NFT breaking the circle: the love-hate relationship between opportunities and risks!

Quote: What do you want to do in the world of the metaverse?

text:

NFT has become popular and has gone beyond the circle, and it deservedly won the title of a tool to break the circle!

Artists, curators, media professionals... every investor with a keen sense of smell hopes to seek some opportunities in the NFT craze. So, what investment opportunities are there for NFTs that have gone viral?

Recently, Sophia, a researcher at NFT Labs, visited the live broadcast room of Lieyun Finance's "Online Classroom" and brought vivid and informative sharing to the fans of Lieyun Finance.

01The “NFT” token is not the same as NFT

Host: What is a non-fungible token (NFT)?

Sophia: The full name of NFT is Non Fungible Token, which means non-fungible token in Chinese. Different from the homogenous form of Bitcoin, the characteristics of NFT are unique. It is a unique and easily verifiable digital asset that can represent assets such as GIFs, pictures, videos, and music albums.

In fact, everyone may have known about NFT a long time ago. For example, the popular game CryptoKitties in 2017 was so popular that the Ethereum network was paralyzed, and the price of an NFT cat was as high as 600 ETH. The recently popular NBA Top Shot is also a good example.

In fact, the token "NFT" is not the same as NFT. Non-fungible tokens come in various forms, such as music, art collections, and game props.

Host: What are some ways to participate in the investment in the NFT track?

Sophia: The easiest way to invest in NFT is to buy potential NFT tokens on major exchanges. For example, ENJIN, MANA, SAND and other top NFT tokens. As for which tokens are NFT projects, many exchanges have NFT sections, such as Binance, Huobi, coinmarketcap and other platforms, and investors can find out for themselves. (Warm reminder from Lieyun Finance: Tokens are risky, so be cautious when investing. In addition, please strictly abide by the laws and regulations of your location and do not participate in illegal investments.)

The second way is to buy and sell NFT assets. NFT collections are very suitable for speculation and collection. For example, the cost price of a star card is only $230, and the transaction price can reach about $100,000. For example, the recently popular Bored Ape Yacht Club, the issue price of each monkey is 0.08 ETH. From CryptoSlam, we can see that the current lowest price is 3 ETH.

NFT collectibles can be purchased on NFT trading platforms such as Opensea, Rarible, Binance NFT trading platform, etc. There are also NFT platforms dedicated to crypto art, such as SuperRare and Nifty Gateway.

The third way is for those who want to become crypto artists. They can issue their own NFTs and sell them on the above-mentioned trading platforms.

The fourth is to participate in NFT liquidity mining. For example, MEME is to deposit ETH/MEME LP tokens on Uniswap to mine NFTs. Or deposit MEME in the Genesis Pool to earn pineapple points to exchange for tokens.

The fifth way is to participate in NFT fragmentation trading platforms like Unicly. Deposit your own NFTs, such as cryptopunks or Hashmasks, and mint uTokens in the vault. This gameplay provides great liquidity for NFT holders. It is also a good opportunity for other players who are unable to select NFTs, because they do not need to hold any NFTs during the whole process. They can wait for appreciation by holding uTokens issued by others and then sell them on AMM.

02NFT is more dependent on market activity than DeFi

Moderator: When you want to buy project tokens or invest in NFT assets, how should you evaluate NFT projects? Are there any reference standards? Please share with friends of Lieyun Finance, Sophia!

Sophia: (1) The quality of the project and the reliability of the project party. Because the threshold for NFT issuance is extremely low and it is easy to be imitated and plagiarized, the focus on the influence of the issuing team affects the judgment of the subsequent transaction potential.

(2) Community activity. NFTs are more dependent on market activity than DeFi. When purchasing collectibles, the fans behind the creators are particularly important. The more popular the creator, the higher the value of the NFTs they create.

The number of followers on social networks such as Twitter is one of the most important data for evaluating projects. When participating in NFT projects, you can go to official media channels such as medium and twitter to learn about the latest project developments, or join official chat channels such as discord and telegram to learn about project activities and community activity.

(3) Market transaction records. These historical transaction data can be found on the Nonfungible website, after all, these data are publicly visible. It is worth noting that the evaluation of NFT projects is not based on the assets for sale on the platform, because the scarcity and uniqueness of NFTs determine that the market's evaluation criteria for each asset are constantly changing.

(4) Unlike homogeneous tokens, NFTs also have aesthetic requirements. There are many crudely made NFT artworks on the Internet that need to be identified by yourself.

(5) The scarcity of NFTs. For example, the total number of CryptoPunks is fixed at 10,000. Unlike CryptoKitties, which can be generated in unlimited quantities. As the scale of the NFT industry continues to expand, the scarcity of CryptoPunks will make them more valuable. In the last quarter of 2020 and the first two months of 2021, sales around CryptoPunks have reached tens of millions of dollars.

03Transactions, games, and infrastructure are the focus of large institutions

Host: I heard that Sophia is reviewing the investment portfolios of crypto venture capital institutions and exchanges in the NFT track. Can you tell me what conclusions you have drawn?

Sophia: Yes. I have previously analyzed the investment funds of more than 10 investment institutions and exchanges based on public data. Based on their investment portfolios, we can see that most institutions focus on three main areas:

First of all, there is the trading platform. No matter what type of NFT, it is inseparable from the trading link, and the profit model is clear. OpenSea is currently at the top of the NFT trading platform, providing the trading model commonly provided by the NFT secondary market, including issuance, trading, and auction. However, the gameplay is not rich enough, such as auxiliary financial gameplay, NFT lending, fragmentation, etc. Therefore, other projects still have a chance to compete for the top.

Moreover, trading platforms can be subdivided into art trading, music trading platforms, trendy brands and luxury goods, etc. In these sub-sectors, institutions also have their own layouts.

The second direction is games. First, there are game studios, including Dapper Labs, which was invested by a16z and developed CryptoKitties, NBA TOP Shot, and Flow public chain. Animoca Brands, a game studio invested by Multicoin, is also a big player in the blockchain game circle, and its products include the virtual world Sandbox and the racing game F1 Delta time.

These game companies have relatively mature experience in game development and operation, and have multiple blockchain game projects under their umbrella. The projects can cooperate with each other and convert existing fans into users of new projects. They also have rich experience in game operation and blockchain game marketing, and have certain advantages.

In addition, Grayscale's parent company DCG and Alameda Research have laid out the RPG game Big Time Studios. NGC participated in the Legend of Crypto card game and My neighbor Alice virtual world game. There is also Seascape, which was invested by Binance in the early stage, a game that combines NFT and DeFi gameplay.

Finally, they are mainly concerned about the infrastructure of NFT (mainly the public chain and side chain of NFT). Due to the low throughput of Ethereum, high gas fees, network congestion and other issues, infrastructure problems cannot be avoided. There are only three solutions: migrate to other public chains (such as BSC, Near), build a public chain dedicated to NFT (Flow developed by Dapper Labs, Efinity, a public chain on Polkadot developed by Enjin), and choose Layer2 solutions (Polygon, Roinin).

04NFT is the second largest application scenario of blockchain outside of finance

Host: The payment code NFT issued by Alipay has attracted much attention. It is marked that "NFT copyright is owned by the issuer or the original author. NFT shall not be used for any commercial purpose without the written consent of the copyright owner." Can Sophia explain to the friends in Lieyun Finance Community what buyers get when they buy NFT? Does this regulation of Alipay still conform to the concept of NFT?

Sophia: This is a very good question! This is a question about the distinction between copyright and ownership. These two are always easily confused. Copyright refers to the right to reproduce the work, the right to create a secondary work, etc. Ownership refers to the right to use and dispose of assets.

What NFT buyers get is ownership, which means they can trade the NFT in the secondary market, such as buying, selling, and leasing. This regulation of Alipay does not violate the concept of NFT. Whether in the field of NFT or traditional art, copyright is not transferred during sales, but the ownership of the asset is transferred.

Host: Sophia, what do you think about the development prospects of NFT? And can you tell me which area of ​​NFT development you are more optimistic about?

Sophia: Most assets in the real world are non-fungible assets. If these assets are to be put on the chain, or to find a corresponding digital form, then NFT will be the most suitable standard. Therefore, we firmly believe that this is the second largest application scenario of blockchain outside of finance.

I agree with a sentence I saw before: "What NFT needs is carriers and application scenarios, not constantly printing new assets." The wide range of scenarios in which NFT can be applied determines that the development of NFT will not stop there. In the future, it will also have a wider range of applications in game props, virtual worlds, fashion and entertainment, identity verification, insurance, electronic tickets or coupons, etc.

I personally am optimistic about the development of the Metaverse. The concept of the Metaverse is very attractive. As I said before, when investing in NFT projects, the narrative of the project is very important. In the Metaverse, people can do many things that they cannot do in the real world. For example, they can participate in various activities, go wherever they want at any time, and do whatever they want. Users can hang out with friends remotely, create art, consume art, play games and shop to their heart's content, and they can also visit other areas with their virtual identities.

Although it is still too early to realize these, as many companies lay out the Metaverse industry chain, such as Tencent's investment in the sandbox game company Roblox and Nvidia's launch of the Metaverse infrastructure Omniverse, it will greatly promote the development of the Metaverse.

05NFT itself is a high-risk market

Host: Faced with the various NFT projects on the market, how can ordinary users identify reliable NFT projects? What are the risks of investing in NFT?

Sophia: If you really want to participate in a project, you need to learn about the project through various channels, such as the project’s official website, official media channels such as Telegram, Twitter, Discord, Medium, etc., project progress, financing status, and domestic and foreign media coverage.

The information collected from these official media channels can help you determine the background of the project and whether it is legitimate. Don't just believe the information you get from third parties. It is key to carefully confirm the source of the information.

Regarding the search project investors, you can confirm from Cypherhunter and Block123. In addition, there are endless counterfeiting methods, and there will be similar institutional names to attract user investment. For example, the following figure is a SoftBank announcement. Kishu Inu's consultant Softbank SG is a copycat company, not the literal SoftBank Singapore.

NFT itself is a high-risk market. The price fluctuation risk of NFT tokens and collectibles, especially the value of encrypted collectibles, is high, because most users are just following the trend to hype IP. How to judge the fair value of the NFT, everyone has their own measurement system in mind.

Finally, the risks and security of NFT projects. The project owner may go bankrupt or run away. For example, if the creator of the uToken in Unicly withdraws liquidity, then the person who buys the uToken will be at risk. Also, when buying NFTs, it is necessary to carefully confirm whether the NFT is minted by the original author. This is the key. Because everyone can use other people's cryptopunks pictures to mint new NFTs, which are fakes.

Host: Thank you for your wonderful sharing!