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Pantera partner tells you why NFT may be the next "killer application" on the chain

Pantera Capital

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Seems like every VC is wondering about NFTs these days

Original title: "Pantera Partner: Why NFT May Become a "Killer Application" in the Blockchain Field"

Original Source: Lianwen

Nowadays it seems like every venture investor is right NFT Confused -

Digital Artist Beeple's NFT work "Everydays: The First 5000 Days" was successfully auctioned at Christie's for $69.34 million;
Famous music DJ Justin Blau's music album also released NFT and sold for $12 million on Origin DShop;
Lebron James and other NBA players' game "highlight moments" are even more on NBA Top Shot Recorded sales of more than $230 million.

Next, let Let's talk about what is NFT and why NFT may become a "killer app" in the blockchain field!

Pantera partner: why NFT may become the

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NFT, or non-fungible token, is a "non-fungible" encryption tool that can be used to tokenize "unique digital items". Being non-fungible means that NFTs are not interchangeable with each other, thus proving the scarcity of digital items, which in turn gives items inherent value.

In the real world, people communicate through entities such as exchanges, brokerage firms, etc. The concept of "digital ownership" is much vaguer than the concept of "physical ownership" in the exchange of things such as artworks and collectibles by media, so there is a lack of corresponding transaction infrastructure in the digital field.

NFT is a very effective solution that can help individuals "own" things like digital art on the Internet in a verifiable way Items such as these can also be exchanged for value. Through standardized "digital goods", NFT can also exchange digital works on the public blockchain, and then solve the problems of low efficiency of traditional digital trading platforms.

Ethereum provides a variety of tokens for NFT Token standards have led to a surge in the number of NFT projects based on the Ethereum platform. As more and more people are interested in NFT, the load on Ethereum is also increasing, and other blockchains (such as FLOW, Polkadot, and Tron) have also begun to Provides support for NFT projects with performance improvements such as lower transaction fees and a better developer experience.

Digital art and collectibles are currently the two most important use cases for NFT. Creators can make digital art Tokenized and signed, then sold on digital marketplaces as NFTs. Digital art collectors can find them at OpenSea, SuperRare, Rarible and other NFT trading platforms to purchase and exchange these works, in the field of encrypted currency, has now formed A relatively active digital art community. OpenSea has become the largest NFT market by transaction volume, with a transaction volume of nearly $90 million last month, and NBA Top Shot, an NBA-licensed digital collectibles market, has sold more than $280 million in recent months.

In Game In the world, NFTs have also exerted a huge influence because they can be used to represent in-game assets and purchase transactions. For example, games such as CryptoKitties and Gods Unchained allow players to trade assets (such as animated characters and game cards) on the built-in platform for fiat and cryptocurrency. There are also some sandbox games that allow users to create their own virtual world, not only to customize the game, but also to trade built-in assets.

In 2020, great innovations have taken place in the NFT industry. We have seen decentralized markets such as Rarible, and there are also explorations of NFT ownership Projects like NIFTEX. In addition, the total transaction volume of NFT has tripled, and many well-known "big names" have also joined this field, such as DC Comics artist José Delbo, and Twitter (Twitter) CEO Jack Dorsey (Jack Dorsey) , the latter's first tweet NFT released in 2006 has soared from the initial price of $5 to a high price of $2.5 million.

Thanks to mainstream attention to cryptocurrencies, better and better developer platforms and NFT tools, and a thriving The digital creator community, NFT is expected to continue to grow in 2021. In February 2021 alone, the transaction volume of NFT has reached 340 million US dollars, exceeding the transaction volume of the whole year of 2020. As a certifiably scarce and unique asset, developers have realized the value of NFT and have begun to explore more practical use cases, such as property ownership and independent music distribution. In the future, more and more people will realize the importance of digital identity (and the consequent digital ownership), and NFT is bound to become a new way to change the concept of the Internet and exchange value.

"Million Dollar Tweets"< /h3>

Recently, Jack Dorsey, the founder and CEO of social media Twitter, "made headlines once" because of his own first tweet NFT Sold for a high price of $2.5 million, Jack Dorsey’s tweet NFT has a digital certificate on it, which is signed by Jack Dorsey himself to ensure its authenticity.

Jack Dorsey is a long-time supporter of blockchain and cryptocurrency technology, and now he is also paying attention to NFT, and hopes to explore it further to reward creators and implement The idea of commoditizing digital experiences in a way that personal ownership. What’s “interesting” is that although Jack Dorsey’s NFT sold for millions of dollars, there are thousands of similar NFT auction transactions in the digital art and collectible NFT market.

What is an NFT?

Jack Dorsey’s first tweet actually represents the precious history of Twitter formation, just like archaeological artifacts in a museum may represent a certain period of history same way of life as society. These items, whether in physical or digital form, hold significant value. But in the real world, physical objects like artifacts and paintings have established exchange agreements, such as auctions, brokerage, etc., but for computer-based artwork and Internet-based digital products, there is not much for trading and selling. infrastructure.

This is the problem that NFT hopes to solve. NFT, that is, non-homogeneous tokens, is a type of encryption tool designed to tokenize Digital goods (eg, artwork) traded on the blockchain. The so-called "non-homogeneity" means that any token cannot be replaced by the same asset, while other financial assets are interchangeable (such as legal currency cash and Bitcoin, 1 dollar can be replaced by another 1 dollar, 1 BTC can be replaced by another 1 BTC). Generally speaking, works of art are items of original value and therefore irreplaceable, since each work of art is unique and no identical item can replace them. When users purchase NFTs of digital artwork, they can have complete confidence that the "item" they are purchasing was created and signed by the original artist, and not a replica or fraud. If someone takes a screenshot of a work of art, such as a painting, and tries to sell it, the situation is actually similar to using an iPhone to take an authentic "Mona Lisa" in the Louvre, because in essence, NFT represents What is meant is the "ownership" of a certain digital property, that is, it represents the "authentic work".

There are many types of non-homogeneous assets, such as domain name sellers, in-game stores, artworks, etc. The digital trading market for such assets has existed for a long time It's time, but before the outbreak of NFT trading platforms, the vast majority of digital products have been lacking effective means of exchange. Transferring non-fungible assets from one user to another often involves inherent problems such as having to use third-party services, escrow accounts, slow payment channels, and complex transfer methods, resulting in a digital commodity market Potential is hard to realize.

Another feature of NFT is the standardization of digital items, these tokens can be exchanged on various public blockchains such as Ethereum, and then more liquidity The introduction of sex and cash flow into the marketplace for digital items also provides strong cryptographic safeguards for ownership, censorship, and protection against fraud and plagiarism. Now, it is easier than ever for ordinary users to participate in digital product transactions, "own" a part of the Internet, no longer have to endure the various problems of the past, and do not have to worry too much about the risk of fraud.

NFT "Landscape"

Most cryptocurrencies on the Ethereum blockchain are Follows the ERC-20 token standard, which is an Ethereum standard for interchangeable backing. The token standards used by NFT are mainly Ethereum ERC-721, ERC-1155, and ERC-998:

ERC-721 is the earliest Ethereum token standard adopted by NFT, and has been adopted by famous projects such as "CryptoKitties";
The ERC-1115 token standard can make NFT "semi-homogeneous", and users can own various quantities of digital goods (such as in-game purchases, etc.), but the substitution of digital goods is not as good as Bitcoin or USDC and other cryptocurrencies;
ERC-998 token standard allows tokens to have both "fungible" and "non-fungible" components.

Pantera Partner : Why NFT may become a Ethereum token standard: ERC-20 maps addresses (users/accounts) to the number of fungible assets, ERC-721 maps non-fungible tokens to the owner's address, ERC-155 maps non-fungible Qualitative support types are mapped to owners and quantities. (From the OpenSea blog)

In addition to Ethereum, NFT can also be hosted on other blockchains, such as FLOW and Polkadot (Polkadot), these blockchains have the following Several advantages:

It allows digital creators to obtain lower gas costs;
Developer tools for real use cases are available;
Can support cross-chain DeFi liquidity expansion set (superset).

Digital art and collectibles are currently the two most important use cases of NFT. NFT provides a powerful tool for digital creators, allowing them to tokenize and sign digital art for effective transactions , and then get rewards from the continuous appreciation of the works. Since NFT tokens are non-homogeneous, the authenticity of all transactions can be verified by encryption, so fraud and plagiarism can also be prevented. Digital artists can list themselves on the NFT trading platform These platforms include Nifty Gateway, SuperRare, OpenSea and Rarible, etc., on which digital art creators can list their works, and digital art collectors can trade and display their collections on it. Thanks to these trading platforms, the digital art community has grown tremendously. Currently, the largest NFT trading platform is OpenSea. In the past month, its transaction volume was close to 90 million US dollars and its users exceeded 22,000. These trading platforms also integrate a lot of NFT tools. Even if you are not familiar with encryption infrastructure, artists don’t have to worry. Using these tools, you don’t need to write smart contracts to create NFTs, so as to make more Handle relevant transactions with ease.

Pantera partner: why NFT may become the

CryptoKitties, one of the earliest NFT projects, is a unique animated kitten that allows users to breed and collect It is precisely because of this game that many people pay attention to "tokenized collectibles". At its peak, the price of a "crypto cat" can even reach 170,000 US dollars. The developers are still building on this game. The "two-layer" game allows third-party developers to change the gameplay by interacting with the "crypto cat" smart contract, and introduce richer in-game assets and storylines.
Gods Unchained is another card-type blockchain game, users can Buy and sell card packs from each other online. At present, the average price of Gods Unchained game cards is close to $20, and the total market value has reached $10 million.
Sandbox is launching a virtual world where participants can create their own games and gain Lee, who have licensed many well-known animated characters such as Care Bears, Smurfs and Shaun the Sheep.

Pantera Partner : Why NFT may become a The picture above shows the digital world in the CryptoVoxel game scene. Players can "own" the digital territory through NFT (source: gigazine.net)

actual In fact, the scope of NFT applications goes far beyond the fields of digital art, collectibles, and games. They can be used for tokenization and exchange for any "unique item" on the Internet.

NFT in 2020

The reason why people have a strong interest in NFT is mainly due to 2020 has seen tremendous innovation in this space. In the first half of 2020, Rarible launched the first fully decentralized NFT asset market and released its own governance token RARI. Previous non-financial trading platforms were all centralized. These platforms were basically managed by a centralized entity to manage market rules and operations. Decentralized trading platforms mainly encouraged user participation and attracted more cash flow through decentralized governance. . RARI was issued at $0.63 in July 2020 and has reached $35.62 at the time of writing, with a market cap of around $30 million, implying growing interest in decentralized solutions.

Other projects, such as NIFTEX, have devised a way to "cut" unique NFTs into a large number of homogeneous tokens, which can then be traded in Uniswap and other decentralized financial exchanges for transactions. Tools like this allow users to obtain liquidity from NFTs that they may not be able to obtain from other sources, and even support collateral through "digital property ownership" (digital property ownership).

Since 2020, NFT has received unprecedented attention in the mainstream field. Some well-known artists have entered the NFT market, such as DC Comics artist, "Wonder Woman" illustrator José Delbo, and crypto artist Trevor Jones; More and more digital collectors are starting to see value in NFTs. NBA Top Shot is a marketplace for NBA-licensed digital collectibles on the FLOW blockchain, with over 67,000 users and over $228 million in sales. Overall, in 2020, the total value of NFT transactions has tripled to nearly $250 million.

Pantera partner: why NFT may become the The figure above shows the trend of NFT transaction volume in the past year (source: nonfungible)

NFT in 2021 and the future

For NFT, with the integration of several favorable factors, 2021 2019 will be a particularly exciting year, such as:

Platforms like FLOW allow It is easier than ever for ordinary developers to build digital worlds with their own NFTs;
Companies like SuperRare invest a lot of time and The interaction of the digital art community allows artists and more people to have a deep understanding of NFT technology, and also promotes the expansion of the value of NFT to a wider art and technology community, thereby realizing a new generation of digital market.
With the increasing interest of institutional investors and retail investors in cryptocurrencies and DeFi, it has brought huge liquidity to many blockchains, which in turn has made cash inside the NFT market The flow has become abundant, and a new financial use case for NFT has been discovered in the wider DeFi field.
More and more users Friendly fiat currency exchange channels and wallet services will also help bring more people into the NFT world and facilitate more transactions.
Growing digital creative community, people's growing interest in encryption technology, and better NFT development platform and user experience.

The above factors will drive the continued growth of NFT in 2021, only in February , the total amount of NFT transactions reached 340 million US dollars, which has exceeded the annual transaction amount of 2020.

Not only that, the encryption community is also constantly exploring more NFTs Use cases like:

Indie music distribution
Timeshare and fractional property ownership
Territorial ownership in virtual worlds (like CryptoVoxels )

as a certifiable scarcity , Unique assets, developers have realized the value of NFT, and began to explore more practical use cases. In the future, more and more people will realize the importance of digital identity (and the consequent digital ownership). As the future life gradually transitions to the digital world, NFT is bound to become an important way to change the concept of the Internet and exchange value .

If you have an NFT project and want advice, feel free to tweet at Contact me here .