Author: Kel Eleje
Original compilation: HYD, Cecilia
Original source: bfrenz DAO
In your mind, what does NFT represent? What is the purpose of buying NFT?
Some people may be for novelty or as a collection, and others may be for some functional attributes of NFT, such as props used in blockchain games. Bfrenz's family members also said: "Buying NFT is like buying a bag, it is purely a consumer product."
In the Web3 community, many people will also call the user who holds the profile picture of BAYC and Crypto Punks a big boss. Whether you know what he does or not, a profile picture has already explained his determination to enter this industry (after all, he spent money ), this situation also represents another purpose of buying NFT.
In this article, analysts at Messari divided existing NFTs into two categories based on whether they are functional or not, namely low-functional picture (PFP) NFTs and highly functional NFTs, and discussed Application scenarios and intrinsic value.
The OG of the NFT session and Twitter V Cobie recently referred to NFT as "altcoins with pictures" (altcoins with pictures), which caused some controversy-is that true? If so, is this really a bad thing for NFTs? If not, how can this set of NFT standards be used outside of aesthetics?
Article Highlights Overview
Maximizing the speculative element fires the flywheel, giving projects the chance to create intrinsic value over the long term.
Most NFTs currently have little practical use, but the long-term trend is to add functionality and attributes to NFT projects.
Image NFT projects need to rely on a luxurious framework to evaluate their value
The function-based NFT situation predicts that future ecosystem growth will be supported by these NFTs.
Cobie recently criticized the NFT community for nothing more than a group of speculators with “picture altcoins.” In a way, he was right. As things stand, the NFT industry is mostly "JPEG" speculation.
If so, two questions need to be answered:Can JPEG reasonably preserve any value? Going forward, will the ERC-721 NFT standard find more use cases beyond images?
ERC-721 is an open standard that describes how to build non-homogeneous tokens on EVM (Ethereum Virtual Machine) compatible blockchains; it is a standard interface for non-homogeneous tokens; it is a set of Rules that make it easy to interact with NFTs. NFT is not only an ERC-721 token, but also an ERC-1155 token.
Emphasis on aesthetics
Degen Spartan from eGirl Capital provides the most reasonable valuation framework for a series of collectible monkey JPEGs (aka Boring Ape) that can reach billions of dollars. This price proposition takes a traditional valuation framework and attaches a speculative element on top.
For NFT, what matters is not necessarily the intrinsic value, but the marginal pricing of speculative factors.It might seem like a ridiculous proposition, but it's not without precedent in the crypto space. Taking Bitcoin as an example, because of its low yields and lack of real-world utility other than savings, one could argue that the price of Bitcoin is largely determined by a speculative premium amplified by the dramatic increase in liquidity over the past decade.
Although Bitcoin began in part as a speculation, early supporters strongly supported BTC, giving it time to find real use cases (such as "unofficial silk road", value store, inflation hedge, etc.). As the history of Bitcoin shows,Maximizing the length and magnitude of the speculative element can ultimately create intrinsic value for a given asset.
Maximizing the speculative factor relies on the growth of social consensus around the narrative. As society's consensus on an asset's value increases, the price of that asset also increases.The Image category is perfect for generating social consensus because people love images.
People also like to share pictures, and the virality is high. In doing so, people shared narratives about the significance of the images they had. These sharing activities amplify the narrative of NFTs, just like fungible tokens amplify their own narratives.
image description
Hsaka: When you take away all the layers and abstractions, each token is essentially just a social token.
NFT beyond aesthetics
Considering the large number of NFTs that focus on aesthetics, the future trend may be that more projects focus on providing intrinsic value based on high-function assets.
An example is the domain name ENS - a username with little "aesthetic value" in it. Admittedly, there are some highly speculative ENS names, such as 3-digit and 3-letter ENS. But in most cases, these domain names are cheap to acquire and have clear functions.
Other projects working on high-functioning identity solutions include Aave's Lens Ptotocol (an open, composable decentralized social media underlying protocol.) Inc.) and Civic (a non-custodial wallet on the Ethereum blockchain that allows users to store cryptocurrencies and identification.).
For other new NFTs, there is still a lot of design space. For example, the trend toward functionalization is extending to the tokenization of real estate assets, where NFTs are also being used. Among them, protocols such as Propy are dedicated to putting real estate contracts on the chain. Other agreements, such as Vesta Equity, allow homeowners to sell part of their property ownership as NFTs, sharing any profits from the sale with NFT holders.
In addition to real estate, the promotion of more functions of NFT also occurs in vertical fields such as games and music. It's unclear which verticals will lead to new highs for NFTs. But it's clear that there will be a historic amount of experimentation in the functional domain of NFTs over the next few years.
Aesthetics and Function
No one knows if aesthetic-based collections will have lasting value, or if the fiery bull run of NFTs in 2020-2021 will be the first and last. The case for aesthetic NFTs treat collectibles like Art Blocks or CryptoPunks as luxury items. In this case, the lack of obvious functionality is not so much a bug as a property --The main function of NFT is to display wealth. That said, NFTs don't need that many extra features.
If the luxury framework works for NFTs, these collectibles must adapt to people's changing tastes over time. However,If any of these projects walk out of any NFT project and can maintain social consensus (at least the consensus in the circle) for a long time, it will be of great significance, because reaching the mainstream category definition art sells for millions, and the sustainable value is produced.
In 2021, Art Blocks, Punks and Bored Apes sold for millions of dollars at world-class auction house Christie's, a sign of this. If these collections maintain their status, what will they be worth in 10, 20 or 50 years?
Highly functional NFTs do not face the problem of fluctuating value due to changing tastes, at least not directly. If a game like STEPN (a Web3 app aiming to be the leading encrypted fitness game for smartphone users) requires sneaker NFTs to play and players have no choice but to buy NFTs, then the NFTs provided by STEPN , there is added value. It sounds simple, but perhaps an ecosystem, STEPN has managed to create an environment where the use of NFTs is critical to the use of its products.As the product grows, so does the economic value of the underlying NFTs.
final thoughts
final thoughts
In the long run, it's hard to say what will be more valuable - "picture altcoins" (picture NFTs) or highly functional NFTs.
There is a case where most NFT (functional or otherwise) valuations do not rule out zeroing in value, just like their image NFT counterparts.
This does not mean the end of NFT as a whole. The altcoin movement has maintained momentum over the past 10 years, even as different iterations of Litecoin, Namecoin, EOS, etc. have come and gone. The altcoin movement powered Ethereum, Solana, DeFi, and many other crypto innovations.
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