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NFT works are frequently priced at sky-high prices, and three major problems in the supervision of valuation liquidity need to be solved



A digital art painting that doesn't exist in reality sold for $69.3 million, a tweet for $2.9 million and a shot of LeBron James dunking for $208,000. The "sky-high prices" that have been repeatedly exposed recently have made NFT (Non-Fungible Token), an emerging niche encryption field, "break the circle" with a high profile, including Marvel, the National Basketball Association (NBA), and the luxury goods group LVMH. Well-known institutions in China have successively announced that they will participate in NFT deployment.

Although it is expected to be widely used in various fields involving digital copyrights such as art, music, and games, NFT assets are also questioned by the market due to excessive valuation and liquidity concerns. Experts interviewed by reporters from the Securities Times said that at present, NFT mainly has three risks: security, asset value fluctuations, and supervision.

Recently, NFT has ushered in a real explosion, which has also brought blockchain applications further into the mainstream to a certain extent.

In January of this year, the total sales of NBA TopShot, an NFT game introduced by NBA Canada’s official website, reached $226 million, ranking first among NFT collectibles. In early March, digital artist Beeple's NFT work "Every Day: The First 5,000 Days" was sold at Christie's for $69 million, setting a new world auction record. On March 25, a painting by Leng Jun, the leader of the contemporary Chinese hyper-realistic painting school, was burned on the spot, and an encrypted art NFT was generated, which was finally sold for 400,000 yuan. Paradise Auction, the third largest auction house in China, also plans to plan a special or special topic of encrypted art works in the spring auction of 2021...

Research: More than $86.6 million worth of NFTs have been stolen since 2020: Golden Finance reports that recent research from Comparitech shows that NFT theft is becoming more frequent and more profitable than ever. The company has been tracking NFT thefts since the NFT standard was first introduced and recorded the first stolen NFT back in 2020. Since then, more than $86.6 million in NFTs have been stolen. At today's prices, these NFTs are worth more than $896.5 million. In 2022, there will also be a significant increase in the total number of NFT thefts. Of the 166 incidents of NFT theft, 14 occurred in 2021, compared to only 2 in 2020. The remaining 150 occurred in 2022, including 31 thefts in March alone. (CryptoSlate) [2022/8/4 12:01:45]

So, what exactly are NFTs?

NFT blockchain game Blast Royale completes $5 million in seed round financing led by Animoca Brands: On April 13, NFT blockchain game Blast Royale announced the completion of a $5 million seed round of financing led by Animoca Brands and Mechanism Capital. Dragonfly Capital, DeFiance Capital, Play Ventures Future Fund, Double Peak, Polygon, C² Ventures, Morningstar Ventures, DWeb3, Merit Circle, Ancient 8 and AvocadoDAO, as well as well-known angel investors Santiago R Santos and Nick Chong participated. Blast Royale plans to launch the mainnet at the end of the third quarter of 2022. ( [2022/4/13 14:22:55]

The full name of NFT is Non-FungibleToken. The Chinese name is non-homogeneous token, also known as non-fungible token. It is the only digital asset that cannot be replaced with each other, and its ownership is transferred on the chain (such as Ethereum). In general, NFT has the following three characteristics: Uniqueness, each NFT has different attributes, and these attributes are usually stored in the metadata of the token. Provable scarcity, generally there is only one copy of NFT, and the number of tokens can be verified on the blockchain, which is provable. Indivisibility, most NFTs cannot be split, so part of the NFT cannot be purchased or transferred.

Data: In the last week, 888,900 NFT assets were added to the Ethereum network: Jinse Finance reported that NFT Scan data showed that in the last week, 888,900 NFT assets were added to the Ethereum network, with an average of 126,900 new NFT assets minted every day. [2022/1/16 8:51:58]

At present, most NFTs are issued on Ethereum, but with the development of the NFT track, NFT public chains such as Flow have emerged in the industry, which can focus on the issuance and circulation of NFT assets.

Taking the cold army burning paintings and making NFTs on the chain as an example, it is because only by making the original paintings disappear can the NFT correspond to the complete rights and interests of this work, so that the holder of the NFT can have the full value of the work, otherwise in general Under normal circumstances, NFT can only correspond to digital copyright, and its value is often only equivalent to 10% to 20% of the original work. In the future, when assets including artworks generate NFTs, it is not necessary to destroy the original works. The original works can be hosted in a trusted third-party organization, and the corresponding rights are defined in detail when generating NFTs, and the boundaries of rights and interests are drawn. The above-mentioned problems can also be avoided to a large extent.

The NFT game Project Linkstar will be launched on the IoTeX public chain: According to official news, the NFT game Project Linkstar will be launched on the IoTeX public chain. The XRC20 token $GFT was officially released yesterday, and will participate in the fifth week of IoTeX airdrip for community airdrops. Long-term holders of $IOTX and $GFC holders will receive airdrops. Project Linkstar is developed by the blockchain game development team GameFantasy. $GFT will be used as the base currency of the game, combining NFT card mining and liquidity mining.

IoTeX was established in 2017 as an open source project in Silicon Valley, with the vision of linking the real world and the digital world. It is a high-performance public blockchain fully compatible with Ethereum. [2021/5/27 22:49:25]

One of the reasons why NFT is so popular is that, on the one hand, it provides solutions for digital asset circulation, transactions, and confirmation of rights, and can be applied to various fields such as art, music, and games; More items in the real world are combined to act as a bridge between the physical world and the blockchain world.

Ripple CTO: NFT strategy is being developed NFT and other functions should run on the side chain: According to Newsbtc on April 10, Ripple's chief technology officer David Schwartz said that the company is currently developing an NFT strategy. He added that based on observations, people care very little about the underlying technology and only care about the NFT itself and the user experience. Schwartz said the priority for the XRP Ledger is to preserve its strength as a payment mechanism. With this in mind, other functions (be it CBDC, NFT, DeFi, etc.) should run on sidechains separate from the main chain. In this way, the payment function of XRP will remain unchanged and unaffected. Additionally, Schwartz warned that NFTs may be a fad, but it’s too early to tell. [2021/4/10 20:03:37]

"In addition to the existing applications such as game props and art collections, more real assets (such as real estate, cars, etc.) are expected to be chained on a large scale in the future and exist and circulate in the form of NFT, which will profoundly change our daily life "Chen William, a senior analyst at the China Securities Research Institute, told the Securities Times reporter.

Taking the financial market as an example, all kinds of financial instruments carry a lot of information in the process of circulation and transaction. If combined with NFT, it can not only confirm the rights, but also facilitate tracking. In addition, the transactions of various NFT assets in the future can form a subdivided financial market.

Chen William said that although NFT is still in a very early stage, it has released huge development potential, and it is possible to apply it to the mainstream market in the future, because the real value of NFT is to provide an on-chain channel for real-world items and act as a physical world. A bridge to connect with the blockchain world.

Yu Jianing, the rotating chairman of the Blockchain Special Committee of the China Communications Industry Association and the president of Huobi University, told the Securities Times reporter that the realization of asset on-chain in the form of NFT, in the short term, is mainly to realize digital assets represented by digital artworks. The on-chain confirmation and circulation transactions of virtual goods allow these digital goods to have clear scarcity and ownership. In the medium term, in the future, some traditional assets including private equity, private equity bonds, trust shares, and even real estate can also be chained and digitally circulated through NFT. In the long run, if combined with the application of the oracle system, NFT may greatly accelerate the process of on-chain and digitization of physical assets, thereby further improving the Internet of Value.

After two weeks of fierce bidding, the NFT work of digital artist Beeple sold for a "sky-high price" of US$60 million, becoming the most expensive digital work ever auctioned, and the 19th place among all auction works (including entities). In addition to being amazed, the market also generally believes that there is a huge bubble in the current transaction of NFT works.

"The valuation and liquidity of NFT assets have always been one of the reasons for being questioned by the market. This is similar to the characteristics of artworks themselves. It is difficult to have a unified standard for artworks, especially similar to NFTs with unique characteristics. Relying on encrypted art promoted by the community, how to make an accurate valuation is a difficult problem facing the market." Yu Jianing said.

Yu Jianing believes that at present, NFT mainly has three risks: security, asset value fluctuations and supervision.

In terms of security, the transaction flow of NFT involves the issuance of public chains, trading platforms, and even the DeFi (decentralized finance) architecture, among which there are relatively many processes involving smart contracts. A sharp drop in currency prices.

In terms of asset value, due to the relatively low liquidity of NFT and the need for encrypted artwork to have a certain aesthetic taste and community support, the artistic ability of the issuer has been tested. In addition, the value of NFT will appreciate or depreciate according to market demand. Once the market heat is relatively reduced and the phenomenon of hype gradually cools down, the asset value of NFT will also be greatly reduced.

Finally, there is regulatory risk. There is currently no regulatory agency for NFT to regulate it. At present, most NFTs are digital assets created on the blockchain, but with the development of the NFT market, there have been more mappings of off-chain physical assets, and regulators may introduce corresponding policies for management.

Chen William said that the NFT track is still very early, and there are inevitably some defects, such as an imperfect ecological environment, serious project differentiation, poor liquidity, and high security risks. For novice players, participating in NFT will involve concepts such as private keys, wallets, and mnemonics, which has a lot of barriers to entry.

Yu Jianing also believes that the current application field of NFT is still relatively single, concentrated in the niche circles such as games, encrypted art, and card collectibles, and has not yet achieved large-scale application. The accurate valuation of NFT assets still has to be left to the market for further value mining. "We should look at the development of NFT with a tolerant and open attitude. With the influx of more talents and funds in the future, NFT can not only overcome the current shortcomings, but also is expected to continue to shine in the encrypted world." William Chen said.


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