Original Title: NFT: The Scarcity of Streaking
Article | Bai Shuo, former chief engineer of Shanghai Stock Exchange, blockchain technology expert
These days, NFT is on fire. The reason for the fire is that some people really use it to carry the rights and transactions of artworks. Let’s look at this picture:
It was bought for 69.34 million U.S. dollars (about 450 million yuan). We have also heard various interpretations of such an incident. Some people cheered and said that the token economy finally found a lofty landing scene and entered the “hall” of high-end people; some people think that this is just cutting leeks and cutting art. It’s only the field of product trading. In any case, this is finally a novelty worthy of comment. Here I also talk about some personal thoughts on NFT from a technical point of view.
Data proliferation: the fire that cannot be contained in paper
Data trading has always been a controversial topic. On the one hand, data is said to be mineral deposits and assets, with incredible value and incredible potential. On the other hand, the transaction of data is seriously threatened by the easy-to-replicate nature of the data itself, and it is not very effective for the moral or even legal constraints of the parties. It can be said that unless this “confidential problem” is solved, it will be difficult for data transactions to become popular in the end. Where there is infringement, there is resistance. Various attempts at anti-data proliferation technologies have not been interrupted in the span of decades. As the “severe disaster area” of data infringement, the anti-proliferation technology in digital form of artwork has been at the forefront of anti-data proliferation technology.
The first to appear is “information hiding technology”, commonly known as “digital watermarking”. This technology embeds rights-related information in the original data in a secret form, and gives it the ability to resist all kinds of damage. It can achieve some destructive transformations that do not affect the content even if the data file loaded with the rights information is implemented (such as ” Affine transformation à noise reduction à inverse affine transformation” etc.), equity information can still be detected. This kind of technology can play a role in the protection of the rights and interests of audio and video art works to a certain extent, but it cannot prevent infringements in advance.
The next protection technology that has been popular for a while is DRM. It is the abbreviation of “Digital Rights Management” in English. DRM uses a security protocol composed of cryptographic algorithms to implement accurate and quantitative management of digital rights in advance, and attempts to implement precise control of the number of playbacks of audio and video works that are authorized to specify the number of playbacks. Anyone familiar with the system knows that audio and video works are media content data, which can only reproduce audiovisual effects through player software, and the two are mutually independent. Because of this, either different third-party players abide by the same protocol standards with each other, or streaming media comes with a trusted player, which is downloaded and played. The former requires third-party players to abide by the agreement 100% and do not do evil, this can only rely on self-discipline; the latter increases the traffic of software downloads, and it does not mean that it cannot be cracked. In general, DRM is far from reaching the proponent’s expectations in terms of landing, and there is still a long way to go to protect the rights and interests of audiovisual artworks.
After blockchain technology and trusted computing technology came out, some people tried to use these technologies to repair the vulnerabilities of DRM, the core of which was to create a trusted execution environment for trusted players to prevent infringers from cracking. The transformation (or reinforcement) of the system by trusted computing technology is relatively large, and is generally not suitable for ordinary consumers; the trusted computing environment on which blockchain technology relies is a virtual machine, but the virtual machine does not implement consensus, and it is not locally. If it is blocked, it is possible to disregard the constraints of consensus locally and cause a fait accompli of infringement. As for how to investigate after the fact, that is a matter of governance.
Later, NFT came, so there was the story we told at the beginning. It’s not difficult to see that to oppose the proliferation of data is like Don Quixote’s battle against a windmill. The technology changes one after another, but you improve and others are also improving. Data proliferation is like a fire that cannot be wrapped in paper, directly threatening the status of data as a commodity and even as an asset. Data transactions are regarded as false propositions by many people.
Scarcity: Unreplicability under the control of God, power and algorithms
Judging from the historical source of data rights protection above, it can be clearly seen that NFT is the continuation of many anti-data proliferation technologies such as information hiding (digital watermark), DRM, and trusted environment. The new contribution of NFT lies in drawing on the scarcity control method of digital currency issuance, and creating “provable scarcity” through technical means, specifically algorithmic means, so as to establish scarcity guarantee for the entire life cycle of digital art.
When it comes to the issuance of digital currency, it is natural to mention the history of the evolution of currency issuance technology. It is by no means accidental that rare metals such as gold and silver became currency in ancient circulation. Currency needs to be exchanged with physical objects, and physical objects satisfy the conservation law of matter. Currency must be conserved in circulation and cannot be arbitrarily multiplied by means of copying. The issuance of currency must be strictly restricted by natural conditions to maintain its scarcity. It can be said that God single-handedly created the scarcity of precious metals such as gold and silver, while human society chose gold and silver in the selection of scarce natural objects that can become currency.
However, once currency becomes the authoritative endorsement of debt, power begins to intervene in the process of currency issuance. During this period, there have been gold and silver coins deliberately manufactured by the government that are short of gold and two colors, and silver bills, banknotes and checks with extremely low reproduction costs have appeared. There has been the end of the Bretton Woods system, and there have also been large and small currencies. Swell. All this shows that power has gradually taken over the control of the non-replicability of money from God. If you control it well, you can export inflation like the U.S. dollar and cut the world’s leeks; if you don’t control it, you can ruin the people like Zimbabwe. In the issuance of banknotes, various advanced anti-counterfeiting technologies have also been added, but in the face of the huge demand for banknotes, the cost of anti-counterfeiting technologies is still only a fraction. With the development of credit business, the banking system has fully participated in the process of currency creation. The currency created by this part can be separated from the real M0 and become M1 and even M2 that can be consumed by credit inflated but can be used for consumption. Later, digital bookkeeping appeared. Bank accounts were fully established on the basis of the digital bookkeeping account system. All kinds of consumption can be reflected through digital bookkeeping.
Later, it was the scarcity guaranteed based on algorithms, and the typical representative was Bitcoin. For the scarcity based on the algorithm, users have a clear expectation of the total amount at each moment, and the algorithm itself is based on the intractability of specific mathematical problems. As long as this foundation does not undergo a miraculous collapse, the expected scarcity guaranteed by the algorithm is clear. With this kind of scarcity created and guaranteed by the algorithm, it is possible to map other scarce resources to the scarce resources that have been guaranteed by the algorithm. This is why NFT chooses to register and trade digital artworks confirmed by blockchain on Ethereum.
Provable scarcity is a great gift of blockchain technology to human society. Its application in the field of art right confirmation and trading has injected high-tech elements into the existing ecology of art and brought dazzling financial play.
Artwork: a combination of sensory enjoyment and scarcity
The original intention of mankind to create artworks is to bring the audience’s sensory pleasure, enjoyment, impact, shock, etc. However, people’s perception of beauty is highly subjective. Many people’s aesthetic experience of works is influenced by popular social thoughts, people’s perception of the author’s status, and their own economic conditions and cultural and educational background.
Reflected in the market pricing of artworks, various mismatches are inevitable. It is gold that always shines, but the word “Zhouhui” reflects the mismatch in time. Buying caskets and returning beads reflects the difference in perceptions of the intrinsic value of artworks. The mismatch in time makes artworks have collection value and cultural relic attributes, while cognitive differences create differences in the valuation of artworks. Therefore, the art market shows that it is not simply a sense to enjoy a single scale to drive pricing and transactions. Complicated situation. And those pricing and valuation factors other than sensory enjoyment can be summed up in two words: scarcity.
The master’s work is scarce. The master’s life is limited and therefore the works are limited; the master’s techniques are unique and therefore difficult to imitate; the background story of the deep binding of the master and the work is talked about; the master’s work can be passed down through the ages together with the master’s name. In the eyes of collectors, buying a master’s work is not only an act of art appreciation, but also an investment behavior, a “preparatory action” for the realization of the expected future appreciation of the master’s work. Nothing is scarce. The difference between a mediocre work and another mediocre work is not important. The important thing is that a lot of this kind of goods is caught in the present, and it will be completely forgotten in the future. Without scarcity, there is no investment value. Therefore, no one will invest in mediocrity.
There are some rookie artists who have just debuted, and their future development path is still long. Who will grow into a master? There is also a time mismatch. When they really become masters, their previous relatively less mature works will be distinguished from other people’s mediocre works, given the aura of masters, and become props that are deeply bound to the master’s background story. To bet on who of these rookies will become masters is also the proper meaning of discovering the scarcity of artworks.
With scarcity, you can play finance. The artwork has thus become a dual carrier of sensory enjoyment and scarcity, on which both artistic and financial attributes are gathered. However, in an era when digital technology is still underdeveloped, the reproduction and imitation of artwork itself is also a difficult task. People with high artistic attainments that can imitate the works of masters to the extent that they are true to life are rare. It can be said that in this “dual carrier” era, the scarcity of artworks has not been greatly reduced. This also makes the elegant veil of the art trade always covered (I suddenly discovered that the “monarisa” is really not for nothing), and did not show the naked truth.
However, finally one day, the “dual carrier” can become history.
The scarcity of streaking
NFT is here. The arrival of NFT changed everything. NFT is the abbreviation of “non-homogeneous token”. It is a digital proof that is strongly bound to a digital artwork and can prove its uniqueness. If this artwork is created in a digital native environment, it is technically possible to achieve “creation is proof”. If the artwork was not created in a digital native environment, as long as you hold this certificate, it is equivalent to holding the original artwork. Even if they are not physically equivalent, they are logically equivalent.
We see that the biggest function of NFT is to technically break the curse that artworks must be a “combination” of sensory enjoyment and scarcity. A piece of art, whether it is created in a digital environment or in a traditional way, must finally be enjoyed by the senses. With the advancement of digital technology, the reproduction of sensory enjoyment has become easier and easier. High-fidelity recording, high-resolution video reproduction, and even 3D printing after accurate measurement… There is no technical threshold, and a sense of enjoyment can only be done by the master. At this time, the cost of using physical means to prove that you are holding a truly rare masterpiece is getting higher and higher. The cost of letting Li Gui as Li Kui is very low, and the cost is very high to prove that Li Kui is not Li Gui. This asymmetry makes the “combination” of sensory enjoyment and scarcity unnecessary.
It’s also a coincidence that the highly developed digital technology is not just the copycats. God closed a door for you, but opened a window for you. This window is the blockchain. With the help of blockchain technology, the fact that you own a unique piece of art can be witnessed by many “miners” and reach a consensus with a certain algorithm and record it permanently and immutably until you are in the same computing environment. Witness it and transfer it to someone else. Prove that you own the artwork, this is called “confirmation”; if you transfer this ownership to others, this is called “transaction”. Confirmation and transactions can be completed on the blockchain. During this period, the artwork does not need to appear at all. In other words, with the complete separation of sensory enjoyment attributes and scarcity attributes, the ownership certificate that carries the scarcity attributes of artworks can now “running naked” on the blockchain alone.
So I said, NFT pierced a layer of window paper: if people buy art only for sensory enjoyment, no amount of encryption technology can stop copying, because high-precision copying technology is constantly improving. But if it is to collect a certain item that can be proved to be scarce, it is completely different. You can have fun with various gameplays with financial attributes.
For example, even if a thief steals Li Kui and replaces you with a Li Kui who is exactly the same, as long as the private key of Li Kui’s ownership certificate is still in your hands, you are still Li Kui’s legality. Master, the Li Gui in your hand can still sell Li Kui’s price, but the Li Gui in the thief’s hand can only sell Li Kui’s price. Since there is no difference between Li Gui and Li Kui in sensory enjoyment, who only cares about sensory enjoyment, who would have the motivation to buy the proof of Li Kui’s ownership at Li Kui’s price? As for a pure collector, what I care about is proof of ownership. I came for Li Kui’s scarcity alone, and what I bought was scarcity itself. As for Li Gui, who has the same sensory enjoyment, even if he copies a million copies, what is my business?
