0. No investment advice included.

This is a memo to demonstrate my personal understanding of NFT, it was released in a decentralized writing platform mirror.xyz. FYI.

Here’s some terms you need to know before the club.

• Block Chain could be regard as a growing public ledger, in which all committed transactions are store in a chain of Blocks.

• Smart Contract (in Ethereum) is a collection of code (its functions) and data (its state) that resides at a specific address on the Ethereum blockchain.

• NFTs(Non-Fungible-Token) are tokens that we can use to represent ownership of unique items.

• Crypto Wallet is a device, physical medium, program or a service which stores the public or private keys for cryptocurrency transactions.

• Gas and Fee You can take gas fee as the price to make digital asset permanent. Gas refers to the unit that measures the amount of computational effort required to execute specific operations on the Ethereum network. Gas fees are paid in Ethereum's native currency, ether (ETH).

• Decentralized exchange(DEX) Decentralized exchanges are open marketplaces for ETH and other tokens. They connect buyers and sellers directly.

• Mint is a verb to describe making solid things such as coins or bronze, when it comes to NFT, we prefer say 'minting an NFT' instead of 'making an NFT'. It's worth noting that each step behind mingting refering the execution of code.

1. What is NFT

Value is the socially necessary abstract labor embodied in commodity.

-- Karl Marx

Infront of things we don't familiar with, we had to figure out how many people contribute labour behind it, and that's the most important part to help us to decide whether it deserves a certain price or not.

1.1 Why human-beings need NFT

There are three questions help us to understand the whole concept of NFT.

① What is permanet? [Digital Permanence]

• Distributed Storage System (Much more cheaper)

  In the Disney movie Coco, if there is a single person in the reality remembers Miguel's grand-grand father's name, he would able to stay in the Mexico Heaven, which means forever.

  This is a typical distributed storage system, which asked mutiple computer nodes store parts of data or the whole data. The more nodes take part in, the more the data safe. Once all the nodes crash, the data lost, but it's almost impossible that all the nodes in the distributed storage system go crashing at the same time, we gonna take it as a reliable storage system.

• Block Chain (Expensive but reliable)

  A super distributed database, a public ledger of all transactions. Explain later.

② What is the SAME thing? [Digital Uniqueness]

In digital world, it's pretty easy to recognize file being changed. Therefore it's naturally easy to verify digital uniqueness in computer.

Example like this: A single space for human-being is a huge difference for computer.

% echo 'Hello World!' > abc.txt

% cat abc.txt
Hello World!

% shasum -a 256 abc.txt
03ba204e50d126e4674c005e04d82e84c21366780af1f43bd54a37816b6ab340  abc.txt

% mv abc.txt bcd.txt

% shasum -a 256 bcd.txt 
03ba204e50d126e4674c005e04d82e84c21366780af1f43bd54a37816b6ab340  bcd.txt

% echo ' ' >> bcd.txt 

% shasum -a 256 bcd.txt
e2dcb6631567618b98b12c22b0fde309e4c34b022f0a73d5a2982cf144ca13c9  bcd.txt

% cat bcd.txt
Hello World!
 

③ What is the most annoying issue in WEB 2.0(current internet)? [Digital ownership]

You don't own your data, and many big companies make a lot of money by using those personal data. Actually, most products you bought online are services, most of them will gone with expire time. Even for the companies claim it's a permanent service, the companies themselves cannot make sure they exist or not 10 years later.

1.2 ABC of BlockChain/Smart Contract/NFT

How a blockchain works

Block chain itself is made up with growing data blocks recording transaction information. It's reasonable to take it as a public distributed database or public ledger for all human-beings.

Nobody can control a public blockchain system, while works from endless computer nodes making the system running, we call these activities as mining. Therefore the computer nodes as miners, their task is to solve a mathematical problem associated with information on the block. It's kinda like rolling dices, the number of dices is hard to predict, but the result is easy to verify.

The whole process is very complicated, it’s totally fine if you feel confused. You don’t need to know how a complicated system running but you can still be a user of it.

What is Smart Contract?

In code, we trust.

The concept smart contract is older than the blockchain, it is blockchain makes smart contract concept became real application.

It's interesting to think what exactly a paper contract stands for. You will not put the whole concrete house upon the contract paper. Most of our economy activities today based on ownership recognition. And smart conctrat in digital world works almost the same as paper contract in reality. The most difference is the smart contract works itself, all the middleman(lawyers, brokers, insurance) are not neccessary anymore.

In the most popular smart contract community Ethereum, there are different smart contract standards, as the response of invoking the contract, there will be Ethereum Request for Comment(ERC), typical ERCs including:

• ERC 20 - crypto currency

• ERC 721 - NFTs

• ERC 1155 - NFTs in Batch

What is NFT in economic view?

• What is more common in our daily life, fungible or non-fungible stuff?

  The answer is non-fungible stuff.

• In reality, why something is cheap, the other might cost a lot?

  Mostly depends on the scarcity.

1.3 Typical popular NFT project (since late 2021)

• NBA Top Shot - Paper card collecor

• Axie - Gaming

• Bored Ape Yacht Club

• CryptoPunks

• Azuki

• Membership - Starbucks

How Big is this Market?

It's pretty easy to check, there are lots of statistics, such as cryptoslam etc.

https://cryptoslam.io/

Data check in Feb 2022

1.4 What can be an NFT?

Categories from opensea.io in 2022.

Anything digital can be minted as NFT.

1.2 How to verify a NFT

Code is the law.

The core question is : what exactly did you buy?

The biggest wrong answer is : a stupid gif with serial number.

Here are a few factors you need to care about a NFT:

• Creator → Operation

• Owner

• Properties → Scarcity

• Detail → Contract on Chain

  • Storage : Link/HashString/DistributedStorageSolution/OnChain

  • TokenID

  • ContractURI

  • ……

• Appearance → No really matter now

Let's do it with a demo: Jay Chou's Instagram Profile

1. https://opensea.io/

2. Phanta Bear #10000

3. Wallet Address

4. Read Contract - As a buyer

1.3 How to mint a NFT

Almost as easy as posting a Wechat moment.

Thinking about posting in Web 2.0, what you need are:

• Smart Phone

• Idea

• Platform(Centralized): Wechat/Facebook/Instgram/Twitter/Weibo/Tiktok

• Create

• Post

In Web 3.0, what you need are:

• Wallet Address

• Digital Arts

• Exchange/Platform

• BlockChain

• Gas Fee

1.4 Mint our NFT

As we mention in the last chapter, here is a realistic solution:

• Wallet Address : Meta Msk

• Digital Arts : From you a'll

• Exchange/Platform : OpenSea

• BlockChain & Contract & Storage : Polygon/ERC 1155/IPFS

• Gas Fee : Free for minting/Fee for Selling/AirDrop Only in our Club

This is not a utopia, it is just another real world.

Now we are talking about NFT & Block Chain application, it's kinda like people in 80s talking about the usage of the Internet, maybe in the future we will laugh at ourselves for how stupid we were, but this is the on-going history in 2020s.

1.5 Risk & Forcasting

• Regulation - almost empty

• Infrastructure - pretty weak comparing with web2.0

• Finacial Bubble

• Economic Value - Ownership Reconization

• Energy Consuming - From PoW to PoS

Welcome to WEB 3.0!

cwray written with ❤️ in Shanghai.

Feb. 2022