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A very small number of high-quality NFTs rely on the rapidly growing community consensus connected by the software protocol behind them, but they may absorb and carry much greater value than physical collections.
Original title: “Wang Chuan: Why the potential of high-quality NFT is far greater than physical collections (1)”
Written by: Wang Chuan, investor
1/ On March 12, 2021, under the gaze of 22 million live-streaming viewers around the world, Christie’s, a well-known art auction house, published the works of Beeple, a post-80s online artist, “Every Day: First Five Thousand Days” A NFT (Non-Fungible Token, translated as “non-fungible token” in Chinese), was sold at a sky-high price of US$69.3 million (corresponding to 42329 ether at the time).
2/ This auction price ranks third among all surviving artists in the history of auctioning individual works of art. The first place was the Rabbit of Jeff Koons (born in 1955), which was auctioned in 2019, at $91.1 million; the second place was the Potrait of an artist by David Hockney (born in 1937), which was auctioned in 2018, in 1997. 0.3 million US dollars. Traditional old artists, obviously have not realized the challenge of young upstarts from the blockchain world. Covid has seriously affected the offline business of traditional auction houses. Christie’s eagerly entered the NFT auction market, which was also forced by the situation, but did not expect the results to far exceed expectations.
3/ Beeple’s real name is Michael Winkelman. Since May 2007, he has insisted on creating one painting every day without interruption. Thirteen years of accumulation has allowed him to have 1.8 million followers on Instagram. In 2019, his work was adopted by the fashion brand Louis Vuitton. In 2020, his work will be shown during the halftime performance of the American Super Bowl football game.
4/ In October 2020, he made a piece of work into an NFT and tested the water for the first time. It was auctioned through the online platform Nifty Gateway and sold for US$66,666. In December, he sold another 20 works as NFT for a total of 3.5 million US dollars.
5/ No one can casually succeed, eager to make a certain NFT out of thin air, without any accumulation and foundation, and quickly shoot the dream of sky-high price, you can wake up.
6/ The first reaction of ordinary observers to the purchase of such virtual artworks is incredible. All digital audiovisual works can be copied easily. Why is your NFT worth so much? Are all buyers sb?
7/ “Every Day: First Five Thousand Days” The buyer is Singaporean Indian entrepreneur Vignesh Sundaresan, whose online nickname is MetaKovan. According to his self-report, he started from nothing, as early as 2013 when he was still studying in Canada. Have done a Bitcoin exchange business. According to Sundaresan: He participated in and created history in this auction. The NFT he bought will become an important object in art history; NFT will take time to serve more people It is understood that the medium of art is quietly migrating to the blockchain, and there will be thousands of creators joining this ecosystem; in the future of NFT, there will be many low-value objects and a small part of extremely valuable collections. Pin; as the new owner of NFT, he will find a way to gain income in the virtual world.
8/ According to Beeple’s own words, the buyer does not own the copyright of the work in the traditional sense, but only the property right of the NFT. However, artists and collectors themselves are a symbiotic and win-win relationship. Everyone is on the same boat, working together and taking care of each other, so that artworks can continue to appreciate. This property right has been recognized by many people through public promotion and auction. Of course, anyone else can copy the original work and create a new NFT, but it will not be recognized by the majority.
9/ The traditional art collection industry has long been troubled by the problem of counterfeit products. The curator of the Metropolitan Museum in New York was once asked, “How many of the artworks on the wall do you think are likely to be fake?” “. He replied, “I don’t know either.” Netflix’s documentary released in 2020, “Made you look: A true story about fake art” (Made you look: A true story about fake art) mentioned that a female liar in New York started in 1994 and paid for one A street painter named Qian from China copied the works of famous artists, paid less than nine thousand US dollars for a copy, then made up stories with clever words, and sold them to major art dealers. The ultimate loss caused by fake paintings to collectors has accumulated to 80 million U.S. dollars. Knodeler, a 165-year-old art dealership, closed its doors in 2011 as a result. Many buyers believe that Knodeler is a conspiracy in a scam, and various lawsuits against Knodeler executives will not come to an end until 2016. This is 22 years after the first fake painting entered the market in 1994.
10/ Art dealers usually rely on third-party experts to verify the authenticity of artworks. But appraisers always serve the interests of the boss who pays them. If your negative appraisal will cause the boss who paid you to suffer huge losses immediately, would you dare to poke this basket right away? Therefore, if the purchaser of art only relies on the identification document of the expert hired by the seller, he will take greater risks. Knodeler sells fake paintings, from 1994 to 2003, it has been smooth. It was not until in 2003 that a buyer from Goldman Sachs asked a third-party expert to verify the authenticity of a work and discovered that the work used dyes that did not exist at that time. This scam was slowly exposed. Usually if one cockroach is found in the kitchen, there must be several undetected. Knodeler is closed, but how many other dealers sell fakes that have not been exposed? We can never fully know.
11/ There is a word in the collectible world called “Provenance”, which means a written record of the origin of an item, the history of resale, and the history of the storage location from beginning to end. Because NFT itself is recorded on the blockchain, it can be said to be “Provenance native” with its own Provenance. From the establishment of the origin to each resale transaction, it is automatically recorded on the chain. Anyone can publicly verify it without any ambiguity and Ambiguity, there is no room for fraud, which is unmatched by physical collections.
12/ A typical question of ordinary people is: I can touch real paintings and art collections, but I cannot touch a virtual NFT. Why do you say that it is valuable?
13/ If you still remember the author’s old article, there are two examples in the fourth section of ” Wang Chuan: The Key to Success = Network, Network and Network “. One is a work of a certain museum. At first everyone thought it was Rembrandt’s The real thing, then suddenly an expert said it was a parody of a Rembrandt student, and the crowd immediately faded. The second example is a collection of items suddenly recognized by several authoritative experts as authentic Da Vinci, and immediately the price skyrocketed. This is the instability of centralized authentication.
14/ The counter-examination from this perspective is: if an expert presents evidence today that your physical collection is fake, its value may soon be zero. Otherwise, it may suddenly become very valuable. Do you really enjoy the art itself, or do you enjoy “the expert’s comments”? If you think that the expert’s comments are far more valuable than the visual and tactile feelings of art, then you can independently and publicly authenticate on the blockchain, which cannot be tampered with NFT, isn’t it more credible than a letter from a few experts?
15/ Why in the world of traditional art collections, everyone feels at ease the risk of being identified as a counterfeit and worthless by other experts after buying an artwork; and it seems strange to NFT, but the cost of authenticating is almost Is it zero, a new medium that makes expert experts unemployed, but terribly scared?
16/ So, as far as NFT is concerned, how do you prove that this work is authentically certified by the original author? The common practice is to simultaneously publish news on major social media as a kind of circumstantial evidence before the mainstream auction website is released. For Beeple, who has millions of followers on Instagram, Twitter, and Facebook, this is very simple. Therefore, the long-term existence of the original creator’s real name (or corresponding stage name) in major social media is a work that must be completed in advance. This can’t be done in a day or two. If you open an account and register only a few days, there are only a few hundred fans, and the audience will not know if this is a fake account that scammers just registered.
17/ Once the NFT is registered on the blockchain and the public sale is completed, all data can be publicly and independently verified. No one can tamper with, and the authenticity cannot be challenged. With the passage of time, the irreversibility of this authenticity consensus, just like the btc confirmation after more than six blocks, is as solid as a rock, and even the original creator cannot change it. Don’t worry, like buying physical collections, suddenly a “so-called” expert jumped out and said that a certain painting is not an original Rembrandt, but a parody of his students! This kind of nightmare that physical art collectors may face is not a problem at all for NFT collectors. This is the advantage of decentralized consensus.
18/ The core of NFT on the blockchain is two things, one is the address of the smart contract on the chain (currently mainly Ethereum), and the other is the ID corresponding to that smart contract. For example, “every day” sold by Beeple The NFT uses a smart contract called MakersTokenV2, and the corresponding ID is 40913. On Ethereum, you can see that this NFT was transferred to the new owner’s wallet on March 13th.
19/ The mainstream standard of NFT is the so-called ERC-721 (later a new and improved ERC-1155 standard, not detailed here). The universal standard means that in theory, the same NFT can be easily switched to different platforms for auction, as long as you authorize your own controlled address and link the platform through the wallet software.
20/ At present, Opensea.io, the largest NFT platform on Ethereum, claims to have more than 4 million different NFT objects on sale. Artists who are unwilling or unable to program can easily use platform tools to convert their artworks into NFTs.
The picture below shows the author’s first NFT publicly auctioned on the opensea.io website. You can find it by searching for “svwangchuan” on the website. The auction will end within forty-five hours after publishing. Interested readers can check directly on opensea.io)
21/ Where/how the image of the artwork itself is stored is not its core key. This is actually the same as the underlying logic of physical collections. Experts’ identification of authenticity is the key. If the expert says it is a counterfeit, no matter how beautiful it is, it’s useless; if the expert agrees that it’s a genuine product, even if the banana is taped. You can also shoot high prices on the wall.
22/ At present, the purchase of NFT on mainstream platforms requires buyers to have a certain amount of Ether (ETH) and corresponding wallet software Metamask (commonly known as “little fox” in the Chinese community). Considering that most people in the world have not even touched btc, Metamask will only have one million monthly active users in October 2020. The expansion potential of the NFT market is actually very, very large.
23/ In addition to revealing the source and verifying the authenticity, the biggest difference between NFT and physical collectibles is that it can be endowed with program logic and can be combined with various software programs or smart contracts to produce endless combinations.
This includes, but is not limited to:
The original creator can set the program logic in the NFT, and can also automatically withdraw a certain percentage of commissions each time the platform is resold (the upper limit set by opensea is 10%) so that the original creator can also enjoy part of the bonus of the future appreciation of the NFT.
NFTs with high liquidity, frequent transactions, or long transaction history can be used as collateral in the future to quickly borrow in the Defi ecosystem; (traditional financial art collections can also be mortgaged, but the costs and cumbersome Procedures, several orders of magnitude higher than Defi)
Because the NFT and its owner can be accurately confirmed by the address on the blockchain, the smart contract in any application scenario can set the program logic to give the NFT owner some special rights. Once the smart contract is deployed on the chain and widely used by the community, the original author of the contract cannot be tampered with. The stickiness and value accumulation of the use comes from this.
24/ Unisocks can be said to be a representative of this programmable NFT. Originally launched by Uniswap in May 2019, unisocks only has 500 copies, and the only right is that the NFT can be exchanged for the corresponding 500 pairs of socks. The transaction price of Unisocks in the liquidity pool is determined by the so-called Bonding Curve formula in a smart contract. The initial price was only $12, but today’s market price is about $80,000, which has increased nearly 7,000 times in two years. In the past two years, 185 buyers have changed NFT to socks (I guess they regret it all). Onlookers are puzzled by the high prices now. But from another perspective, Bill Clinton’s signed baseball can be sold for $900 each. Uniswap, as the world’s largest decentralized exchange with only 20 employees and a market value of over 10 billion U.S. dollars, has created a pair of decentralized exchanges. NFT, the limited edition socks priced by smart contracts, sold for US$80,000. Isn’t that really outrageous?
25/ NFT is essentially a software protocol. The value of a software protocol does not lie in its individual isolation characteristics, but the essence lies in how many nodes will adopt this software protocol in the future and how large the network it can form. People on the Canal Network cannot understand the value of the railway network; the traditional newspaper network cannot understand the value of the search engine network and social media network. Chickens and ducks cannot communicate. In the end, whoever has a big network will be more reasonable. The value of NFT lies not in the artwork itself bound to it, but in the community identity behind this work and the potential for future development of the community network.
26/ For those accusations that NFT cannot be touched, it is air, the response is actually very simple: when the Internet first came out 30 years ago, didn’t domain names also seem to be air? But not long ago, voice.com was sold by its original owner, Michael Saylor, for $30 million. In the past two decades, a small number of interested people have accumulated countless wealth by squatting a large number of scarce domain names. Their gains are far greater than most of the engineers who have worked hard on the Internet but have finally lost their lives. You can see the author’s old article Wang Chuan: The Legend of Domain Name Tycoon Ye Yun-Why Investing Is More Than Just Buying Stocks
27/ Yes, most ordinary NFTs may indeed be of low value, but a very small number of high-quality NFTs rely on the rapidly growing community consensus connected by the underlying software protocol, and instead may absorb and carry much greater value than physical collections.
28/ On the contrary, even if a museum owns the authentic Picasso, if the experts of the museum or the descendants of Picasso want to follow the fashion and sell it as an NFT, how many people in the blockchain community will recognize its legitimacy? Experts may be able to identify the authenticity of oil painting materials. Picasso’s descendants may indeed carry his DNA, but if there are not a large number of fans on social media such as Instagram, Discord, and Twitter, who would care and pay for them?