After the DeFi fever subsided, NFT took over the task of supporting the market’s FOMO sentiment, which to a certain extent alleviated users’ fear of the DeFi market ebb. Due to the industry’s desire to introduce assets into the chain, the NFT that appeared as early as 2017 was given high hopes, but the limitations of the NFT itself make it currently only available in the small circle of art games and cannot achieve real Out of the circle.
Analysis believes that NFT has opened a “hole” for real-world assets on the chain, but this hole lacks a very important “gateway” procedure, that is, the issue of legal warrants. This also makes NFT’s market actions daunting, and the breadth and depth of asset introduction are relatively poor. NFT urgently needs an external force to support. In the past blockchain practice, the STO securitization issuance model may be the most suitable tool.
NFT+STO connection point
The so-called STO (Security Token Offering STO) refers to the issuance of securitized tokens, which refers to the public issuance of legally compliant tokens under a certain regulatory framework and in accordance with the requirements of laws, regulations and administrative regulations. To put it bluntly, it is similar to the token issued after the authoritative review of the current stock or bond market. NFT is a non-homogeneous token. After going through the STO procedure before being put on the chain, this token contains a compliant warrant. Then the NFT that solves the problem of legal warrants will be issued and circulated in the market. It is justified, reasonable and legal.
The definition of assets in asset securitization is not limited to digital assets. Any tangible asset in the real world can be issued through STO, such as real estate, artworks, collectibles, independent creators’ works, and so on. The asset categories mentioned above and the current NFT almost completely overlap. The two complement each other in terms of number of channels. Therefore, in the future, assets on the chain can first pass the STO review before issuing NFT tokens.
Through NFT on-chain transactions and off-chain receiving real-world assets to complete the blockchain transaction process of the entire asset, so that the world’s tradable material assets and other data assets can be expressed on the chain, and the result will be millions of billions of dollars. There is a huge amount of market cakes. Obviously, NFT+STO, as an innovative mode of asset value circulation in the future, is obviously the most likely path to success in the current market environment.
Of course, STO is not only applicable to NFT assets, but also applicable to homogenized tokens in the script design of assets, such as income share certificates issued by enterprises. These are not unique, but homogeneous. The shares are the same, similar to Bitcoin and Ethereum. Under unified compliance, the thread of homogenized ordinary tokens and non-homogeneous tokens NFT is advanced, and more and more large assets outside the circle are introduced to the chain, forming a complete tokenized world. .
The development status of NFT+STO
At the beginning, we also mentioned that NFT appeared as early as 2017, but the current state of development is still lacking. STO also emerged in the same year. On July 25, 2017, due to “The Dao project failed to issue”, the SEC’s investigation report on the incident clearly pointed out that The DAO was a securities asset and also issued the “Investors Announcement: Initial Token Issuance” means that according to the actual situation of each ICO, the digital currency or tokens issued or sold may be securities and are governed by the Federal Securities Law. This is the first time that the SEC has defined an ICO project as a security, and it is also the identification of Security Token.
Three years later, the development of NFT and STO can only be said to be unsatisfactory, and it is far from bringing earth-shaking changes. The main problems of NFT are as follows:
a. Insufficient infrastructure, lack of various functional agreements, and higher thresholds for ordinary investors to learn and participate;
b. Driven by speculative demand, project tokens fluctuate greatly in the short term, and market speculation cannot support the true value;
c. The overall market represented by art collections is not big, and there is an urgent need to cultivate new areas to make the cake bigger.
Similarly, STO is still in a very early stage, and there are not many successful cases. To be fair, everyone knows and realizes not much, but as long as everyone expands their imagination or thinks with logical thinking ability, they will know. The accumulation of factors or market resources is inseparable from the STO model.
In addition to compliance, STO also has many advantages over IPOs, such as lower operating costs, lower legal risks, and lower barriers to entry. Most importantly, it has become an important bridge between the traditional financial sector and the blockchain. Using STO’s compliant issuance of tokens, the size of assets can be defined with a very small granularity. More easily, from the expression of asset value ownership to the entire process of investor purchase, blocks can be used The smart contract of the chain is executed automatically.
In this process, the token issuer will obtain future economic benefits in advance, further expand the scale of production, and investors will also enter through the low threshold of STO, and can further try to build a “more real” market investment portfolio. Most importantly, the increase in liquidity brought about by helping off-chain assets to migrate to the chain will help release value for the market through a liquidity premium. A rough estimate is that when illiquid assets become more liquid, it will Will unlock a liquidity premium of about 20-30%.
The above is an economic aspect. The most important thing for STO is to go further in the interactive level of supervision. By adding some additional codes to the pass to meet the regulatory requirements, such as prohibiting over-large and ultra-small transactions, transaction blacklist functions, etc. This is undoubtedly more in line with the needs of the regulatory authorities. Real-name authentication (KYC) and anti-money laundering (AML) compliance ensure the transparency of the participation of companies and investors, which is undoubtedly beneficial to the market.
The future direction of NFT+STO: on-chain and off-chain of assets
At present, there is no standard implementation technology corresponding to the ticket in the blockchain, and the closest one is the non-homogeneous pass NFT. NFT assets will play an irreplaceable role in the ecosystem of the blockchain. In the context of global digital transformation, the realization of asset on-chain and on-chain right confirmation through NFT may become a key driving force for many industries to achieve digital economic transformation. .
Although NFT has developed well in recent years, it is still far from showing its due strength, which is limited by the development restrictions of the blockchain itself. For its future, we should not only talk about the issue of assets on the chain, but also reflect this process back into the real world. Only two-way interaction with reality, that is, from asset on-chain to asset off-chain is possible. Only if it is feasible can the entire industry value circulation chain and digital life be re-created.
Just imagine, if I chain my own house, I will use NFT to mark the uniqueness of the house. This is the most basic step. And when the blockchain develops to a certain stage of maturity, what really makes NFT shine is not the assets on the chain, but the assets off the chain.
We can imagine such a new scenario under the combination. The above house registration and sale are initially issued on the chain through NFT Token, and then through the STO gateway, your NFT Token is projected, transformed, and confirmed. According to this asset conversion logic, the future of NFT+STO seems to be very worth looking forward to. Although the real potential to become the king of the above-mentioned super-asset on-chain and off-chain infrastructure has not yet appeared, there is still a long way to go before landing. But once it appears, it is bound to become an important target in the digital age of Web3.0.
