NFT: The core identity of Metaverse

At this stage, NFT is still in the early stage of development, and it is more used for personal asset protection. It is a digital asset “identity card”, which has become a symbol of status and wealth in the virtual world, similar to real world collectibles.
The blockchain technology represented by NFT will become the basis for the construction of the Metaverse, and will exert value in more fields in the long term.

NFT (Non-fungibletokens) refers to non-fungible tokens, which is a data unit called blockchain digital ledger, usually refers to the tokens issued by developers on the Ethereum platform according to the ERC721 standard/protocol .

Each token corresponds to a unique and immutable digital ID. This digital ID generally includes the metadata (or metadata link) of the asset that uses the NFT as the certificate of ownership, all transaction information, and the digital signature of the transaction party.

Because they are not interchangeable, non-homogeneous tokens can represent digital files, such as paintings, sounds, films, in-game items, or other forms of creative works.

The principle of NFT:

NFT: The core identity of Metaverse

The blockchain allows C-side or B-side users to place personal data or business data (such as personal IDs, certificates, company financial data and even certain industry data) on the blockchain network, instead of homogenizing tokens. Therefore, it has become the next hot spot in the Internet industry.

At this stage, NFT is still in the early stage of development, and it is more used for personal asset protection, but the blockchain technology represented by NFT will become the basis for building the Metaverse, and it will exert value in more fields in the long term.

NFT ecology:

NFT: The core identity of Metaverse

Compared with most virtual currencies whose market value has skyrocketed through publicity and hype in the past few years, they are homogenized tokens, and there is a clear difference between non-homogeneous tokens.

The same type of FT in the homogenized token (FT) can be interchanged, that is, each FT is exactly the same, which can realize a large number of copies at a lower cost, thus having a strong currency attribute in the virtual world .

In non-homogeneous tokens (NFT), even if they are based on the same underlying protocol standards, each token is different, that is, each token has its own uniqueness and can be used to store unique information. Compare FT and NFT The more apparent function is to mark the belonging of the item.

There have been three underlying protocols in the development of NFT, which are ERC-721, ERC-1155 and ERC-998 according to the launch time.

NFT: The core identity of Metaverse

NFT value industry chain

The NFT industry value chain is divided into three layers according to the Token flow, from bottom to top, they are the infrastructure layer, the protocol layer, and the application layer.

NFT: The core identity of Metaverse

Source: chainnews

1. Infrastructure layer: NFT’s basic technology architecture The bottom layer of the NFT industry chain is the infrastructure, which specifically includes the underlying public chain, side chain/Layer2, development tools, token standards, storage and wallets, etc., which are derived from the protocol layer. NFT applications and services.

CryptoKitties stalled on Ethereum in 2017. The company behind it, DapperLabs, realized that the existing blockchain could not meet the existing needs, so it decided to develop a new type of blockchain—Flow.
Flow is specially designed for NFT digital collections and large-scale encrypted games. It can solve the problem of network congestion on the blockchain. It can also achieve large-scale scalability and provide high-speed and low-cost transactions. At present, many developers have signed contracts with Flow. In addition to the underlying public chains such as Ethereum and Flow, this layer also covers infrastructure such as side chains, development tools, and wallets.

NFT: The core identity of Metaverse

2. Protocol layer: NFT casting protocol and primary market

This layer not only includes foundry trading platforms in the fields of art, digital collections, and game IP, but also covers virtual spaces such as The Sandbox and Cryptovoxels. They often directly match creators and users, and are closely related to the future mainstream trend of NFT.

3. Application layer: Applications derived from tokens generated based on the protocol layer mainly
include pan-secondary markets such as OpenSea and TokenTrove, data platforms such as Nonfungible and CryptoSlam, and social platforms such as Nifty’s and Showtime.

This layer mainly reflects its own value by gathering traffic and providing services.

The bottom communication layer of the domestic NFT ecological map includes:

Alliance chains such as Ali’s Ant Chain and Tencent’s Zhixin Chain;

Domestic public chains Conflux, TRON, NEO, Bytom BTM, Qtum, etc.

On the whole, the underlying structure of my country’s NFT ecosystem is not yet mature. As semi-centralized blockchains, alliance chains such as AntChain and ZhixinChain have relatively mature technology, safe and controllable technology, but they are not connected to each other and market transactions. The radius is limited, and a domestic public chain that is safe and controllable within a complete regulatory system and has sufficient credibility and market influence has not yet been incubated in China.

Under the current incomplete regulatory system and underlying structure environment, my country’s NFT trading platform, NFT project creators and investors are all in a cautious exploration stage, and NFT trading is mainly limited to the primary trading market of digital collections.

Domestic NFT industry chain:

NFT: The core identity of Metaverse

Source: GF Securities

In the NFT ecosystem, the traditional profit model is to directly sell NFT assets, charge handling fees for transactions in the secondary trading market, and charge handling fees for transactions within the game.

NFT platform business model display diagram:

NFT: The core identity of Metaverse

NFT subdivision track

According to the application field and value logic of NFT itself, it can be divided into Art-NFT, Fi-NFT, Game-NFT and IP-NFT.

According to Nonfungible statistics, collectibles, art and games are the main application areas of NFT. In 2021Q3, NFT will account for more than 75% of the application of collectibles, 9% of art, and 7% of games.

At present, the most common use scenario is to use NFT for mortgage loans; IP-NFT is the NFT mainly used in the copyright field, and the most popular application scenario is the NBA star card; and Game-NFT is the NFT mainly used in the game field. At present, the most common application area is the NFT created by the user in the game, and the NFT can be freely traded.
NBA Top Shot card:

NFT: The core identity of Metaverse

Source: Action

Since 2021, NFT transactions have become prosperous. The transaction volume of OpenSea, the largest NFT trading platform, reached its peak in August at $3.4 billion.

At the end of August 2021, NBA superstar Curry replaced his Twitter avatar with a cartoon image of a monkey, and this avatar is Curry’s most popular agency in the NFT market through 55 Ethereum (price about 180,000 US dollars) Purchased from one of the group of Bored Ape Kennel Club (BAYC), these apes, like CryptoKitties, are different and unique.

Because of Curry’s huge global influence, a large number of fans have bought this type of avatar in the market and updated it to their Twitter accounts.

BYAC’s different apes avatars:

NFT: The core identity of Metaverse

NFT function: Metaverse’s identification mark

The social nature of Metaverse requires a stronger sense of immersion and an open and inclusive environment. This is one of the shortcomings of current online games, such as trade unions and private chats.

Metaverse will allow users from all corners of the world to communicate and communicate anytime and anywhere.
In projects with strong social attributes, identification is the most basic requirement. A standardized identification sign that ultimately serves hundreds of millions of people needs to be simple, fast and accurately identify the identity information. The non-repeatable, non-replicable and relatively simple structure of NFT It is in line with this demand.

NFT contains unique commodity assets or identity authentication information-everyone has unique attributes and identity information. NFT can integrate personal information, educational information, case records, and correspondence addresses, etc., and digitize them, store them on the blockchain and receive personal Easily grasp and realize decentralized content storage, which can achieve both information security and decentralization in Metaverse applications with a large number of users.

At present, the regulatory system and underlying technical structure of my country’s NFT ecosystem are not yet mature, and transactions are basically limited to the primary trading market of digital collections. Internet companies such as Alibaba, Tencent, Visual China, and Chinese Online have begun to deploy.
On August 2, 2021, Tencent officially launched the NFT trading software “Phantom Core”. Compared with foreign works that often appear at super premiums, the Phantom Core app blocks players’ hype about NFT in terms of mechanism and management. Up to now, Tencent Magic Core has completely deleted the word NFT and changed it to “digital collection.”

Alibaba has also established an NFT trading platform based on Alibaba’s ecology and released a number of NFT works, including Alipay payment code skins and a number of NFT works jointly launched with big IP.

Netease Cultural and Creative’s Sansan Studio released its first IP-to-NFT work on Taobao in June 2021, the Little Alpaca Sansan commemorative gold coin. After purchase, users can register for Nervos (CKB)-based NFT platform “Secret Treasure” to receive NFT.

Visual China is continuing to improve its 500px community communication and version monetization functions, relying on its existing community advantages, continue to use NFT technology to upgrade the community, continue to empower creators, expand global markets and fields, and enhance assets Monetization ability, enhance the vitality of the community, and create the world’s leading blockchain-based visual digital art creative community.

As an asset digital warrant stored on the blockchain, NFT has the dual value of virtual currency + asset warrant. At the same time, the liquidity and traceability of NFT endow the asset with incremental value.

With reference to international experience and domestic regulatory environment, the traceability and scarcity of NFT can empower the incremental trading market of assets. It is expected that in the future, NFT+collectibles/artwork, NFT+games, and NFT+metauniverse will all have a large room for development.

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