The true value of NFT and its evolution trend
The hype and misunderstanding of NFTs has continued since their appearance in 2014, especially after their total market cap exceeded $24 billion. In fact, the real value of the market valuation behind NFTs lies in giving artists, creators and collectors the right to issue, resell and collect.
The value of NFT
While it remains to be discussed whether a particular collection of digital collections will eventually become a lasting cultural product or a short-lived dream of a technology group, an asset is defined as “something of value” if people are willing to buy NFTs, it is a digital asset. Just like an art collector’s decision to buy a Monet painting, or anything strange or seemingly worthless, the willingness to buy something doesn’t need to be based on any objective reality.
When art collectors bought NFTs, they know it’s a unique work on the blockchain. Simply put, NFTs are just records of something: claims of ownership, timestamped transaction receipts, and agreements. Unlike cryptocurrencies such as BTC and ETH, NFTs typically derive their value from the right to confirm things like digital picture files, house contracts, exclusive club passes, and are not controlled by the blockchain itself. Therefore, NFT owners must resolve the delicate relationship between the two. A record of ownership on the blockchain and the off-chain interest they should have.
People will not buy an NFT of blockchain records that contain only unique data strings and not digital or real world assets.When people own an NFT, they also have almost all the legal descriptions of ownership involving the possession and control of something.If the NFT is used as a ticket to a seat, the user will have an interest in that seat.
The situation with NFTs representing digital works of art is more complicated. In this case, NFTs often contain links to public media files on the Internet that anyone can access and copy. Physical art is hard to fake; but in the digital world of 1s and 0s, making perfect copies is very easy. So, in this case, the only thing the user can own and control is the transaction receipt itself: the buyer’s ID will be written to the NFT record. Users cannot prevent others from creating separate NFT records and pointing them to the same artwork, or claiming ownership of the same artwork.
Many digital collectible dealers think the important thing is not to own or control the actual asset (art). The lack of control over who reproduces and disseminates on the Internet is quite beneficial for NFT owners. Large-scale uncontrolled appropriation, disparagement, and unauthorized commercial use of the intellectual output of others are harmful, but giving people the freedom to promote someone’s work can be beneficial. More recently, NFT supporters have begun to focus on the virtues of the community and use NFTs as a passport to access a variety of online and real-life experiences, from exclusive clubs to virtual concerts in virtual worlds, to the ability to connect with creators, other enthusiasts Chat room to communicate with celebrities. Currently, NFTs may be a more complex and costly way to manage tickets, but they are legitimate and useful, especially as they become cheaper and easier to use. NFTs can really solve problems like ticket forgery.
The evolution of NFT
With the emergence of emerging NFT standards, such as Ethereum EIP-4910, this is a compatible extension to the ERC-721 standard (the form most NFTs take). One can start making stronger claims than so far, that the smart contracts themselves are governed by NFTs.
Take sports event tickets as an example, if the NFT represents a seating agreement, only the NFT holder can offer the seat to others. As long as the sale of seats is only allowed through cryptocurrency transactions, the NFT’s smart contract can give the owner exclusive control over the receipt. In this case, the seat owner doesn’t have to be the stadium, the stadium can franchise each seat and enforce it using the NFT smart contract. This allows stadiums and even other individuals with NFTs to earn ticket revenue. The management of permissions is a reasonable use case for NFTs.
NFTs can represent and help enforce rights to distribute, resell, and collect royalties. If all these currency transactions were managed on the same blockchain as the NFT itself, then these digital transaction receipts and the smart contracts that govern it would have the real power and operational efficiency that could transform finance and the arts & entertainment industry. Now, technologies like zero-knowledge cryptography combined with new smart contracts based on EIP-4910 are adding scalability, privacy, and developer capabilities for developers to build more useful services.
Artists can lay a more reliable and stable foundation for survival through NFT, such as registering their fans as promoters and distributors to obtain specific benefits, such as franchise rights. People don’t have to convince others to buy NFT, because NFT gives it the function of authorization and distribution, which itself represents a benefit. For example, starting with the first generation of digital prints, artists and their collectors, influencers, and promoters can earn passive income from subsequent digital print royalties and revenues collected. Owning such an NFT grants the holder a real, enforceable ownership.
The new NFT standard will allow all of these to work entirely on the blockchain, without relying on third-party market exchanges or centralized services. In the future, people will be able to copy simple embedded code from NFTs to their gallery sites, like using YouTube videos, but without relying on YouTube to provide the videos and sell these works(whether it’s artwork, concert passes, or tickets to big games) .
Financial NFT
One of the latest trends in NFTs is the rise of financial NFTs, benefiting DeFi and trade finance. Due to the potential of financial NFTs, they can reshape and greatly improve the financial landscape. Financial NFT is a tokenized financial product that converts loan tokens into NFTs, offering holders a fixed interest rate over the life of the loan. Another benefit is that, as NFTs, these tokenized loans can be sold in the marketplace, allowing for easy changes to holders or changes to loans and interest, while also converting from fixed to floating rates.
Financial NFTs can provide liquidity providers with unique positions in DeFi protocols. This position depends on a given amount of liquidity or when a liquidity provider enters the protocol. By maintaining their previous positions with liquidity providers, investors can maintain optimal returns as they enter the market. Tokenization of financial projects also facilitates liquidity within DeFi systems and could be the answer to industry interoperability.
NFTs have data encoded into them that cannot be changed or even accessed except with the correct encryption key. As with all digital assets on the blockchain, even if someone were to steal an NFT, its history and destination would be fully visible to the public. This provides opportunities for trade finance and businesses that often deal with sensitive data.
Furthermore, a reliable information sharing process is ensured due to complex regulatory and trade finance supply chain procedures. Since the trade finance space is highly susceptible to document fraud, the use of NFTs can eliminate or mitigate these issues and reduce reliance on intermediaries by tokenizing assets and documents as a single immutable digital token. The use of blockchain-based financial NFTs in DeFi and traditional finance can increase utility and security to significantly improve and develop tools such as loans and bonds, which will also create a more secure environment for businesses that often deal with sensitive information.
