How will the on-going NFT shake up the crypto world? - Lieyun Finance

There is still a long way to go!

Produced by | Lieyun Finance Author | Lingyu

In 2021, NFT opened up a new understanding of crypto assets "going beyond the circle". The crypto circle collides with the traditional art world, and a new wave is coming. NFT is like fighting monsters and upgrading in the game world, constantly occupying new heights. At the same time, the voice of pessimism is also uninvited.

So, how does NFT empower? How does it create value? Where will it go in the future?

In this issue of "No Depth, No Chat" of Lieyun Finance "Hi, Boss!", Xue Jing, co-founder and editor-in-chief of Lieyun Finance, specially invited big names in the industry who are very familiar with NFT to talk with everyone about NFT-related things. They are Congge, ambassador of KAKA NFT Metaverse China, Ellwood, crypto artist, Nico, General Partner at Vulcan DAO, and Yang Linyuan, managing partner of Dfund.

01

The influx of a large amount of hot money was the main background of the previous wave of market

Xue Jing from Lieyun Finance: According to public data, as of the week of May 9, sales of NFT assets reached a peak of $176 million. Since then, as of July 5, weekly sales of the NFT trading market have fallen by 87% to only $22.84 million. It can be seen that the NFT market is cooling down. However, strangely, the layout of NFT is getting hotter and hotter. For example, Alipay launched the payment code skin NFT, and Fox Group established a $100 million NFT creator fund... What do you think of this phenomenon?

Nico: This is a very interesting phenomenon. Alipay, some domestic alliance chains, and foreign investment in NFT may actually be two different paths.

Now we have an illusion that we may think that everything should be placed on Web3.0, and everything can be NFT. Any artwork or collectibles that are worth using should be solved with NFT.

But this idea may not be so accurate in a sense, because if we think about it carefully, we will find that, especially in the scenario of super-high internal circulation of domestic Internet, we have actually realized many new things that we now call NFT in the Web 2.0 era, or even earlier.

The hotness of the entire market is closely related to Beeple's high-priced works. Of course, we can also see that it has made a very big move, which has raised the heat. A large amount of hot money has entered the market, and project parties have entered the market. This may be the main background of the last big market.

But we found that people did not pay attention to some very basic issues. These basic issues caused many stories to stop being told after one or two months, so the market enthusiasm declined.

On the other hand, the things that Alipay and some foreign funds are doing are nominally called NFTs, but in a sense, many times, some new scenarios that overseas countries try to create with NFTs may be exactly what we have solved or realized in the Web2.0 era through centralized networks. We don’t have to follow the foreign NFTs in our country step by step.

For example, fragmentation is a very meaningful scenario, but in China, in the Web2.0 era, cultural exchanges have already realized its transactions ten years ago. That is, if we analyze many of the tools we talk about from a technical perspective, we may separate them into blockchain and NFT. But if we grasp them from the perspective of usage, we will find that many things already exist there.

It is just because of the development differences between different regions, or the different paths of technological development, that we may have solved a problem, but it has not been solved overseas at that stage, so we have to use the new paradigm of Web3.0 tools to solve it.

How do investors view this phenomenon? The fundamental reason for this problem is not how we analyze it technically, but how we analyze it in terms of usage. Due to differences in specific applications and the overall market environment, investors and entrepreneurs in different regions have different solutions and paths to propose.

02

NFT is not too cold

Xue Jing from Lieyun Finance: According to public data, as of the week of May 9, sales of NFT assets reached a peak of $176 million. Since then, as of July 5, weekly sales of the NFT trading market have fallen by 87% to only $22.84 million. It can be seen that the NFT market is cooling down. However, strangely, the layout of NFT is getting hotter and hotter. For example, Alipay launched the payment code skin NFT, and Fox Group established a $100 million NFT creator fund... What do you think of this phenomenon?

Yang Linyuan: NFT is the long-awaited killer application in the blockchain industry, and this killer is not too cold. As we have seen, it is a blockchain breakthrough artifact. As an emerging asset form, new entrants continue to test the waters, and various groups of people come on stage one after another, and the hot circle has brought a lot of recognition and attention to this originally niche industry.

NFT is now like an absurd vanity fair. The market is full of artists (or art practitioners) who want to get rich. NFT trading platform startups are also springing up like mushrooms after rain. However, the sad reality is that no one knows or thinks about the only important question at this stage: who will buy it? No one studies users. In fact, NFT is more like an Internet startup. Its essence is the redistribution of traffic. No matter how good the work is, how powerful the IP authorization is, and how powerful the trading platform is, it will be embarrassing if no users pay.

At present, NFT and even encrypted assets are too niche, and most of this small group of users do not have a particularly high artistic aesthetic. These people are pursuing a 100-fold return and are obviously profit-seeking. When the ratio of buyers and sellers in the market is seriously unbalanced, the market will give an answer.

Behind the dazzling scene, is NFT a hype bubble or a technological wave? To answer this question, we need to think about the essence of NFT. NFT is a container. Any content, pictures, videos, tweets, music, can become NFT. Wherever there is value in the transaction, there are traps. This has always been the case.

Under the wealth effect, there will definitely be people who come to hype and make quick money, especially since NFT currently has no reasonable valuation and pricing methods. Users must be careful when purchasing NFTs and not become the targets of celebrities and institutions. After the heat fades, more than 90% of NFT works will become worthless, while a small number of works with unique value will become very valuable.

If we look at the timeline in a longer term, NFT represents a new technological fashion, and an effective technological carrier and trading medium for intellectual property. There will surely be more and more eye-catching cases and high-priced collections. As the famous American investor Mark Cuban said, NFT is a continuous innovation, and in the future all file types of assets may be changed by NFT.

03

The future may be GameFi, which is more gamified

Xue Jing from Lieyun Finance: At present, the combination of DeFi, digital assets and NFT has brought a new experience in the field of games. In the past, games were just games, finance was limited to the financial field, and the identities of gamers and investors were often separated. The emergence of GameFi (gamified finance and new gamified business) has promoted the combination of the two, allowing players to earn profits while playing games. However, there are also many voices that are pessimistic about GameFi. So, what do you think of GameFi? How do you think NFT+GameFi can better empower traditional game models?

Congge: After the DeFi craze subsides, GameFi is likely to be the next hot spot for NFT development, and more opportunities will follow. In the future, we may enter the game-oriented GameFi.

The integration of decentralized finance, digital assets and NFTs will bring new experiences in the gaming field.

In the past, games were just games, and finance was limited to the financial field, and the identities of game players and investors were often separated. The emergence of GameFi has undoubtedly promoted the organic combination of the two, allowing players to earn income while playing games.

Unlike traditional games such as Minecraft and Pokemon, the game props in GameFi can also be circulated through NFT, making scarce game props more collectible and making the best use of them. The GameFi project is releasing huge potential. Perhaps, in the near future, decentralized games will become the main trend in the game field.

Just like the KAKA NFT we are working on, it is a card game developed by GameFi. All cards are cast based on limited edition physical cards authorized by the copyright holder. In addition to game attributes, they also have collection attributes. Since its launch, they have been loved and recognized by many users. KAKA covers multiple types of NFTs of ERC721 protocol and ERC1155 protocol, such as creating rare KAKA sauce series NFT, Taran Continent NFT, Disney Mickey NFT, Kazai NFT, Marvel Collector's Edition NFT, Big Mouth Monkey Limited NFT, Saint Seiya NFT and many other types. 721 IP cards are more valuable and rare, and can be decomposed into 1155 cards of equal value and different numbers and can participate in battles.

04

The Metaverse is the ultimate form of human beings moving towards the virtual world

Lieyun Finance Xue Jing: Some people say that the Metaverse is the core application of NFT. What do you think? In your opinion, how does the Metaverse create value for society? And what social value does NFT have?

Yang Linyuan: The Metaverse is considered to be the ultimate form of the Internet, a brave new world, something that can change games, social interactions, and even the lifestyle of all mankind.

Many people have been talking about the metaverse recently, and there is no consensus because it is too early and too immature. Our process of exploring and describing it is like a blind man touching an elephant. Some people touched the ears, and some touched the nose, which is very different. We have no way to judge who is right or wrong, but one thing is certain that the process of human digital migration is irreversible.

The next stage of the Internet will definitely be a virtual world supported by various terminals and technologies such as sensor terminals, high-speed Internet, and blockchain. Human beings have been constantly moving towards the virtual world. Carbon-based life will sooner or later move towards silicon-based life, just as we increasingly trust humans and more machines and algorithms in many scenarios.

Why are humans so obsessed with parallel worlds and virtual time and space? Because of curiosity, which is a natural desire of human beings, we keep expanding outward, into the universe and space, and on the other hand, we keep exploring inward, to obtain the satisfaction that we cannot obtain in the real world. People are happy to create new identities and images in the virtual world, with various avatars, skins, and expressions, trying to become a better self and live somewhere else.

The time we spend in the Internet world may have far exceeded that in the real world. In the near future, with the help of new devices and terminals, the boundary between reality and virtuality will become blurred, and humans will live in the virtual world through digital avatars.

Just like in the movie "Ready Player One", as long as you put on a helmet you can enter a virtual world called "Oasis", where a loser in the real world can turn around and become a legend in the virtual world. The immersion and diversity of current games are still far from enough. The future metaverse must be a combination of multiple scenes that can provide a rich immersive virtual experience.

In order for the metaverse to reach a relatively complete state, many elements are required:

Among these elements, both identity and economic systems require the help of NFT. The uniqueness of your role, identity, and social attributes in the virtual world will be reflected and protected by NFT. Another important feature is the economic system. A huge virtual world requires a complex economic system. From game props to digital real estate and digital asset ownership, NFT will support the continuous capture and creation of more digital value.

AI, VR, brain-computer technology, NFT and other blockchain technologies are all contributing to the metaverse. The metaverse is the ultimate form of human beings entering the virtual world. Just like the movie The Matrix, this may be the inevitable ending.

05

NFT is the best container for virtual goods

Lieyun Finance Xue Jing: Some people say that the Metaverse is the core application of NFT. What do you think? In your opinion, how does the Metaverse create value for society? And what social value does NFT have?

Cong Ge: In the first wave of NFT, the market generated a large number of long-tail assets, and the second stage is to consider how to utilize these assets. People who do not understand or cannot understand the NFT craze have been questioning, "NFT collectibles have a price but no market, what is the point of holding these assets?" I personally think the answer is the metaverse.

I think there are two ways to succeed in the metaverse. You can create content first or you can create a platform first. What I see is a change in the traditional gaming field. Any props out of the game are meaningless, and any virtual peripherals or virtual artworks out of the virtual world cannot play the greatest value.

The NFT asset class, which occupies the largest market share (currently), will eventually be a subset of the Metaverse. In other words, the Metaverse will be the best container for these virtual goods (NFTs with pure collection properties).

The metaverse is not a new concept, but before the emergence of NFT, the metaverse was an insecure world for humans, because in the metaverse the ownership of all data and assets was in the hands of a few people. With the advent of blockchain and NFT, humans found that the ownership was returned to the users themselves.

Therefore, the transfer of asset ownership brought about by NFT has stimulated human beings’ secondary imagination of the metaverse, which I think may be the greatest value.

Currently, the Metaverse is still in the initial research and development stage. After market trials and adjustments, it will definitely be a major breakthrough direction for NFT in the future.

The real value of NFT is actually opening up human’s secondary imagination of the concept of the metaverse.

In addition to artwork creation, NFT can also be applied to liquidity mining, off-chain assets, games, VR scenarios, etc. At present, there are already a large number of practitioners in the field of games, which is a relatively prominent direction. Our current project KAKA NFT is also a card game based on NFT, and we already have a large number of IPs.

In the future, NFT will enter all walks of life, including identity documents, real estate and automobiles, luxury goods, biological genes, bill contracts, etc. NFT may be the beginning of blockchain becoming a truly universal technology. This is also the achievable level of the metaverse.

In my opinion, one of the best application scenarios for NFT is Metaverse. NFT can actually represent any category of digital assets, so there is still a lot of market potential and room for growth. Among them, games, user-generated content, art, finance, avatars, multiplayer games and social networking are the concepts of adding tangible value to each other between players.

06

Most NFT prices are currently in a bubble

Xue Jing from Lieyun Finance: How does the advent of blockchain technology and NFT empower art? What impact will it have on entrepreneurship in the field of digital art?

Ellwood: First of all, as a creator, I can actually establish a very good relationship with collectors through platforms like BCA and OpenSea, which is equivalent to my works and collectors growing together. In fact, creating these things is a very long-term thing. NFT connects the audience, collectors, and creators together very well.

Secondly, the emergence of NFT has greatly changed the creative behavior. For example, we used to think that creation might be just a work of art, which is static and unchanging. In fact, on many platforms, such as Async Art, every collector can occupy a certain layer in this work, and this work is actually changing in real time. Based on NFT technology, the work is eternal, and this work is always changing over time. Therefore, the way of creation has changed, and based on NFT technology, new art forms have emerged, which further encourages the emergence of new artists.

I have observed a phenomenon now that most of the people I have come into contact with who react quickly to NFTs are my students, and some are younger people born in the 2000s and 1990s. They can naturally understand and get in touch with this thing quickly.

Because they are willing to spend a lot of time on the Internet to learn about information, visit forums, and find small circles that they are interested in. They naturally have a sense of community, and NFT artists are actually inseparable from this community to a large extent. For example, we had a rainbow cat before, and the high price of the rainbow cat was actually because it was an important meme in Internet culture at the time.

Regarding how NFT can empower the value of artworks, most of the current prices are inflated. The ultimate value of NFT art depends on a long-term result. Regardless of the form of artistic creation, the value of art is the result of a long period of precipitation. There is no need to pay too much attention to the value of NFT in the short term, but to pay more attention to the artists who are really working on NFT creation and communicate more with the creators. This is a very important thing, not various superficial marketing behaviors.

What impact does the emergence of NFT have on digital art entrepreneurship and creation? One obvious point is that some overseas artists have started to develop the characteristics of digital artists, that is, they no longer create for commercial projects, but think independently about digital creation, rather than just completing a 4G special effect or a commercial modeling. Many interesting digital works have also begun to emerge based on the context of NFT.

At the same time, the emergence of NFT has created new art forms and slowly created new art communities. For example, major platforms have their own artist communities, where many pixel artists communicate and discuss technical issues, and also talk about many issues about the history of pixel art.

This kind of positive communication, accumulated over a long period of time, will form a civilization like the one in the metaverse, or a cultural layer or cultural symbol. These contents are accumulated slowly by real people through communication over time, rather than an empty symbol or a business plan.

Civilization cannot be planned, it must be a primitive and emerging behavior, just like the Internet memes we see, which cannot be planned. It is a phenomenon that naturally emerges from the Internet, just like there is a character called Smiley Man in Ghost in the Shell. Smiley Man is based on a network theory. It is an inevitable phenomenon that emerges unpredictably.

With the implementation of NFT applications and the emergence of a large number of new products, the NFT art form will become more and more mature. At present, most of them are still clichés and imitations.

07

What art entrepreneurs lack more is tools

Xue Jing from Lieyun Finance: How does the advent of blockchain technology and NFT empower art? What impact will it have on entrepreneurship in the field of digital art?

Nico: Let me talk about this from the perspective of tools. Now, the act of so-called cryptographic creation itself does not happen on the chain. In other words, the elements that constitute a work that we need to witness the most, its process of creation from scratch is not witnessed and recorded by the blockchain.

But this is precisely a very important part of art. Art needs a material carrier. A work needs paint, canvas, and a carrier to become an object that we can perceive. This is a kind of understanding.

There is another way of understanding it, that the material of art is inseparable from its form, such as poetry.

What is the material of poetry? It is words. What role do words play in artistry? In fact, it is precisely these materials that fix the content of some works of art. For example, if you change any of the words "the setting sun shines on the big flag, the horses neigh and the wind blows", you will change the material and it will no longer be its artistic conception.

Therefore, literature and art are about preserving materials, and their content and materials are highly consistent.

But some things are not art. For example, if I publish an article on Lieyun Finance, it is not art. Because my purpose is to make everyone understand the point of view I express, and it is enough to achieve this goal. There is no need for a material basis to fix it there.

Does the blockchain record the most important part that cannot be tampered with? In fact, it does not record it. It only records the results, not the process. In this way, from the perspective of authenticity or authentication, it has not achieved its mission. In other words, we have not found the most essential point of encryption and artistic creation, that is, to encrypt the process with encryption.

This point also has a very important meaning. For example, a statue in a museum is standing there motionless. It was like this in the past, it is like this now, and it will be like this in the future. But if one day the statue is smashed, can it be smashed? Yes. Because this is the material law of our real world. In other words, although the work is there, it is always in an open state.

Of course, this is a destructive development, but on the other hand, there are many art forms, such as the co-creation model contained in the traditional Chinese calligraphy and painting collection, where a work is jointly completed by many artists, even across not only space but even time. This puts forward requirements for the openness of the work itself.

What is the model of crypto art now? After the work is finished, it stays there, and you can't find other good ways to add more to it. In other words, it is impossible to add new content to the original work, and its openness does not exist. In this way, compared with our real art, or the creative scene we often talk about, it has particularly great limitations.

It has to be said that the power of the crypto community is huge. However, at present, we cannot use the existing tools to complete community co-creation.

This is exactly what we need to solve in the future. In other words, we want to provide these authors who come to the crypto community with a new pen or an encrypted pen, so that their works can remain unique in the blockchain value network from beginning to end, while remaining open, but this openness is based on modular combination.

In the current NFT track, people may pay more attention to galleries and markets, but these asset transactions themselves are not new content brought by blockchain. These are just an attempt, and the greater possibilities it can bring come precisely from the creative process.

What is lacking in art entrepreneurship is not works, but tools, and what is lacking even more is new tools that utilize the principles and logic of blockchain to discover it. The possibilities of tools are open, while the possibilities of works, under the current framework, are precisely closed.

We prefer to call crypto art open, and this is also the meaning of art, because we feel the openness and disruptiveness that the entire blockchain community and this tool bring to various industries.

Our emotional judgment or rational cognition all lean towards this result, which is the so-called openness. However, the existing tools are not enough to realize these ideals. This is why we focus on making these underlying tools and protocols.

08

NFT is an inevitable result that will happen

Lieyun Finance Xue Jing: To make the digital world a reality, what will be the most important development direction and final form of NFT?

Ellwood: Now the digital world has become a reality, and each of us has long become a so-called cyborg. For example, glasses are the most primitive cyber extension of the body. Only through glasses can we see things clearly. For people with myopia, our extended body is now the mobile phone. The digital world has penetrated into the entire social structure. Our cognitive habits, social habits, and even our income are completed through the Internet. NFT has further promoted the implementation of this matter. It has greatly solved the attribute of the realizable value of digital assets.

The same is true for the final form of AI, that is, when we no longer realize that this thing is AI, then this AI is its final form. The same is true for NFT. When we no longer deliberately discuss NFT, the form of NFT will be created. In other words, NFT has become an indispensable part of our lives.

However, there is still a long way to go.

First, there needs to be a lot of real projects, that is, teams that really understand technology and have a deep understanding of NFT features are needed to do solid things. For example, creating creation tools based on the chain is a very important thing.

Second, the next generation, including those born in the 2000s and 2010s, may not be familiar with this matter just like the older generation may not be familiar with TikTok and Internet social culture. For us, we may use mobile phones more for socializing and living, but for those born in the 2000s and 2010s, they may be in a completely different state.

Nowadays, many young people can even design their own games in the Minecraft app, which is a bit like the metaverse. Not to mention my students, they are already accustomed to using many native digital tools for virtual creation, and their cognitive habits of tools have completely changed from traditional physical creation to digital creation.

NFT is a long and arduous task. It may have a bubble in the short term, and then the bubble bursts, and then a new bubble appears. There is a cycle. But in the long run, this is an inevitable result that is bound to happen.

In addition, don't pay too much attention to NFT. From the creator's perspective, NFT is just a tool. How to make good use of this tool actually comes from the information around NFT, that is, combining NFT with other things to create, rather than just focusing on the characteristics of NFT. NFT is an expression tool that can enhance comprehensive cognition. It is indispensable, but if you only focus on NFT, it will make the content boring.

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