James Talks | The last party of the NFT bull market

Every round of bull market starts to hype copyright, confirmation, music chain, taxi chain and these things that are particularly close to reality, it is basically the tail end of the bull market, you can check with the history. Why is that? Because the general public can easily understand the hyped ideas. The products that represent the most peripheral group of people came out, and this kind of well-designed magical realism, various driving forces, is the result of all the valuable ideas are fading away. The bull market starts with innovation and ends with “creation”, and when the creation ends up being as simple as 8 words, its content is no cleverer than “MassGrid” or “Shitcoin”, and its attitude is even more naked, and the peripheral interpretation The attitude is even more pronounced, and the peripheral interpretation rises to the level of this is really a high-class beauty! The shiny knife behind it makes people shudder! You are really an angel among devils!

Information Scarcity in the Blockchain World

Everything that does not capture on-chain value is a desecration of the blockchain!

One particularly valuable aspect of blockchain from an information perspective is that the on-chain world can charge for information and is not dependent on third parties, which is not possible in the traditional off-chain world.

Information is replicated, resulting in information that is no longer scarce and thus unpricable. But from the perspective of an on-chain decentralized contract, that is, the user of the information, copying the information is constrained. While many people emphasize that information from the entire blockchain can be copied off-chain and passed on to the chain in a centralized way, don’t forget that such contracts cannot build a non-cooperative game: because of the introduction of centralized agents, which is not in the realm of our discussion of decentralized information (no one is stopping you from using the blockchain in a centralized way, there is just little interest in our Crypto Native world).

Thus, only on-chain information can be charged in a decentralized way, while off-chain information must have some kind of agent or regulation to guarantee replication scarcity before it can be charged.

Information logic of NFT

NFT as an independent information stream, if it is completely static, I find it hard to imagine how much or even what kind of contract such a string of information can charge, I don’t think it can continuously create a revenue flow, so it can only generate value as a scarce information flow.

However, a string of codes entrusted with subjective utility (value), in the case of complete transparency, is copied on the chain with equivalent gas, except for the difference in the timestamp and the hash of the corresponding time, the amount of information is almost the same. Therefore, the difference in value between the two is determined by the hash and timestamp at the time (because other information can be copied). For this to be reflected in reality, there must still be a trusted agent to confirm certain internal information, that is, it only has the value of point-to-point transmission: the value depends on the information related to hash and timestamp and the party who guarantees the information (or agent).

We can take this anonymous static information and pass it on as a medium in some kind of code or testimony, thus giving it a historical significance at a specific moment. For example, a witness of a certain historical event, thus preserved and kept as a scarce artifact (similar to certain letters or documents). This preserved stream of scarce information is valuable because the more valuable information behind it has been recognized as a kind of public information or recognized as private information by the authority, which is still meaningless if only the timestamp and hash value are available.

Therefore, the NFT based on static information is essentially just a record of the presence of off-chain authority or public authentication, without which it will be meaningless. What is valuable is the verification of external authority or public knowledge, which is an annotation of this kind of verification.

If NFTs are generated with dynamic information, we require a higher level of irreproducibility to truly capture value. If the NFT information at a given point in time can be easily replicated by the contract, this can lead to similar structures for subsequent NFTs (the distribution may differ), which can also be somewhat controversial, although we believe such NFTs are of some value.

If the NFT information at a given event point is not likely to be reproduced again by the contract or consumes too much computational resources, time costs, etc., then this type of NFT truly achieves the scarcity plus value capture possibility on the chain. Such an NFT needs to have a random flow of information coupled with a huge amount of computational resources or time consumption.

As we all know, there is a great difficulty in generating random information flow on the chain, but it is not completely impossible. At least some of the “random” information generated by relying on the amount of computation, or by relying on arbitrage, still has its ability to resist attacks. So a truly dynamic NFT cannot get past these two foundational building blocks (I know most people will say at this point, what’s the point of being so complicated). With such base building blocks in place, the complexity of change is best dependent on outside forces, rather than relying entirely on random information flow. This takes on the characteristics of a game, making it possible to generate equilibrium values. Otherwise, it remains a product of the algorithmic world, unable to interact with the outside of the chain and get a volume of information beyond the random information flow itself. This type of NFT combines the random information flow and the game information flow to construct a piece of unique dynamic information on the chain, which is mapped into an NFT, thus possessing the attributes of transaction and confirmation. This idea will be extensively developed in the next round of NFT or the hype of various games and image collections.

Conclusion

NEST oracle will provide a very interesting stochastic information flow to the on-chain world: price information flow. Regardless of various complex transaction costs and realistic costs, random information based on GBM (Geometric Brownian Motion) or Brownian motion has good stability, independence, Markov, and other attributes, and it can even be said to be the largest information entropy. Using it to design dynamic NFT will reduce a lot of unnecessary processing and is an ideal dynamic stochastic information flow. In the future, the NEST community will also derive such NFTs, or become a new art form that never ends, or as a kind of event library that records the changes of a group, instead of a few unrelated picture signatures.

This article is a personal opinion and does not constitute any investment advice.

Nest Protocol is a decentralized oracle built on Ethereum and powered by the NEST token. The protocol is a distributed price oracle network.🌍