Explain in simple language to show you the difference between NFR and NFT

On October 14, the “NFR White Paper” guided by the International Institute of Technology and Economics of the Development Research Center of the State Council was officially released. The “White Paper” is co-edited by Professor Cai Weide, Director of the Digital Society and Blockchain Laboratory of Beihang University, and Lawyer Zeng Wenwen, a partner of Beijing Tianyuan Law Firm. In order to better interpret the “White Paper”, the two editor-in-chief, with the theme of “Digitalization Makes People Prosperous Together”, taught everyone how to use NFR to protect their legal rights and interests in Kuaishou XinLive. The wonderful interpretation of Professor Cai Weide and Lawyer Zeng Wenwen has accumulated 2.172 million viewers on the entire network. The following is the live record. The content of this issue will be divided into two releases, the first and the next. This is the first one.

Cai Weide:

The overseas NFT market is hot

How many Jay Chou fans are in the live broadcast today? If it is a Jay Chou fan, please deduct 1. See how many Jay Chou fans are, or many netizens are Jay Chou fans. In the past few years, we invited Chinese relatives to send some CDs abroad to listen to. Jay Chou is a multinational star. Why do I mention Jay Chou, because Jay Chou did an NFT project recently. In fact, the NFT done by Jay Chou was proposed from the digital token community in 2014, and the NFT did not become popular until 2020. The first quarter of this year was particularly popular, with a 20-fold increase. I see NFT posts every day, which arouses heated discussions. It was quieter for the next 4 to 5 months. In July this year, NFT became popular again.

Many places in China are mentioning NFT. What does NFT look like? In a very simple way, the T behind NFT stands for Token (digital token). NFT bluntly is a digital token like Bitcoin and Ethereum , but a different form of digital token. The Chinese government has repeatedly issued documents prohibiting people from buying and holding digital tokens, including derivatives. I think it is illegal to engage in NFT trading or industry in this environment, and it is against the government. Many friends, groups, and companies come to me and hope that I can help them do NFT. I said I’m sorry, I can’t help. If I do, there will be very serious consequences.

The “assets” of NFTs and digital tokens have been kept on the network to support the virtual

NFT is a kind of digital token, and has a common feature with “traditional” digital tokens. The actual “assets” are on the network. For example, in Ethereum , 100% of Ether remains on the Ethereum network, and the same is true for Bitcoin. Anyone who stays on the Bitcoin network must do business on the Ethereum network. It is exactly the opposite of our current physical asset model. For example, when we buy real estate now, the real estate is in the physical space. If we digitize the real estate certificate, the certificate is in the cyber space (virtual space), but the “asset” still stays in the physical space. Spatial.

NFT, Bitcoin, and Ethereum are digitizing or networking assets. This is a very serious issue, because in this way we are “feeding the virtual with reality.” We put actual assets on the network, and NFT is a very good representative. You drew a painting, you burned the original painting, put it on the Internet, the Internet is gone, and your artwork is gone. Your assets exist in cyberspace and virtual space, and a completely different economic model has emerged. The entity is not important, the important thing is virtual assets, cyberspace.

NFT itself is the same as Bitcoin and Ethereum. You are using actual assets (RMB, U.S. dollars, etc.) to buy Bitcoin, Ethereum, NFT, and you are using actual assets to buy a virtual asset. Yangxu. I sold a painting on NFT. This painting has increased by 100 times. I am very happy. All the assets are actually still on the Ethereum network, not in the physical space. After you sell the network assets, they will become The actual assets (such as RMB or US dollars) return to the physical space, but the original painting is still on the Internet.

NFT, Bitcoin and Ethereum have a very important point of view, which is to nurture the virtual with reality. Therefore, the rise of NFT will eventually lead to the rise of Ethereum. Everyone puts the physical music on the Ethereum system. The real assets are virtual. melted. Some people say that NFT is not the same as Bitcoin. In fact, it is the same. Some people say that Bitcoin and Ethereum are banned in China. NFT China will not. I think it is impossible because their nature is the same. This is just a little explanation. Let’s take a look at why NFT has legal risks, and problems arise anytime and anywhere.

NFT and digital tokens are the same. The “assets” handed in will always stay on the Internet. Everyone’s transactions are just virtual assets on the trading network, and this virtual asset will never come back to the physical space.

NFR assets remain in the physical space to support the reality

We put forward the concept of NFR on the Double Ninth Festival on October 14, 2021. This concept is just the opposite. We don’t use digital tokens, and we don’t have a payment system. Assets are not in virtual space, not on the Internet, but in entities. For example, the painting is still in the entity, not on the Internet. What is on the Internet? It is the digitization of the certificate or the owner’s certificate. This is the digitization of the certificate, not the digitization of the asset. The network certificate is gone, but the asset is still there. This has a very big philosophical change.

The domestic policy environment requires us not to help the fictitious with reality, but to help the real economy. The 1024 meeting also emphasized the need to integrate with the real economy to help the real economy. This is very clearly written, NFT is to nourish the deficiency, NFR is to nourish the real, or to say that the virtual helps the real.

Zeng Wenwen:

Just now, Mr. Cai gave a brief introduction to everyone. Some time ago, it was really popular. Some people also joked that NFT was “warning the sky”. Indeed, in the art market some time ago, including some markets for cultural products, NFT has received widespread attention. Many authors make their own works into NFT products, and some auction companies are also issuing these NFT products, and many investors have also flocked to join the investment ranks.

Just now, Mr. Cai explained to you a simple situation of NFT, and also pointed out the legal risks. In fact, in this respect, I also made a simple supplement to the content I want to talk about. First of all, from my understanding, NFT (non-homogenization token), this non-homogenization is a unique asset. One of our paintings and songs is unique, and it actually corresponds to the same quality. The concept of chemistry. For example, our currency, like currency, is a homogeneous commodity that serves as a general equivalent. It is interchangeable. I believe everyone can understand that our NFT represents a unique feature of digital assets.

Don’t touch the legal red line

Teacher Cai also talked to you about legal issues just now. I would like to remind everyone that now that NFT is so popular, as creators and investors, you must pay special attention to some risks. You cannot touch the legal red line and you cannot step on thunder. For example, we just now Speaking of virtual currency. If you have paid attention to the previous news, some time ago we already had an official notice of “Notice on Further Preventing and Disposing of the Risks of Virtual Currency Trading Hype”, and at the same time, we have also issued relevant notices on the rectification of virtual currency mining. It is a particularly obvious signal. Our national government currently has a clear negative attitude towards digital currency transactions and hype. NFT products will be linked to virtual currencies to a certain extent, because this is determined by its payment system, and there will be a relatively large risk in this area. You may be curious about new things on the Internet just now, and there are also collectors or friends who work in collections. They may think this is a worthwhile investment area. The foreign exchange supervision on taxation that we just talked about, and what we are now actually On the Internet, the country’s anti-money laundering requirements and anti-corruption requirements will strengthen the supervision of this aspect, and this area is also prone to relatively large legal risks. When we issue NFT products, we must also pay attention to whether it will involve illegal financial activities such as illegal issuance of securities, illegal fund-raising, and illegal sale of tokens and coupons. The qualitative nature of this type of behavior is relatively complicated. I will follow the topic of Teacher Cai just now to remind everyone that when we see NFT products in the near future, we must pay special attention to the legal risks that exist.

Cai Weide:

Engaging in NFT means doing transactions on the Ethereum system

Many people today say that NFT is not a digital token, and there is no risk. In fact, if you use the Ethereum system to run the NFT protocol, you actually have to pay in Ether and register on the Ethereum system. Although you paid in RMB and did not go through the Ethereum system, the merchants still used RMB to buy ether and went to the Ethereum system. In this case you still violated the national law.

Some people say that I am not on the Ethereum system, I have not paid Ether, and I have not violated the law. But your NFT merchant may still need to buy Ether, and make NFT transactions through the Ethereum system, and you instruct the merchant to conduct the NFT transaction. And this is the same as a digital token exchange. You pay RMB to buy ether for a transaction, and the transaction goes through the merchant without participating in it. Therefore, whether you are buying or selling digital tokens or NFTs, it is equally illegal.

NFT allows money laundering

There are other serious problems, namely money laundering. Some people say that I buy and sell paintings and I do not launder money. When I participated in the digital currency money laundering standard conference last year, I mentioned that non-compliant digital tokens are the easiest to launder money, and it is easy and can be laundered in large amounts. NFT is a “classic case” of money laundering, and money laundering can be done easily.

You can do an NFT in China, and then deploy the NFT in foreign digital stores. Someone bought it, isn’t it normal? It may be normal, but it may also be money laundering. He Shen in the Qing Dynasty has almost no record of taking bribes, but he still has a wealth of wealth. Where does he get so much money? He said that the broken bowls and jars in the house belonged to the Qin Dynasty, and were antiquities of the Han Dynasty. Brought to the pawn shop, some people agreed to say that the broken bowl was really from the Han Dynasty in order to curry favor with He Shen, and then bought it with ten thousand taels of gold. In this way, ten thousand taels of gold seems to be transferred to Heshen very legally, so that money laundering can be done with the help of NFT. It may be just a worthless painting, established and transferred in China, and then raised a lot of funds in foreign digital stores, such as Bitcoin. This is the classic digital token, NFT money laundering path.

Foreign regulatory agencies believe that this is the classic path of digital token money laundering, and these cases have been published in foreign regulatory technology reports.

You may think that NFT does not launder money, but because NFT has a payment channel, you can trade across borders. For example, NFT runs on the Ethereum system, and there is Ether on the Ethereum, which can be used for cross-border payments. When you do NFT, there will be channels for money laundering and evading foreign exchange management!

NFT has no legal protection

You can check some NFT reports. Many people go to museums, books and magazines, take pictures of the famous paintings on them with cameras, and then sell them as NFTs. The author at this time didn’t even know that his painting had been sold, and he might have sold a lot of money. There have been many cases abroad.

Some people say that NFT can suddenly be worth 10 million or 20 million dollars. What is going on? It is very likely that the left hand sells the right hand, and the right hand sells the left and right hands to make the market hype. In the environment of digital token anonymity, NFT is a through train for money laundering, and the risk is very high. Some people say that I made a lot of money by doing NFT. How did you get your money? This is because NFT has no foreign exchange management, no evaluation, no legal basis, and no one will control you. However, once there is a problem, it will cause more problems, and there is no legal protection, all of which evolve into new problems.

NFR has no digital tokens, no payment system

What is the difference between NFR? NFR is very different. Let me give you an example to understand. A city has car accidents all day long, especially at crossroads. Later, the mayor looked at it and said that if this intersection is not a crossroads, then there can be no such many accidents. Suppose you walk north and south under the bridge, and walk east and west to the bridge, instead of the bridge, so that the intersection is gone. . This is the design of NFR.

NFR itself has no digital tokens and no payment system. In this case, it adopts a real-name system. Many irregularities in money laundering cannot happen. This is our design. When we design it to make it difficult for those irregularities to happen, then do you think that there is no possibility of a car accident without an intersection? There will still be car accidents, but the previous car accident at the intersection is gone. Today we do NFR, which means that traditional digital tokens are illegal. Because we have blocked the way of traditional digital token money laundering, you can’t run into the intersection anymore, and there will be no traffic accidents at the intersection. , This is a spirit of NFR.

The network is attacked and there is no problem

At the same time, the assets I put on it are the digitization of asset certificates, not the digitization of assets. In this case, if the network is attacked, there is no problem, because the assets are still in the entity. I created the entire real economy through the convenience of the network. There have been huge changes in philosophy, management, and the market. This change is based on Chinese laws and Chinese government policies. Just as the domestic policy says that it is fully compatible with the real economy, this is a design of ours.

What is the difference in the field of system application according to NFR? NFT is still limited to artworks, text, and paintings. Can you talk about the differences in NFR?

Zeng Wenwen:

NFR is exposed to many legal issues

Zeng Wenwen: The concept of NFR that we put forward actually represents non-homogeneous rights, that is, all unique assets can be used as the underlying assets of NFT transactions. I also want to explain to you. For example, we have certain assets such as qualification certificates or real estate that have regulatory requirements in our country or even in countries around the world. Similar to such a special category of assets, we can create NFR and do related things. Transactions must also comply with national regulatory requirements. To be more specific, Mr. Cai cited some interesting examples just now, and I will extend them to you.

For example, as mentioned earlier, there is a photographer who took a picture of a painter’s work, and he created himself whether it’s NFT distribution now or the NFR product we will make in the future. After he took the picture, he will digitize the work. Uploading to the Internet for distribution, this will have a problem. When I create and distribute NFR products, do I have legal rights to the work and its underlying assets, including any elements? This legal right includes many kinds For example, when we talked about paintings just now, we know that the copyright belongs to the painter, so if you take this photo, you use the photo to spread the profit, etc. The behavior of distribution, this is not authorized by the painter, and no reasonable remuneration is given to the painter. , There is no fee for the license.

Secondly, during the release of our paintings, if we extend this example just now, it is the second type of situation. For example, if the photographer took a portrait of a person, Mr. Cai mentioned just now that the person being photographed is him. The portrait right of may be infringed. You took my portrait to create an NFR product and distributed it on the Internet. You made a profit without my consent. This is an infringement of the portrait right of others.

Go back to Teacher Cai’s question just now. Our NFR products, I personally think, in addition to cultural and artistic works, such as the paintings, songs, and novels just mentioned, we have many non-homogeneous features. Under the premise of our country’s transaction supervision, we will It is possible to trade in the NFR direction.

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