The nature of NFT
As mentioned earlier, the essence of NFT is smart contract + smart contract ID, a method of marking ownership of digital assets. That is, the asset is digitized by a smart contract and its ownership is determined by the contract ID.
- This digital asset can be: any item that can have a price value. The price value of this digital asset originates from the value of the real physical or virtual item that is carried behind the encoded string of data. So NFT can be understood as a simple “product” that can be bought and sold.
- An NFT is a “product” that can be traded. This product has a unique address ID based on the blockchain, although indivisible, but can be jointly owned, for example, by several buyers pooled together, either in the traditional way of pooling authentication, but also in the way of blockchain DAO (DAO will be explained later, remember the core: come and go, reduce risk, win-win cooperation).
Like artwork NFT, real estate NFT, game equipment NFT, because the price of a single item is too high for individuals to bear, it can be purchased through a partnership of 10 or 100 people on the chain together, and because of the decentralized organization DAO makes there will be no partner cheating behavior occurs, or the phenomenon that someone can not complete the transaction without cooperation.
So, to summarize the above two points, a thing that is considered to have a price value or already has a price value can be coded as NFT on the blockchain, this NFT will be priced by the virtual currency (if it is a real physical object may be priced by the stable coin in the virtual currency), and then it can be traded freely, and because of the transparency and traceability of the blockchain, every transaction will leave a record on the blockchain. If you don’t want others to know your transactions, privacy computing is used, i.e., each of your transactions is recorded as well, but encrypted, and others need your permission or payment to see the transactions.
- NFT is based on smart contracts, which can be deployed on any chain. Polka’s cross-chain functionality allows smart contracts on any chain to cooperate with each other. The value of a smart contract comes from its user consensus and ecological consensus. Similarly, if an NFT can become an efficient bridge to a specific community through the program logic of a smart contract, then its value will be defined by the development of the community behind it, and has little to do with the isolated nature of the work itself. This category is particularly suitable for artwork NFTs.
- It is also argued that NFT is an acknowledgement of the scarcity of the item, as certain categories of digital assets, such as once crypto cats, are each unique. Although they are all cats, some of them are 90% the same. But being unique does not mean having value scarcity. Must things be rare to be valuable? Does it have to be unique to be scarce? Does being unique necessarily mean it has a high premium price value? Ultimately, it all depends on the community consensus on it.
The source of value of NFT
So where does the value of NFT come from, and how to determine the value of NFT transactions.
Here there are two cases.
If it is against a real object, such as a house, equity share, or any item of the entity, they it’s price value without further ado, is familiar territory. Simply to see if there will be a certain premium due to the convenience brought by the blockchain based.
If it is a virtual commodity, including game props. Then the community consensus needs to grow rapidly.
For example, we all know Beeple, whose NFT sold 42,329 ETH, corresponding to a price of $69.3 million at the time.
Beeple first tested the waters in 2020.10, a pair of works made into NFT, auctioned in the Nifty Gateway platform for $66,666, in December of the same year, and 20 works made into NFT for sale, a total of $350w.
2021.2.12 The work “Every Day: The First 5,000 Days” was made into an NFT and sold for 42,329 ETH ($69.3 million at the time). It is currently the third highest price for a single artwork at auction among all living artists.
But the actual value of Beeple’s NFT is.
Beeple has been creating a painting every day consistently since May 2007 without interruption. (The value of the labor underlying the commodity)
The result of thirteen years of time is cumulative is gaining one million eight hundred thousand followers on Instgram. (Market value of commodity)
In 2019, his work was adopted by the fashion brand Louis Vuitton. 2020, his work was displayed during the halftime show of the Super Bowl soccer game in the United States. (Brand premium of the commodity)
The underlying labor value, market value, and capital value, are the main price value contributions of a commodity, whether real or virtual. (And, of course, the premium from the blockchain’s underlying features, traceability: permanent assurance of the authenticity of the work, and fast and transparent transactions: knowing where the transactions go, and a clear price tag)
What does NFT bring to the blockchain?
Advancing the practical application of blockchain
NFT is about to tokenize arbitrary goods, which will flow and be traded through the blockchain. Supply will stimulate demand to a certain extent, and the process of achieving access to demand is the emergence of blockchain advantages.
For example, on March 23, 2021, a Uniswap propaganda video was auctioned as NFT to commemorate the Atlanta tragedy (the killing of an innocent man) and ended up with 310 ETH, which was about half a million dollars at the market price at the time. The entire process, from the start of the auction on Twitter to the complete transfer and delivery, took only thirty-eight hours, and the 310 ETH came from different strangers who did not know each other and who held the NFT together.
But for traditional finance, an international money transfer usually takes one to two business days and is not open on weekends. Not to mention the big question of how to ensure the safety of funds when strangers pool their money together to do something, but on blockchain this speed, efficiency, and safety is obvious.
If it was too abstract to understand the actual transfer application of blockchain before, NFT is a concrete and happening example, and NFT is just the nominal carrier of the commodity these funds are transferred to.
If we call the Internet a virtual world, then blockchain is a part of the technological revolution of the Internet, a way and medium of exchange for this virtual world.
The virtual world is in a sense parallel to the real world where we happen to feed, clothe and house ourselves, meaning that what reality has will also be there virtually, just maybe in a different form and at a different pace.
Blockchain-based games, Defi, NFT, development, business activities, and even the clothing, food, housing and transportation of virtual tasks inside, all need “currency” as the medium of exchange and as the support of operation, and cryptocurrency is the currency of the virtual world.
DOT belongs to the virtual country of Boka, ETH belongs to the virtual country of Ether, and so on. There is no consensus on a universal cryptocurrency that can be used without barriers across borders, but the need may be weakened by cross-chain technology, but at least one coin is needed to take the lead in accessibility, and DOT is likely to be the next one (because of the cross-chain properties native to the polka network).
We trade, move, buy and sell various programs (Dapp), commodities (NFT) written by smart contracts in this virtual world through a rule-based approach written by smart contracts. But now the main contradiction is, personally, not blockchain landing, not whether cryptocurrencies shake the national sovereignty, but how to put the asset funds in the blockchain world and the real funds can correspond and circulate with each other.
NFT will advance this process to some extent.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/what-is-the-value-support-of-nft/
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