Key investment points
Introduction: with the popularity of the concept of metauniverse, NFT (non homogenization pass) has also become one of the hot spots in 2021. The continuous sky high price transactions continue to stimulate people’s nerves. The veteran NFT project cryptopunk#4156 has sold a maximum of US $10.35 million, and the virtual plot of fashion street estate under decentraland has sold us $2.42 million, For a time, NFT seems to have become a wealth password. According to the statistics of nonfungible, a third-party data organization, the transaction scale of NFT reached US $14 billion in 2021, 1.3 times the total amount of US $10.57 billion of global art auctions in 2019 before the epidemic.
This report will comprehensively sort out and analyze NFT and answer seven questions: 1) what is the essence of NFT; 2) Based on what underlying technology; 3) What needs NFT solves; 4) The reasons behind such popularity in 2021; 5) What is the future development prospect; 6) Where are the current limitations; 7) Development status of NFT market in China. (the core ideas are briefly described below. Please refer to the text for detailed analysis).
① definition of NFT: non homogeneous digital asset certificate created, maintained and executed by smart contract;
② underlying technology of NFT: blockchain is the underlying technology of smart contract implementation. NFT is deployed on blockchains such as Ethereum through standard contract forms such as smart contracts erc-721 and erc-1155 (different blockchain Contract Standards). The only public, tamperable and tradable attributes of NFT are realized based on blockchain technology;
③ function realization of NFT: it can be summarized as realizing decentralized authentication and transaction of assets;
④ development process of NFT: since 2017 and 2021, there have been two upsurge. The two upsurge are completely different in technical background, basic ecology and application scope. The upsurge started in 2021 is to break the circle under the background of mature ecology
⑤ development potential of NFT: NFT has gradually become a new social model in the digital world, and the market scale of NFT will continue to expand with the promotion of global digitization;
⑥ the current limitations of NFT: 1) the influx of funds brings a tide of speculation, the head effect of NFT market is obvious, and most trading participants lose out; 2) At present, the scope of application is still in the fields of digital art collections, and the connection with real-world assets needs to be further strengthened.
⑦ NFT China’s development: weaken the transaction attribute, highlight the functions of confirming rights and collecting, focus on the underlying alliance chain, and have strict supervision.
Investment suggestion: NFT value transmission chain is divided into multiple roles: 1) NFT project party; 2) NFT aggregation platform; 3) Blockchain platform; 4) Nodes (miners); 5) NFT users; 6) Derivative applications such as defi. From the analysis of NFT’s value transmission chain, it is suggested to focus on three types of Companies:
1) NFT content producers, including art works, audio and video, games, domain names, online texts, real estate and other asset parties, suggest to pay attention to: 1] Visual China Group Co.Ltd(000681) , 2] Disney, as well as Activision Blizzard, take two, Nintendo, EA, Netease, Tencent holdings, China Mobile Games, music related spotify, TME, cloud music, video related BiliBili Iqiyi, online literature platform, reading group.
2) NFT service providers, including aggregation trading platform, encrypted wallet, exchange, decentralized financial platform, etc. China pays attention to the trading aggregation platform Visual China Group Co.Ltd(000681) (meta vision), Sumavision Technologies Co.Ltd(300079) (Dongyi Yuandian), as well as Three’S Company Media Group Co.Ltd(605168) and Mango Excellent Media Co.Ltd(300413) . Overseas exchanges can pay attention to coinbase.
3) NFT technical support parties, including underlying blockchain platforms, nodes (miners), etc.
Risk tips: 1) transaction risk: NFT asset price fluctuates greatly, and the decentralized system still has the risk of asset theft and loss after being attacked; 2) As for policy risk, China restricts NFT secondary trading and strictly regulates NFT.
