Article from BlcokBeats/Translated by Yang(Milian)
All the popularity in cryptocurrency is caused by the wealth effect, and so is the NFT.
First is the MEME. A sudden boom led users to find a new continent.
This is a project that combines liquidity mining with NFT. On September 11, the price of a MEME was less than $200. But when MEME launched NFT art inspired by YFI founder Andre Cronje and admired by Andre Cronje himself, the price soared to nearly $1,800.
Following is MEME, NFT trading platform Rarible launched its own platform token, RARI, which will be awarded by air drop based on the number of purchases and sales made by users. The team calls this method “market liquidity mining”. Since then, the Rarible has gone from a no-no to a hot seller, selling 10 times as much in September as OpenSea, the dominant NFT player, with $1.5 million in sales on September 14 alone.
Then came the period of separation. Led by Dego. finance, this project gained popularity similar to SushiSwap at that time by means of community fission and scratchers. Gas Fee consumption ranked the third after Uniswap transaction and USDT transfer. Then there are other NFT projects, such as games from EOS Node EOS Nation, NFT+DeFi from Binance Smart Chain, and so on.
Not only that, NFT seems to have some trend of being popular out of this area. Recently, BlockBeats released its own NFT works on Weibo, which attracted a lot of curious users, asking how to convert their works in the real world into NFT assets.
A casual glance at the community information reveals that it seems that the remaining users of DeFi liquidity mining have shifted their attention to NFT mining, token hype, and the accumulation of wealth effects are all telling investors that NFT is taking the next step from DeFi.
But is this the best time to hype the NFT?
Is there any imagination space for NFT?
According to Lu Yaoyuan, PM of MathWallet, NFT can be divided into two categories: collectibles and services.
Collectibles are easy to understand. They are known as paintings, sculptures, cards, and so on. However, the value of collectibles is difficult to define in figures, because they are all more or less related to people’s subjective consciousness. According to Lu, their value can fluctuate greatly due to the celebrity status of the creator and the collector, and even the price of the same art can vary greatly due to the different collectors.
But NFT is more than just paintings and collectibles. Its more practical application is as a “service”.
What really matters is the objective value, it should not be limited to be defined in the collection of “scarcity”. Andre Cronje, the founder YFI, once said “NFT is similar to the database structure, can be used for foreign keys, definition list, across the table lookup and connection, the scarcity of so-called depends on creators in creative ideas, just like Leonardo Da Vinci can draw 10 pieces of Salvator Mundi, but he actually only painted one.”
At present, NFT tickets, certificates, ID and other applications are actually the initial landing of “service” NFT. There is no high threshold for them, but a convenient tool for ordinary people.
This is actually the real imagination space of NFT, the crypto art is only a small part of NFT, like a subset of the subset. From a macro point of view, for the wider public, NFT may be their gateway to on-chain space from reality.
But even with unlimited imagination, we need to look more rationally at the current market. Why is NFT now hot?
NFT has not to be hyped yet
If you carefully observe the tokens in the NFT area, it is not difficult to find that in the days when MEME exploded the NFT, the tokens prices of relatively new projects such as MEME, WHALE and ARTE all had a relatively exaggerated increase, while old projects such as SAND and MANA did not seem to attract much attention. And, oddly enough, token prices have shot up in the secondary market, but most NFT prices have not risen or even fallen slightly.
NFT’s popularity looks more like an illusion. DappReview CEO Niu Fengxuan said: “now on the touted Rarible trading platform, there is a large list of fraud behavior, users, who in order to pursue rewards of RARI token will continue to trade. And it is pushing up the platform of transaction data.”
“The recent NFT is a hype this time, it’s just a new hype opportunity created by people who haven’t caught up with the DeFi one. There’s not really much growth in terms of NFT trading volume and users at the moment.” Lu holds the same view.
Cao Yin, director and general manager of The Digital Renaissance Foundation, agrees that: “strictly speaking, this wave of NFT didn’t stir up, the most expensive on the Opensea NFT prices down even. MEME, WHALE both belong to boundless rise. However as for tokens like SAND, the full circulation tokens with large liquidity, microfinance can never shake its price, therefore NFT has not to be hyped yet.”
As DeFi has gone downhill, the market has become a bit of a mess, and the speculators’ ambitions of nowhere have long since switched to the next hot spot. These “copycats” do not seem to care about the NFT’s essence and are more interested in token prices than anything else, which is just like a swarm of locusts rushing to the next crop.
But do the “crops” of the NFT land really grow? Is the soil fertile enough to grow the crops that everyone expects?
Another question many investors are concerned about, is it time to enter the NFT? No!
The problems of NFT
In combination with the views of Lu Yaoyuan, Niu Fengxuan and Cao Yin, there are three main reasons why we think now is not the best time for NFT: user education is weak, easy to fake, and infrastructure needs to be improved.
Obviously, NFT has a much smaller audience than DeFi. Most people now think of NFT as “crypto&art”, both of which are very niche. What’s more, there is a lack of art education and popularization in today’s society, which makes it difficult for ordinary people to distinguish which works of art are worth collecting.
Even WhaleShark, a well-known crypto collector who has a deep knowledge of the NFT, tweeted that “it is advisable not to invest in NFT collectibles unless you have a strong aesthetic or a time machine.”
A small community is more likely to be a KOL, and in the field of the art collection, the collector trade fair is influenced by the celebrity effect. It is not fair for ordinary people that KOL conducts the collector trade fair much more easily and can fetch a better price. In addition, IP is easier to be hyped in a small group, which leads to tokens such as MEME being overhyped and without any actual application. It is just a mass of air.
The small community also means there are few regulations. For example, in the field of crypto art, the definition of whether copyright infringement, portrait right and so on is still very vague. At present, there are a large number of secondary creations on the trading platform in the form of spoof themed portraits of famous figures such as Vitalik, Andre Cronje and world-famous paintings.
“I don’t buy collections in the physical world because you would only have the real right, but someone else has the property right,” Cao told BlockBeats. “I prefer to collect native NFT collections that are purely on-chain and won’t cause copyright disputes.”
At present, there may be many problems hidden in the small community, but once the NFT field grows and more and more people join this area, more problems are likely to be exposed, and even the loopholes that disrupt the whole field may emerge.
NFT≠ Scarcity and uniqueness
NFT assets are not as scarce and unique as we might think. On the contrary, they can be easily copied, not just in art, but also in services.
For example, can dego.finance’s NFT be copied and faked?
Absolutely yes, as long as the picture is the same, then it can be faked by changing the name as the real token uses.
But of course, fake tokens can be distinguished, because the address of the contract is different and it will not appear in the contract classification of real one, but for the noob, will they think of the contract and judge is it true or false? They are gullible if they search only through the search bar.
Recently, a crypto artist said that someone had copied his work and published on SuperRare trading platform and sold it on Rarible. It can be seen that the current audit on the platform is not perfect. Although only a few artists have found their works have been copied, there are more counterfeiters hiding in hidden corners. With the development of NFT, the group of counterfeiters will become larger and larger, and the problem will become more serious.
And this is only the most basic operation of NFT fraud. A trickier trick, and one that is harder to spot, is simply copying the URL encoding that identifies the original. Copying an image at the same time as copying its URL encoding, so that a fake can have an authentic “ID” that counterfeiters can easily make it like real. At present, there is no solution to this fraud.
When it comes to DeFi, what comes to our mind? It’s MakerDAO, Uniswap, wallet, various data platforms, and so on, the DeFi ecology we can blurt out because we’re familiar enough. But when it comes to NFT, what else can you announce besides paintings?
You have no idea about what’s in the NFT section, what platforms to trade NFT, what historical prices of similar products, and how many people are playing NFT.
Even the simplest transfers are not quite as complete. It seems that only MathWallet can support NFT display and transactions on your account, and it is now impossible to see if you have an NFT on your account, let alone transfer money by using other wallets.
NFT is truly popular, but that hype is just a transmission of the wealth effect, not a discovery of its value.
NFT in 2020 is just like DeFi in 2018, it has real value but still needs time to develop. Pushing it to the front of the line too early will only hurt it if it gets all the attention at the wrong time. In this most imaginative area, NFT needs more developers to lead the way, build the infrastructure, and gradually expand its reach.