Combing NFT Summer: What are the future directions of NFT worth looking forward to?

Abstract: After experiencing the bull market in the summer of 2021, NFT has completely changed from a niche market in the previous crypto market to a gold track that cannot be ignored. As of now, NFT sales in 2021 have basically reached 300 times that of 2020. We believe that NFT has gradually entered the public’s field of vision from the beginning of 2021 to the present, and it evolution process can be roughly divided into seven stages: star card/digital art-avatar OG-generative art-GameFi-PEP avatar party-decentralized NFT-yuan Game, and each stage has a representative project. Through combing, we can get six characteristics and trends of NFT development: 1. Be given more functionality; 2. Pursue innovation and scarcity; 3. Gradually move towards the mainstream; 4. Bottom-up, community-driven; 5. Social attributes are getting stronger and stronger; 6. non-fair mint; 7. Tend to be homogeneous. In addition, we also put forward five directions worthy of attention for NFT in the future: 1. Combinable NFT; 2. xFi; 3. Pricing mechanism and liquidity solutions; 4. Decentralized identity; 5. Other forms of innovation.

 

1. The history of NFT

We believe that the development process of NFT can be divided into seven stages.

1.1 Star Card / Digital Art

At the beginning of 2021, NFT’s first hit was mainly due to the star cards represented by NBA Top Shot and the digital art represented by Beeple’s paintings. Let me start with the star card. NBA Top Shot is currently ranked fourth in historical sales, behind Axie Infinity, Cryptopunk, and Art Blocks. As of October 14th, the total sales volume was US$730 million. The sales volume in the past month was about one-tenth of its peak sales in March, the most expensive one is LeBron James’ US$71,400 card. In addition, Beeple’s painting “Everydays: The First 5000Days” was finally sold for nearly US$70 million at Christie’s auction. There are also many other digital artists whose works have been auctioned for high prices. We can see that the NFTs of this period mainly relied on ultra-high-priced single products to go out of the circles, and more of them had collection value, lacking functionality, mobility, usage scenarios and social attributes. It seemed more like the art of art in real life or the trendy play only transforms the physical art into digital art. But people also began to realize the advantages of NFT and digital art from this time, such as clarifying copyright, reducing storage and maintenance costs, and richer forms of expression. From the perspective of creators, NFT also creates a revenue stream for long-tail artists.

1.2 Avatar OG

CryptoPunk is the originator of the avatar NFT. It is a total of 10,000 pixel avatars launched by Larva Labs in June 2017. With a total sales amount of about 1.48 billion, CryptoPunk has perennially stood in the first place in the NFT collection market, and its floor price has been raised to 108 ETH. The price often represents the consensus of the community on the project, which shows the status of Crypto Punk in the community. As can be seen from the average selling price of CryptoPunk in the figure below, it was not as high as the current price as soon as it was launched, but it started the carnival on a weekend in mid-July 2021 and led it for several months “Avatar Storm”. We believe that the important significance of CryptoPunk is that it represents the cultural value of Ethereum in addition to the financial value. David Hoffman, the co-founder of Bankless, also put forward the idea of Ethereum as a “cultural settlement layer”. As the value of Ethereum began to be recognized by the world, as a product of Ethereum culture, CryptoPunk has become a valuable Ethereum belief, and some people think that the design of CryptoPunk’s cyberpunk represents, “The spirit of rebellion”, the revolution of the crypto world to a certain extent. Regardless of the meaning of CryptoPunk, we believe that in the long run, CryptoPunk will be given higher and higher value because of its historical position, originality and scarcity, and its position will not be shaken in a short time. CryptoPunk to NFT is like BTC to Crypto. It is No.1 blue chip NFT and a symbol of status and position.

Source: Dune Analytics

Source: Twitter

 

1.3 Generative art

Generative Art, also known as Coding Art, refers to the artworks automatically generated by computer algorithms. The artist formulates the creative process by writing a program, and then through the Seed that triggers code changes to increase the randomness of the work. Generative art is an artistic achievement produced by humans and computers. Art Blocks is the largest generative art trading platform, with a historical transaction volume of nearly US$1 billion, second only to Axie Infinity and Crypto Punks, ranking third, and since the middle of this year, the transaction volume of Art Blocks has far exceeded that of the sum of all NFT trading platforms combined except Opensea. Unlike the avatar NFT, which is usually fixed at 10,000, the upper limit of the series on Art Blocks is usually one thousand or several hundred, and the buyer does not know what works will be obtained before the mint, and can only make a general inference based on the appearance of other pieces in that series, which is what makes generative art so scarce and random and one of the main reasons for it to attract such a large number of players. We believe that in addition to Curated’s high-priced and scare blue-chip works, some potential series at the Playground and Factory levels, such as AlgoRhythms, Dreams, and Scribbled Boundaries, are also worthy of attention. In the future, we believe that Art Blocks will continue to occupy the dominant position of generative art. Whether it is a group of generative artists, or users and community groups interested in generative art, it will become larger and larger, and the demand for generative art will change. There will continue to appear more popular series like Fidenza, Chromie Squiggles, Ringers. Compared with traditional art, the scale of generative art is still very small, but the growth rate is very fast. We continue to

Fidenza
Chromie Squiggles
Ringers

1.4 GameFi

GameFi, driven by Axie Infinity, can be said to be the most topical track in NFT summer in 2021. The Play to Earn model transforms user consumption games in traditional games into users earning income by participating in games. Axie Infinity’s dual currency anti-inflation economic model is cleverly designed, and the YGG union’s idea of collective wealth is also very advanced. According to Coinmarketcap data, as of October 8, 2021, the market value of the game track has reached US$17 billion, accounting for almost 40% of the entire NFT market value. We believe that this track is by far the most attractive for ordinary users to participate. In addition, the game is also the most capable of providing scenes in the NFT and metaverse, and it is the most important foothold of Metaverse. We believe that an excellent GameFi project has the following characteristics:

  • Stable economic system
  • Playability
    • Clear story line or strong narrative background (representatives include Darkforest, Parallel)
    • Can be operated on mobile devices
    • Picture aesthetics
  • The team’s experience in game development and operation, and understanding of the market
  • Infrastructure for better user experience (such as Axie’s Ronin, BSC, Solana, etc.)

We believe that a large part of the explosion of Axie Infinity comes from its low-cost customized public chain Ronin, so Layer 1 public chains such as BSC, Solana, customized public chains, and Ethereum side chains are all choices that can be considered for game layout. Take BSC as an example. With its fast speed and low cost, it has formed a relatively large game ecology, and several new games are launched every day. The current game ecology is summarized as follows:

BSC game ecology

Source: Twitter, Gamemarketcap

 

1.5 PEP Avatar Party

The popularity of the NFT avatar party will not be repeated here. It is another important part of this year’s NFT summer in addition to GameFi. Currently, the avatar NFT is basically led by the two blue-chip NFTs, Crypto Punk and Bored Ape Ychat Club, and this status quo will not change in a short time. In addition, a large number of avatar projects continue to emerge every day. We can see that the development of avatar NFT has a similar path: concept creation, subtle narrative, famous design-minting-buyers replace social media avatars, buyers build communities, establish identity-marketing promotion (social media voice, Invite celebrities to change their avatars)-(sales and transactions)-community benefits (airdrops, etc.). It can be said that the development of avatar NFT is now in a relatively “involved” state: the number of projects is large, and the development path is similar. It is basically difficult to create a successful NFT avatar project without the blessing of celebrities or special concepts. We believe that the future portrait NFT need more empowerment: buyers need to get follow-up benefits after purchasing NFT, and the benefits should not be limited to other NFT portraits or accessories (such as BAYC’s mutant monkey), which is a one-time reward empowerment. The better empowerment includes, for example, the entry in the meta-universe scene or the introduction of a token incentive system. For example, CyberKongz allows holders to collect ten of its native tokens $BANANA every day for the next ten years. At the current price, holders can obtain a reward of US$600 per day. We believe that only through empowerment can the holder obtain more value than the JPEG NFT of the avatar.

 

Part of CyberKongz NFT

Source: cyberkongz.com

 

1.6 Decentralized NFT

The representative of decentralized NFT is undoubtedly Loot. Loot can become a representative project of the new generation of NFT mainly because of the following four characteristics: 1. Directly receive the minting in the smart contract; 2. Bottom-up community-driven approach; 3. Novel form and minimal design; 4. Great follow-up imagination space. Since the launch of Loot, the founder Dom has put forward some derivative ideas in the Discord community, including visualization tools, rarity query tools, Market tracker, etc. In addition to the idea of Dom, members of the community are also constantly proposing new ideas, mainly including a series of imitation disks (such as changing the original Loot equipment attributes to land, character roles, tasks, etc.), and its governance token $AGLD. We believe that games and metaverse are the biggest application directions of Loot ecology. The concept of Loot is equivalent to providing an atom with powerful composability, interactivity and creative space. In the future, more RPG games, text-based, placement games, development games, and even script kills may be born based on Loot. In addition, the project party itself has plans to incorporate Metaverse into the Loot ecosystem. The most important significance of Loot is that it provides an example of a decentralized NFT, adopts a community-driven bottom-up model, transfers the creation rights of NFT from the project party to the community, and truly stimulates the huge creativity of the community. Loot’s most anticipated is its follow-up ecology and all possibilities created by players. Matt Huang, the co-founder of Paradigm, once tweeted this question: Is LOOT the seed for a game (or set of games)? Or is the process of building around LOOT the actual game? We believe that both of these statements are valid.

Source: Twitter

 

1.7 Meta game

The representative of the meta game is the game Rarity created by yearn founder Andre Cronje (AC) on Fantom. Strictly speaking, Rarity can be regarded as an imitation of Loot. Loot has 8 equipment and Rarity has 11 adventure characters. The subsequent gameplay is determined by the developer. We regard Rarity’s character as a kind of game atom, members of the community write games together. Rarity differs from Loot in three characteristics: 1. Rarity is based on Fantom rather than Ethereum; 2. Rarity can have unlimited mint; 3. Rarity is more centralized under the leadership of AC. As of October 14, more than four million characters have been minted, with more than 170,000 holders. Multiple visual UI interfaces, trading markets, adventure upgrades, adventure maps, etc. have been developed. The ecology is constantly evolving, although now the gameplay of it is still very early, but the developers are relatively active, and some developers earn income by charging fees. We believe that Rarity’s advantage is that it is actively promoted by AC individuals and the Fantom team. AC previously announced on a social media to set up a US$100,000 bonus for Rarity developers. He will also actively promote the direction of the project on Twitter and personally screen the ecology.  The construction project has enabled Rarity’s ecology to not only develop the community’s bottom-up enthusiasm, but also have a unified direction to control. There are still many possibilities for the development of meta-games represented by Rarity in the future, let us wait and see.

One of Rarity UI interface

Source:  raritymanifested.com

2. Characteristics and trends of NFT development

After sorting out the different stages of NFT development and evolution, we summarized the following seven characteristics and trends:

 

2.1 NFT is given more functionality

We can see from the above NFT development context that NFT has evolved from being only collectibles at the beginning to having more functionality in the later stage, from artwork to tools, and currently NFT is mainly used as a reference scene for tools. It lies in game props (such as Loot, Rarity and Axies). We do not deny the value of NFT as a collection and firmly believe that the first batch of influential NFT encrypted artworks will continue to maintain high value, but the artworks are still far away from ordinary people, and the premium brought by scarcity is fragile to some extent. NFT needs more scenarios and is given more functions. Although it is too early to talk about the application of NFT in Metaverse, the potential value of NFT as a tool in games and DeFi deserves to be further explored. In addition, the functions of NFT in the direction of bills and identity also need to be developed.

 

2.2 Pursue originality and scarcity

People participate in NFT in pursuit of its scarcity and originality. Take Loot’s additional issuance of Mloot as an example. After Loot’s founder Dom officially announced Loot on August 27, the initial 8,000 Loot NFTs were quickly claimed in a short period of time. These 8,000 initial Loots represent its “scarcity” and “originality”, and the subsequent various benefits (such as airdrops) and derivative privileges (such as discounts and numbers of derivative mint) will be in the hands of these 8,000 Loot users, which may limit Loot’s subsequent gameplay and application scenarios, including games and Metaverse, and will also reduce the enthusiasm of latecomers. Therefore, Dom launched Mloot a week after Loot was announced, the number starts from 8001, and the annual supply is about 250,000. After Mloot started minting, Loot’s floor price experienced a short drop of about a day and then rebounded again. So we can see that the additional issuance of NFT will not dilute the value of the original NFT, but will make the community aware of the scarcity of the original NFT. Including other Loot’s imitations and derivatives, although there has been explosive growth after the launch of Loot, the consensus of the community is gradually decreasing, and the community basically only recognizes the originality and value of Loot.

 

2.3 Gradually move towards the mainstream

Since the outbreak of NFT, we can see that many large enterprises in traditional fields have begun to embrace NFT and use NFT for marketing and publicity. This must be a big trend. Visa bought Cryptopunk and plans to buy more NFTs; Alipay launched two limited edition Dunhuang-themed NFT skins; Time magazine launched the NFT series; auction houses such as Sotheby’s and Christie’s have repeatedly included NFTs in auctions, and LV launched NFT treasure hunt games Louis the Game; Twitter announced that users can set NFT personal avatars; TikTok and streaming media platform Audius developed TikTok Sounds, allowing songs on the Audius agreement to be imported into Tik Tok… The direct benefit of these large companies entering NFT is that it brings traditional fields traffic and resources. Take Twitter’s announcement of setting up NFT avatars as an example. Although it is still too early to discuss the application of avatars in Metaverse, the application in social media can be implemented. When most people would not choose to spend money to buy a social media avatar, Twitter, a social giant with huge user traffic, has made the best publicity effect. Will Instagram, Facebook, and Telegram all launch this feature in the future? Another example is TikTok. The viral spread of short videos around the world will further strengthen the NFT community. In the future, we expect more traditional companies to embrace NFT, and more NFT assets to enter the traditional field, and NFT will continue to be mainstreamed.

 

Visa purchases CryptoPunk #7610

Source: Twitter

 

2.4 Bottom-up, community driven

Cryptopunk, boring monkeys, and other avatar NFTs are mostly operated by project parties or artists directly passing their creations to the community, and by operating and expanding the community, adding value to the original NFT artwork. In the future, the original NFT will be empowered by airdrops to NFT holders, adding functions and application scenarios, etc. This is a top-down development model, and users need to passively accept the creators’ creation results. Loot and Rarity are essentially community-driven, using a bottom-up operation. The project party only stipulated some basic rules (such as Loot’s 8 equipment and Rarity’s 11 roles), and the subsequent creation and imagination are left to the community. Every member of the community can contribute their own ideas and determine the direction of the project. NFT shows the trend of decentralization.

 

2.5 Social attributes are getting stronger and stronger

The outbreak of dog currency in early 2021 made people begin to realize the connotation of not only the founder of encryption assets or its complex function given by the cultural foundation and strong community consensus can be administered assets more vitality. This year’s popular “JPEG” “avatar social” can be said to be a product of the culture and community in the NFT track. It has strong social attributes and represents the prevalence of “Club awareness” in the crypto world, and this kind of club is exclusive. Often only members of the club can enjoy community airdrops or other benefits. And when you ask some boring monkey holders why they chose to buy in the first place, they will answer that they can enter the monkey holder community group if they have a monkey avatar, and they can communicate with other monkey avatar users in private messages. So when people are still questioning “What are the uses of these JPEGs?”, we don’t deny the factor of economic benefits, but “show off” and “identity” may be better answers.

 

2.6 Non-fair mint

NFT’s currently mint method is mainly “first come, first served”, there is no limit on the number, there is no cap on the top, and the last is sold out. Later, players cannot continue to participate. In this mode, whale and “scientists” with technical background have great advantages compared to retail investors. Players with technical background can specifically mint a series of the rarest NFT by reading smart contracts. Although most users’ minting are random, once the rarest NFT is minted in advance, the sales of other retail NFTs of the same series in the secondary market may be bleak, so the minting of NFTs is not really fair.

 

2.7 Tend to be homogeneous

Generative art or coding art is an important part of this NFT boom. Although artistic creation led by computer code is randomly composed of different vectors, the execution of the instruction program is set in advance by humans, that is, the randomness of the generative art contains certainty, and its final artistic form ca be estimated. Therefore, some people criticize that this model is contrary to the subjectivity of art. It lacks value, creativity, and creative traces. It is not difficult to replicate. The development of coding art may tend to be homogeneous. But is the homogeneous coding art also an art? This is worthy of people’s thinking.

3. NFT’s future vision

Below we have summarized several directions worth paying attention to in the future of NFT:

 

3.1 Combinable NFT

We believe that NFT Lego like Loot is the paradigm of a new generation of NFT. The project only provides basic combinable minimum units (vectors). The subsequent imagination is created and followed up by the community. This decentralized model still has huge derivations and imagination space. However, the current state of combinable NFTs such as Loot is still too simple, and the brains of the community are relatively messy, lack of synergy, and have no unified development direction. Most of the derivatives after the original Loot are rarity query tools and visual performance tools, etc.. There is no clear development path and gameplay, and the ecological development is relatively slow. Therefore, we believe that the decentralized NFT community needs an effective developer incentive model. In comparison, Rarity has adopted a more decentralized approach under the guidance of AC, and the path and progress of the project are still quite impressive: visualized UI, adding points, automatic risky upgrades, batch upgrades, trading markets, etc. Therefore, although we are optimistic about decentralized NFTs, we believe that in the initial stage, a centralized “centralization” is needed to guide the development of the project and give developers sufficient incentives. In addition, the foothold of combinable NFTs is always in games.

 

3.2 xFi

  • SocialFi
    SocialFi refers to Social+NFT+DeFi, which is different from GameFi’s “play while earning” model. SocialFi users rely on social interaction and interaction to earn revenue. SocialFi’s current market value is still very small. The largest Social Money projects, Rally and Whale, have a market value of around US$100 million. Due to limitations of infrastructure and ecological environment, although this track has been discussed in the early years, it is still in a relatively early stage. The innovation of SocialFi is to break the monopoly of centralized platforms and endow it with financial attributes that Web2 social applications do not have. It is a ready-to-go track that deserves long-term attention. The classification of SocialFi as a whole includes personal tokens, community tokens and incubators, issuance platforms and Web3 management tools, including but not limited to the following items:

  • CreateFi
    CreateFi is a subset of SocialFi, that is, creators earn income by creating content, and creators have the right to speak in content. However, the current content production and distribution model based on the Web 2 model fails to effectively protect the interests of creators, and the benefits of decentralized creator economy are twofold: 1. Transfer content ownership from traditional Internet platforms to creators; 2. Create an income stream for long-tail creators. We can also see that social media giants like Twitter have shown a keen interest in decentralized social networking: it supports cryptocurrency payment and rewards and verifies users’ NFT avatars, and the ecosystem of CreateFi is constantly improving. In the following table, we list some creator economic projects related to content and communities.

 

Project Brief introduction
Mirror It is a decentralized content publishing platform, where creators raise funds from fans by issuing tokens. After their works are minted into NFTs, the revenue from article reprints and rewards will be shared with fans based on their contribution, and the creators need to open the columns through WRITE tokens
Audius It is a decentralized music streaming media project where fans can obtain benefits and vote with the creators by holding AUDIO, thus forming a community of creators and fans. Audius has now established a partnership with Tik Tok
Nafter Similar to Instagram’s NFT platform, users can tokenize posts and earn profits from the posts when other users view them. The platform’s native token is NAFT
Only1 It is the first Solana-based NFT social platform where users can bid on creators’ NFT works via Stake’s native token – LIKE. Its beta version is now live, which allows users to pledge LIKE to earn revenue in the creator pool
Nifty’s It is an NFT-focused social platform, which brings together outstanding creators, collectors and fans to a platform, where community members can create, collect and exhibit NFT works
BitClout With custom blockchain and DEX, it is a decentralized social platform similar to Twitter, allowing individuals with accounts to publish and trade in tokens. a16z and Sequoia Capital have taken a part
Cent It is a social platform that transforms celebrities’ tweets into NFTs for trading, with the originators, creators, and the platform all generating revenue from the secondary sales

 

  • LearnFi
    The traditional education platform model is that users pay to watch videos or obtain learning resources, while LearnFi allows players to make money during the learning process, including watching video courses and completing course tasks. The concept of LearnFi is still very early. In addition to learning courses, instructor users can also create instructional video NFTs for sale and gain profits in the subsequent circulation process, which is closer to CreateFi above. Now some cryptocurrency platforms provide LearnFi functions, such as Coinmarketcap, Coinbase, derivatives trading platform Phemex, etc. In addition, some platforms such as RabbitHole will also provide cryptocurrency learning tasks. Players who complete the tasks can get experience points (XP), tokens for the project, or NFT rewards. Projects offering courses on RabbitHole include Aave, Opensea, Uniswap and Compound, etc.

Coinbase Course

Source: Coinbase

 

RabbitHole Course

Source: RabbitHole

 

There is an online course project in RabbitHole

Source: RabbitHole

All in all, the important significance of xFi is to transfer the initiative from the platform to the hands of participants, which is a basic paradigm shift. But whether it is game-oriented GameFi, or social-themed SocialFi, or learning-oriented LearnFi, the most important thing is “Fi”. With reference to the outbreak of GameFi represented by Axie Infinity, Play to earn is the biggest highlight in this wave. Even for playability and economic benefits, economic benefits are even more important in the Web 3 ecosystem. If only Game/Social/Learn, Web 2 applications have accumulated a certain level of users and markets. If Web 3 applications want to further expand the user base, they must introduce DeFi economic models and financial attributes to bring users profitability. At present, the motivations of blockchain and cryptocurrency players are relatively single. Hope to obtain revenue from games or social interaction is the main motivation of players. Once these revenues decrease or disappear, it will be difficult for the project to retain players.

 3.3Pricing mechanism and liquidity solutions

At present, the main problem facing NFT assets is still low liquidity. The root cause of low NFT liquidity lies in the lack of an effective price discovery mechanism. The lack of pricing mechanism will also make the application scenarios of NFT relatively narrow, such as mortgage lending related to NFTs. Such financial activities cannot be carried out effectively, and the efficiency of capital utilization is low. Currently, the valuation method of NFTs mainly stays on the historical sales prices, and the valuation method of artworks such as Beeple mainly relies on subjective judgment. The historical sales price valuation method and the low liquidity of the NFT are inherently contradictory, because the NFT has a small number of transfers and not enough participants, and historical price data is general scarce, which is of little reference. In addition, the later NFT fragmentation agreement also provides new ideas for the price discovery of NFT, but whether the fragmented fragments are valuable, the management and distribution of ownership and governance rights are all worth considering.

 

We believe that NFT price discovery can have the following three development paths in the future:

  • There is a clear value support
    If the price of NFT can be supported by FI, the price of NFT will become very clear. Specific examples include Uniswap V3’s LP token that represents a user’s position, Dego Finance’s “shovel”, or the POW NFT that reflects value through hash power and difficulty explained in detail below. NFT with reference to the value of FT or hash power may be one of the ideas for future pricing, but this method has a lot to do with the design mechanism of the project itself.
  • Oracle
    We believe that the oracle of NFT can be divided into two modes: centralized and decentralized. The centralized model is that NFT’s asset valuation experts assess the value of NFTs, that is, a consulting group composed of professionals who have knowledge of the artwork itself and the market give assessments and insights on the pricing of NFTs, and charge fees. We believe that the future is very important. There may be a series of NFT asset evaluation service agencies, but the problem of expert evaluation may be that it is not decentralized enough, there may be subjective ideas of the evaluator, malicious evaluation, or limited experts cannot carry a large number of NFT product evaluations, and cannot respond different kinds of NFT value estimates. Another solution is a decentralized oracle, that is, participants voluntarily evaluate the value of NFT assets and receive rewards in the evaluation to motivate more people to participate in the evaluation. However, this model more reflects that the minority obeys the majority consensus. In works of art that require a certain degree of appreciation, consensus may not reflect its value.
  • Derivatives
    NFT index, NFT-backed loans, call and put options on the NFT floor price, long or short NFT fragmented tokens… Such NFT financial derivatives will provide reference for NFT pricing and create liquidity. Paradigm’s research came up with the NFT derivative viewpoint “floor price perpetual contract”. The proposal proposes that NFT holders can lock the NFT to mint a perpetual contract that tracks the NFT floor price, and introduces the funding rate, and the floor price is perpetual. Contract renewal can enable NFT holders to obtain liquidity through trading contracts to hedge against the risk of fluctuations in the NFT floor price, and can also provide other non-NFT holders with exposure to the floor price. However, the research pointed out that the problem with this solution lies in the volatility of the NFT index and the lack of liquidity of the spot NFT floor price. Failure to solve these problems may cause the collateral liquidation value to be incorrectly estimated and increase the liquidation risk. The NFT derivatives track is still very early, and there are more possibilities in the future.

3.4 Decentralized identity (DID)

In today’s Web 2.0, the identity of users is isolated. Users need to manage their identity on different platforms, and the information between different platforms is fragmented and cannot be shared. DID is one of the important infrastructures of Web 3.0. It can represent all personal activities and credibility on the chain. It is a “chain badge”. Users only need one DID to use applications on all platforms, and can have better privacy and complete control of personal data, and the unique identity is also very consistent with the characteristics of NFT. At this stage, people’s on-chain identities are basically the wallet addresses, but the amount of information and application scenarios recorded by the wallet addresses are far from enough. Moreover, wallet addresses on different chains cannot be aggregated to form identity data, which is not yet able to fully present the user’s “portfolio”. Traditional Internet giants such as Microsoft and IBM have already laid out decentralized identity networks, but in the blockchain field, although DID has been discussed in the early days, it lacks a project leader. In the future, DID will play a huge role in DeFi, NFT, and DAO. For example, DeFi relies on credit mortgage lending and DAO’s voting governance. The main problem currently facing is that the application scenarios are relatively limited and the ecological environment is lacking. There is still a long way to go to create a DID with a unified identity on the chain.

     

    3.5 Other forms of innovation

    • POW NFT
    • As mentioned above, the minting of NFT is unfair, and we believe that a fairer method is needed to mint NFT. Moreover, in addition to subjective aesthetic judgment, NFT needs valuable support. NFT borrowing from Bitcoin’s POW mining mechanism may provide a new idea: without any pre-mining and reservation, the value of NFT is determined solely by hash power and mining cost. And inflation issues can be solved through a preset difficulty mechanism of the project, as the number of participants increases, the difficulty of mining will also increase. It is more friendly to early participants, and the distribution of NFT is more decentralized. In addition, the work system proves that NFT has never appeared in the NFT field before. Specific projects include: POW NFT and Hacash Diamond, etc.

     

    POW NFT

    Source: Opensea

     

    Hacash Diamond

    Source: Opensea

     

    • Interoperable NFT
      As present, most of the NFTs appearing on the market are static artworks, props or JPEG avatars, while dynamic NFTs with character, action, dialogue, thought, and interaction can create a fuller character image and narrative. GameFi or the future Metaverse will play a more important role. This logic is similar to the fact that short videos are more influential than images and texts. Take the NFT+AI project Mirror World as an example. Each Mirror NFT will have a virtual consciousness “Soul” created through AI. 11,000 Mirrors have different appearances and personalities, and different dialogue reactions and actions based on different personalities. In addition, Mirror can learn and upgrade from the dialogue and interaction with the holder, which means that Mirror can be “trained” by users, provided that Mirror first receives information provided by people. And Mirror World has provided a Metaverse scene (Battle Game) for Mirror NFT holders to participate.

     

    Interact with Mirror

    Source: Twitter

    Battle game scene

    Source: Twitter

     

    • Growth NFT
      Growth NFT means that the shape of NFT will change during the transaction, and it will grow every time it is sold and transferred. The final form and rarity will only appear after several transactions. In other words, the growth NFT is tied to its transaction history and is the result of the joint creation of the artist and the holder. At this stage, the growth NFT is still very early, and there are few projects with similar ideas. Let’s take the Organic Growth: Crystal Reef project as an example.

      There are six stages of OGCrystal’s growth. The first stage is to sell on the primary market, and buyers will only get seeds; the second stage is five days after the purchase, crystals begin to grow freely based on the buyer’s wallet ID and transaction history; the third stage occurs after the first sale, the crystal will grow on the original basis according to the situation of the new buyer’s wallet; the fourth stage is the second growth of the crystal after the second sale; the fifth stage is after the crystal is being sold for two months or seven times and it is “locked” in the primary market, and the crystal form and rarity are fixed; in the sixth stage, the final crystal form is created by all collectors.

    The six stages of crystal growth

    Source: ogcrystals

    The figure below shows the crystal algorithm and the elements that determine its shape, including: the collector’s wallet ID, transaction time and block number, historical transactions, the ETH balance in the wallet, the number of NFT artifacts, and the 6 elements of ETH changes.

    Source: ogcrystals

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