Ancient Rhyme and New Year” program team, CCTV, jointly with Hubei Provincial Museum and QQ Music, released the New Year-themed digital collection “Ancient Rhyme Inheritor”. This set of digital collections is based on Tencent Zhixin Chain and encourages my country’s future block Chain technology is applied to the direction of digital asset confirmation.

Evolution of the Ascension Metaverse of NFT

The domestic exchange is expected to open the secondary trading of digital collections. Cultural Property Exchange (CCE) is a comprehensive service platform that provides enterprises with services such as transaction, auction, investment and financing. The transaction objects include cultural enterprise assets, art collections, cultural heritage, cultural and creative works, IP derivatives, etc. The establishment of a cultural exchange requires certain qualifications and an official government background. However, there is a lot of overlap with the digital collection trading platform at the business level of the China Cultural Exchange, and the secondary trading of digital collections is expected to develop on the basis of the China Cultural Exchange.

The domestic digital collection infrastructure is moving towards opening, and it is expected that a unified secondary transaction specification will emerge. According to public information, from the end of last year to the beginning of this year, Xinhuanet and Shanghai Cultural Property Exchange briefly outlined the agreement to jointly build a national-level digital cultural and creative regulatory ecological matrix and jointly build a national-level copyright transaction protection alliance chain. Until today, Tencent Magic Core, Ali Digital Auction, and iQIYI Digital Cultural and Creative have all announced their access to the national copyright transaction protection alliance chain. With the opening of the underlying infrastructure of domestic digital collections, it is expected that a standardized and unified management of the secondary trading market will emerge.

The alliance chain has more advantages in copyright protection, and domestic digital collections will be deeply integrated with copyright protection. The copyright protection of the alliance chain is simply to record the intellectual property information in a trusted database, and then the court recognizes the alliance chain data as evidence, which can reduce the cost of rights protection in the event of infringement. From this point of view, the alliance chain NFT is a kind of copyright certificate with expanded functions, which not only records the ownership of copyright, but also transfers transactions to make some business model innovations. According to OpenSea’s analysis of its own market, more than 80% of the NFTs in its market are infringing, but all OpenSea can do is to remove the NFTs reported by the creators from the shelves. In the future development of digital collections of the alliance chain, compared with the anonymous and decentralized public chain NFT, the alliance chain has great advantages in protecting the rights and interests of creators.

Evolution of the Ascension Metaverse of NFT

Overall, the development endowments of alliance chain digital collections and public chain NFTs are not the same. The former is more protective of creators and popularized by the public, while the latter is more dynamic in model innovation.There is a certain “intergenerational difference” between the two in terms of gameplay. With the standardization of the secondary market for digital collections, the domestic alliance chain digital collection market is expected to approach the scale of the public chain NFT market.

Investment Advice

Since 2021, NFT projects and platforms at home and abroad have continued to emerge, and they have been explored on various tracks. For the secondary market, last year was the time when the Metaverse took off, but as Meta’s performance fell short of expectations, the market’s enthusiasm for the Metaverse dropped significantly. We have the following views:

1) Facebook’s renaming of Meta was a catalyst for the last wave, but Meta does not represent the Metaverse.

We believe that although Meta has the advantage of changing its name, the layout of giants such as Microsoft and Nvidia in the Metaverse may be more representative. Yuan Shouzhou is not a fanciful idea, but represents the next ten-year journey of Web3.0. At present, no company has an absolute advantage. Just like the beginning of the mobile Internet, I don’t know who can grab the next one. ten-year ticket.

2) VR, virtual human, NFT? What is the Metaverse?

Metaverse will be the culmination of the above concepts. Recently, we have discovered the emergence of industrial division of labor in the research of the primary and secondary markets. Companies that are good at semantic recognition technology can provide support for virtual human applications, and VR hardware manufacturers are looking for content. NFT The distribution platform and IP generation complement each other, and the Metaverse is a process of gradual integration. According to the differences in regulatory policies in various places, the development of the Metaverse in North America, Southeast Asia and China will also be different.

3) What is the catalyst for this Metaverse?

On the one hand, various domestic summits will be held one after another in April, and the market will have the opportunity to focus again; on the other hand, domestic Internet manufacturers will continue to develop NFTs and Metaverse under the compliance framework, which is also worth looking forward to. From the perspective of the original NFT market, the NFT upgrade driven by the boring ape will focus on more IP creators, funds and users. The expectations for NFT are not only the avatars used for display, but the games derived from this community. , script killing, concerts and peripheral creativity.

In the secondary market, attention can be paid to platforms, IP resources and related targets of the Cultural Exchange.

Digital collection platforms include: Tencent Holdings (HK 0700), Alibaba (HK 9988), Tianxia Show, and Tianzhou Culture.

IP categories include: Vision China (000681), Digital Video (300079), China Literature Group, Tencent Music, Blue Cursor, Torsi for vertical applications, Mio Exhibition and Zhongqingbao, Shunwang Technology in the game field, etc. , NFT may provide it with a new business model.

The targets of the Wenzhou Stock Exchange include: Sanxing, Xinhuanet, Borui Communication, Zhejiang Wen Internet, and China Media Holdings.

risk warning

Code vulnerability risk: Code-based organization means that code vulnerabilities may bring huge economic losses.

The risk of blockchain policy supervision: At present, the blockchain is in the early stage of development, and there are certain uncertainties in the supervision of blockchain technology, project financing and tokens in various countries around the world, so there is uncertainty in the development of industry companies’ projects.

This article is excerpted from the report “Guosheng Blockchain | Metaverse (IX): NFT’s Dimensional Ascension, Metaverse Evolution” published by Guosheng Securities Research Institute on April 2, 2022. For details, please refer to the relevant report.

Song Jiaji S0680519010002 songjiaji@gszq.com

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