NFT & ERC-6551 The Resurgence of a New Star

NFT & ERC-6551 The Resurgence of a Rising Star

Key Insights:

• Significant decline in trading volume in 2023. NFT liquidity decreased due to lack of innovation and playability.

• ERC-6551, Blend lending, and Opensea’s Deals may be the key to the recovery of the NFT market.

• The state of the NFT market largely depends on the performance of the broader cryptocurrency market.

• Long-term trends for NFTs include the combination of quantum computing and NFTs, the combination of virtual reality and augmented reality technologies, the combination of biotechnology and NFTs, and super AI becoming the mainstream artists of the future.

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In the past few years, NFTs have risen like shining stars and become a hot topic globally. With their unique digital assets, they redefine the way creativity, ownership, and digital value exchange work, empowered by blockchain technology.

As the concept of NFTs becomes more well-known, it has been applied to prove ownership of digital assets such as music, videos, images, as well as non-digital assets like artworks, cars, or event tickets. Many institutions have recognized the distinctive features of NFTs and made early investments.

In the first half of 2022, we witnessed the prosperity of NFTs and the hype surrounding digital assets. The concept of NFTfi was born, completing the financial innovation from idle assets to liquidity. By using fractionalization, lending, and other financial products, NFT liquidity was increased, promoting ecosystem development. This also indicates that NFT-related innovations will make NFTs even more unique.

In this in-depth research by Bing Ventures, we will analyze the current state of the NFT market, explore the latest developments in the ecosystem, and discuss the challenges and future prospects.

NFT Market Overview

Starting from the summer of 2021, the NFT market experienced rapid growth and popularization. During this period, both NFT trading volume and prices reached historical highs. The total NFT trading volume in 2021 reached approximately $20 billion, a tenfold increase compared to 2020.

However, the second half of 2022 became a difficult time for the NFT field. From the Luna rug pull to the FTX collapse, the entire crypto ecosystem faced significant challenges. Although NFTs continued to generate excitement with the emergence of new projects, the overall market downturn dragged the NFT market into a bearish trend. The total market value of NFTs has dropped from its peak of $21 billion in 2021 to the current level of $4.2 billion (as of October 8, 2023), and trading volume has also significantly declined.

Through the transaction data of different types of NFTs, we can see that currently, PFP ranks first in terms of transaction volume. The most famous blue-chip NFTs are also mostly about PFP. The next is utility NFTs, followed by collectibles and art.

At the blockchain level, Ethereum still dominates the NFT market, followed by Polygon. This dominance is still rising, according to data from 2023, Ethereum’s market share is slightly increasing every month. This trend indicates that Ethereum’s established reputation, security, and widely recognized technical capabilities are crucial for the operation of NFTs.

Innovations to Watch

Compared to 2021, this year’s trading volume has decreased significantly. The decreasing liquidity caused by the lack of innovation and playability in NFTs is becoming more and more serious. Recently, features such as ERC-6551, Blur’s Blend lending, and Opensea’s Deals have appeared, giving people some hope. Because these small iterations in the bear market may be key factors for the future recovery of the NFT market.

Deals

Deals is an NFT bundle exchange feature released by Opensea, which allows users to exchange their NFT bundles with other users’ NFT bundles. The feature is powered by the Seaport protocol, a decentralized smart contract protocol used for creating and fulfilling orders of ERC-721 and ERC-1155 tokens. Each order consists of the token bundle offered by the supplier and the token bundle required by the recipient.

Value Proposition

• Simplified Exchange Process – The “Deals” feature of OpenSea aims to attract more users to participate in the NFT community by simplifying the exchange process. It adopts an interactive bundle trading model to reduce the transaction flow and solve the liquidity problem of NFTs by using a barter-like approach. It changes the existing transaction process of NFTs and eliminates transaction steps.

• Reduced Risk – By utilizing Seaport, collectors can exchange NFTs on OpenSea without being subjected to potential risks outside the platform.

Blend

Blend is a peer-to-peer perpetual lending protocol launched by Blur, which can support any collateral, including NFTs. According to Blend’s whitepaper, “Blend is a flexible, permissionless floating-rate lending protocol that supports any collateral without relying on oracles, allowing any interest rate and loan-to-value ratio determined by the market.”

Value Proposition

• Flexibility – Blend offers open-ended loans, allowing borrowers to repay according to their convenience. The refinancing auction mechanism further enhances this flexibility.

• Simplicity – By avoiding oracles, Blend simplifies the NFT loan process. The lender takes on the risk and sets the preferred Loan-to-Value (LTV) ratio and interest rate, while the market determines the terms.

• Capital Efficiency – The “Buy Now, Pay Later” option reduces the barrier for entry for small traders, enabling them to trade high-value collectibles such as BAYC and Wrapped CryptoPunks.

• Risk Management – The refinancing auction reduces default risk and improves efficiency. However, it requires both borrowers and lenders to monitor the minimum value of the NFT, especially during market volatility.

ERC-6551

ERC-6551, also known as “Token Bound Accounts,” is a new Ethereum standard introduced by the @futureprimitive team. ERC-6551 allows each NFT to have its dedicated wallet.

Additionally, since it utilizes CA (Contract Accounts, without private keys, controlled by code), it means that all NFTs supporting ERC-6551 will automatically receive a bound address without any additional actions. ERC-6551 provides smart contract accounts for all ERC-721 Tokens, allowing them not only to possess various assets such as ERC-20, ERC-721, ERC-1155 but also to interact with various applications. Since the concept of ERC-6551 was proposed, many applications based on ERC-6551 have emerged, attracting intense attention from the crypto community.

Value Proposition

• More Interactivity and Functionality – ERC-6551 is not just a new NFT standard; it provides more interactivity and functionality for NFTs. This means that NFTs can now interact with other smart contracts, hold tokens, and even represent real-world entities. For example, a game player can use an NFT account to hold all their in-game assets.

• Improved Security – One of the main advantages of token-bound accounts is their security. Since ERC-6551’s NFT can store ownership history of all other assets it possesses, it makes these assets more resistant to hacks and theft. Additionally, this also means that ownership and transaction records of NFTs are transparent, providing users with higher trust and certainty.

• Addressing ERC-721 Limitations – Although ERC-721 paved the way for widespread acceptance of NFTs, it has some inherent limitations, such as the inability to interact with other smart contracts or store additional information or value. ERC-6551 addresses these issues, making NFTs not just proofs of ownership for digital assets but also powerful smart contract tools.

• More Innovation Space – ERC-6551 addresses multiple limitations of ERC-721, blurring the boundaries between NFTs, wallets, and smart contracts, providing developers with more space for innovation. It brings tremendous potential and opportunities to the entire blockchain ecosystem.

ERC 6551 Potential Projects We’re Following:

1. AquaNet: Social product, finalist in the ETHGlobal Waterloo 2023 Hackathon

Features and Innovations:

• NFT-powered social network: AquaNet is an AI-driven NFT social network that allows NFTs to interact with each other, develop unique “personalities,” share information, and express interests.

• Activity tracking for NFTs: Utilizing the ERC-6551 standard, each NFT can create its own account in AquaNet and retain all its activity records. This provides more information and value for NFT holders.

• AI personalities: Using GPT-3.5 technology, each NFT can generate unique personalities based on its metadata, such as usernames and bios. This adds greater value and attraction to NFTs.

Future Outlook:

• Social revolution for NFTs: AquaNet, combining AI technology and the ERC-6551 standard, has the potential to lead the social revolution for NFTs and become a pioneer in the NFT social sphere, providing unprecedented value and opportunities.

• Leveraging the advantages of ERC-6551: AquaNet can utilize the features of ERC-6551 to offer more interactivity and functionality for NFTs, potentially attracting more users and developers.

• New application areas for NFTs: AquaNet may pave the way for new application areas for NFTs, such as NFT-based social media and interactive games.

2. Fukuro: Blind box product, finalist in the ETHGlobal Waterloo 2023 Hackathon

Features and Innovations:

• Innovative trading method using EIP-6551: This project utilizes EIP 6551 to create an auction marketplace where users can list and bid on Fukuro packs. Fukuro packs draw inspiration from Japan’s “Fukubukuro” or “Lucky Bags.” Each Fukuro can contain anything an Ethereum address can hold, such as other NFTs, ERC20 tokens, and more.

• Diversified asset trading: Users can trade various assets, ranging from art collections and trading card sets to strategic investment portfolios.

• Complete market experience: From listing to bidding and trading, users can have a seamless market experience on a single platform.

Future Outlook:

• Expanding application scope: As the NFT market continues to grow and user acceptance of new trading methods increases, the concept of Fukuro packs may attract more artists, investors, and collectors. It not only offers a novel trading method but also allows users to trade multiple assets within a single pack, opening up possibilities for complex trading strategies and portfolios.

• Becoming a leader in NFT auctions: Given the uniqueness of Fukuro packs and their application in the auction marketplace, this project has the potential to become a leader in NFT auctions. It can provide users with unprecedented trading experiences, attracting more users and developers.

• Integration with other platforms and services: The concept of Fukuro packs can be integrated with other platforms and services to offer users a richer and more comprehensive experience. For example, it can integrate with DeFi platforms, allowing users to use Fukuro packs as collateral for loans, or integrate with gaming platforms, enabling users to trade assets from Fukuro packs within games.

3. Piggybank: The Finalist Project at ETHGlobal Waterloo 2023 Hackathon

Features and Innovations:

• NFT Savings Account: Piggybank 6551 is an NFT-based savings account where users can mint Piggybank NFTs and recharge them by using the payment function or by sending ETH directly to the NFT’s 6551 account address.

• Real-time updated metadata: With the accumulation of ETH in each Piggybank, the NFT’s metadata (color, text labels, and attributes) will be instantly updated, thanks to 100% on-chain metadata rendering. The real-time updated metadata provides users with intuitive feedback, allowing them to stay informed about the status of their savings.

• Secure ETH withdrawal method: Piggybank 6551 is designed to ensure the security of ETH, and users can only withdraw ETH by destroying the NFT. The process is as follows: Mint NFT (Piggybank) ➡ Send ETH to NFT (Piggybank) ➡ The color of the NFT changes with the amount of ETH ➡ The withdrawal method is to burn the NFT.

Future Outlook:

• Integration with other NFTs: Piggybank 6551’s account implementation is compatible with all existing NFTs, meaning users can create Piggybank-style vault wallets for any existing NFT.

• Technological innovations: Piggybank 6551 utilizes ERC-6551 and other technologies, which may introduce additional features and capabilities in the future, such as improved security, faster transaction speeds, or better user interfaces.

• Becoming a pioneer in NFT savings: By combining the concepts of NFT and savings accounts, Piggybank 6551 has the potential to become a leader in the field of NFT savings.

4. Tokenbound Titans

Features and Innovations:

• Dynamically generated NFTs: Players own unique NFTs, each with different abilities and characteristics, providing them with a unique gaming experience.

• Strategic NPC battles: Players can strategically battle against other players’ NPCs in the digital arena.

• Upgrade system for increased game longevity: Players’ NPCs can level up by winning battles, enhancing their attributes, and unlocking new abilities and combinations. The upgrade system provides players with a deep and long-lasting gaming experience, incentivizing them to continually improve their NFTs.

Future Outlook:

• Richer game content: With the continuous advancement of technology, it is foreseeable that more NPCs, battle scenes, and strategies will be introduced, bringing players a more diverse experience.

• Cross-game applications: The combination of ERC-6551 and dynamic NFTs is not limited to the current game. It may be seen in other games or applications in the future, further expanding its potential value.

• Enhancement of strategy and depth: The use of ERC-6551 allows NPCs to have other assets, which will bring players more complex strategic decision-making, increasing the appeal of the game.

• Leading the NFT gaming trend: The uniqueness of this project has the potential to set a new benchmark in the field of NFT gaming, driving innovation and development throughout the industry.

5. LianGuairallel Colony

Features and Innovations:

• AI-driven fully on-chain simulation strategy game: LianGuairallel Colony is a game that runs entirely on the blockchain, allowing players to guide virtual avatars in mining colonies for exploration. All simulated activities run on the blockchain, providing players with a transparent and verifiable gaming environment.

• ERC-6551 wallet functionality: Each virtual avatar is an ERC-6551 wallet, which means they can own and trade digital assets such as ERC-20 and ERC-1155, enhancing player asset ownership.

• AI interaction with players: In addition to players giving commands to avatars, AI virtual avatars can also take actions based on their own decisions or requests from other AIs, providing players with a more complex and strategic gaming environment.

• Prominent venture capital participation: In October 2021, LianGuairallel completed a $50 million funding round with a valuation of $500 million, with participants including LianGuairadigm and YouTube co-founder Chad Hurley.

Future Prospects:

• Expansion of ERC-6551 applications: With the features of ERC-6551, the game can further expand the functionality of virtual avatars, such as engaging in more complex transactions, signing contracts, or interacting with other blockchain projects.

• Leading the on-chain gaming trend: Combining AI and ERC-6551, LianGuairallel Colony has the potential to become a leader in the field of on-chain gaming, bringing new opportunities and challenges to the entire industry.

6. SLianGuaicebar

Features and Innovations:

• SLianGuaicebar is a space-themed casual game that integrates Web 3 tools, including decentralized identity systems, decentralized finance (DeFi), non-fungible tokens (NFTs), and game guilds. Players can make money by selling items in the game. The game will release some major updates, and players will also participate in decision-making. This game is more like a mobile game rather than a AAA-level game.

• Autonomy: SLianGuaicebar truly believes that a game that is fun and co-constructed with the community can bring mass adoption of Web 3 and cryptocurrencies. The game hopes that users can not only enjoy the gameplay itself but also participate in shaping and governing the entire game.

• AO Labs raised $4.5 million for its SLianGuaicebar Web3 gaming platform.

Future Prospects:
– Game Release: SLianGuaicebar will release its first game in the coming months, which is expected to attract a large number of players and crypto enthusiasts.
– NFT Dynamics and Personalization: Considering the features of ERC-6551, SLianGuaicebar may further utilize the dynamic generation and personalization features of NFTs to provide players with a unique gaming experience.
– Enhanced Interactivity: With the further development of NFT and Web3 technologies, SLianGuaicebar may introduce more interactivity and game mechanics to immerse players more in the game.
– Pioneer of NFT Games: SLianGuaicebar has the potential to become a leader in the field of NFT games, leading new game trends and innovations, and bringing new opportunities to the entire industry.

7. SLianGuairkle
Features and Innovations:
– SLianGuairkle is a gamified astrology social application with multiple Web3 and AIGC features, and has been selected for Binance Labs’ 6th season MVB accelerator program.
– Genesis NFT was released on August 7th, adopting the ERC-6551 protocol, limited to 500, with a total transaction volume of 50 ETH, and the current floor price is 0.27 ETH.

NFT & ERC-6551: The New Star Shines Again

8. Onchain Albums
Features and Innovations:
– Decentralized Music Experience: Onchain Albums offers a decentralized music experience, allowing artists to interact directly with their fans without traditional music distribution channels.
– Cross-platform Support: Artists can release their music on multiple platforms (such as Sound, Zora, Lens, etc.) and integrate these songs into Onchain Albums’ album account.
– Enhanced Copyright Management: Using ERC-6551, artists can ensure proper protection and management of their music works, while also providing a secure platform for fans to purchase and listen to music.
– Flexibility: Artists can update and modify their music anytime, providing fans with the latest and best music experience.

Future Outlook:
– More Artist Participation: With the increasing popularity of Onchain Albums, more artists may choose this platform to release and manage their music works.
– Expansion to Other Media: Onchain Albums may consider expanding its services to include other forms of art, such as movies, TV shows, or podcasts.
– Community-driven Features: Considering the features of ERC-6551 and the decentralized trend, Onchain Albums may introduce more community-driven features, such as fan voting, crowdfunding, or direct interaction between artists and fans.
– Innovation in the Music Industry: Onchain Albums has the potential to lead innovation in the music industry, providing new opportunities and experiences for artists and fans.

9. Lens V2

Features and Innovations:

• Decentralized social experience: Lens V2 offers a decentralized social platform that allows users to interact and share content without the restrictions of centralized platforms, resulting in a more enriching and personalized social experience.

• Socialization of NFTs: By using the ERC-6551 standard, Lens V2 allows users to accumulate value into profile NFTs instead of traditional wallet addresses, enhancing user social experience and interaction. By providing their own social relationships and monetization opportunities for NFTs, Lens V2 also brings new opportunities and value to the NFT market.

• Multiple community support: Users can access and interact with multiple communities, creating unique operations and experiences for their handles and NFTs.

• Advantages of decentralization: Leveraging the advantages of decentralization, Lens V2 provides users with a more secure, transparent, and reliable social platform.

Future prospects:

• More interactivity: With technological advancements and growing user demands, Lens may introduce more interactive features such as video chat, live streaming, and more.

• Expanding applications of ERC-6551: Considering the characteristics of ERC-6551, Lens may further expand its applications in the social field, providing users with a more enriching and personalized social experience.

• Leader in the NFT social network: Combined with its unique features and decentralized advantages, Lens has the potential to become a leader in the NFT social network field, bringing new opportunities and challenges to the entire industry.

• Integration with other platforms: Lens may consider integrating with other popular social platforms and NFT markets, providing users with a one-stop social and NFT experience.

Challenges and Dilemmas

Macro challenges in the NFT market

The NFT market is closely related to the cryptocurrency market, especially Ethereum. When the cryptocurrency market performs poorly, the NFT market tends to be impacted. This high correlation means that the stability and health of the NFT market largely depend on the performance of the broader cryptocurrency market.

Data further highlights the sluggishness of the NFT market. The market is experiencing a downturn similar to last year’s summer vacation, with a significant decrease in trading volume. Despite the boost from the emergence of Blur, investors are being more cautious in their fund allocation during the bear market, resulting in fewer funds being invested in NFTs as assets. This also hampers the development of new NFT technologies. Due to the market’s downturn, the attractiveness and practicality of NFTs face challenges. To revitalize the market, the introduction of new technologies and innovations is necessary; otherwise, NFTs could end up trapped in a cycle of pure speculation and hype, losing their true value and potential.

The Bottlenecks of Innovation

• The Potential and Limitations of ERC-6551 Although ERC-6551 provides more interoperability and playability for NFTs, there are currently relatively few innovative products in the market that fully utilize this standard. This may be because developers and project teams are still exploring how to maximize the potential of this new standard.

• The Risk of Fraudulent Activities In a decentralized environment, fraudulent activities are always a concern. For the NFT market, this means there may be criminals selling counterfeit or fake NFTs. While ERC-6551 provides more functionality for NFTs, it does not directly address this issue. To ensure market security and buyer’s interests, it may be necessary to address fraud issues at the market level or through external smart contracts.

• The Issue of Ownership Loops One potential risk of ERC-6551 is that NFTs may be mistakenly transferred to their own token bonding accounts, resulting in locked assets. This “ownership loop” issue could lead to permanent loss of assets. To avoid this situation, further technological and strategic measures may be required to ensure asset security.

Future Outlook: The Peculiar Evolution of NFTs

For the long-term development of the NFT ecosystem, the overall recovery of the cryptocurrency market plays a crucial role. If the cryptocurrency market can see more stable and sustained growth, it will contribute to attracting more investors into the NFT space. However, at the same time, NFT projects themselves need to constantly innovate and evolve, providing more attractive use cases and practicality to drive market activity.

The arrival of ERC-6551 is a historic milestone in the NFT space, opening up a world of new possibilities by turning NFTs into their own smart contract accounts. This brings more versatility to NFTs, making them more practical and relevant for users. Looking ahead, we can focus on the adoption and increasing experimentation of ERC-6551 in the coming months.

In the short term, here are a few anticipated practical use cases for ERC-6551:

• Extension Marketplace: Developers can build extension plugins that can be installed on NFTs. Imagine if you own an Azuki, previously you had to wait for the project team to create new contracts to add new functions to the NFT, but in the future, if there is an extension marketplace based on ERC-6551, developers can publish many interesting features in it, and you can add them to your own NFTs instead of relying on the creators of the NFTs.

• Social Track Applications: There are already decentralized social platforms like Lens adopting ERC-6551 as the core. By combining ERC-6551 with decentralized social platforms, future decentralized social interactions can become more convenient, enhancing usability and reducing barriers for users.

• Blind Box Applications: ERC-6551-based blind box applications are expected to bring more innovation to the NFT market. By redefining user experiences, expanding collectible value, and creating more possibilities, this model could become a notable trend in the NFT space.

• Game Track: The features of ERC-6551 can provide a better user experience for blockchain games, enabling single-character upgrades, NFT equipment enhancements, and character customization (NFT fashion) – all essential game features. The features of ERC-6551 may inject new vitality into the game track and inspire more developer creativity.

• Integration with DAO: Through ERC-6551, DAO communities can integrate richer functionalities. For example, points and SBT (Social Behavior Token) can be embedded into members’ NFTs, granting members more rights and incentives. This multi-dimensional empowerment design not only increases member engagement but also lays a solid foundation for the sustainable development of DAOs.

In the long term, we can expect the following trends in the evolution of NFTs:

1. The Quantum Copyright Era: In the digital age of the 21st century, as quantum computing gradually emerges, we can’t help but wonder: what sparks will fly when quantum computing meets NFTs? Imagine a future where there could exist a quantum NFT, with a state that can be “superimposed.” This means that an NFT could simultaneously exist in multiple ownership states until observed or traded. This unprecedented “quantum copyright” would completely disrupt traditional ownership and transaction models, providing artists and creators with more creative space.

2. Multi-dimensional Universe and NFT Interactions: With the development of virtual reality and augmented reality technologies, there could exist a multi-dimensional digital universe in the future, with NFTs serving as bridges connecting different dimensions. For example, an NFT could simultaneously exist as a 2D digital painting, a 3D virtual sculpture, and a 4D time-based artwork. This would allow artists’ creations to present different aesthetics in different dimensions, giving NFTs more depth.

3. DNA-level Digital Verification: Currently, the market faces significant challenges of counterfeiting and fraud with NFTs. But imagine if we could combine NFTs with biotechnology, such as using DNA sequences as unique identifiers for each NFT. This authenticity and uniqueness would be nearly impossible to counterfeit. Future NFTs could be closely associated with the DNA sequences of each creator, ensuring their authenticity and uniqueness.

4. The Artistic Creation of Super AI: As super AI becomes a reality, these AIs will become the artists and creators of the future. They may use NFTs to sell and trade their artworks. The artworks created by these AIs, with their background in deep learning and big data, may possess unprecedented complexity, bringing new possibilities to the NFT market.

5. Fully Automated Circular NFTs: The current NFT market primarily focuses on the buying and selling of individual assets. However, in the future, a circular economy-based NFT model may emerge. In this model, NFTs can be recycled, reshaped, and reused to create entirely new artworks. This will not only help protect the environment but also provide ongoing value for artists and investors.

In summary, the future NFT market will far exceed our current imagination, with its potential and possibilities limited only by our creativity and technological advancements. But regardless of how NFTs evolve in the future, their core value – providing authenticity, uniqueness, and value to creators – will remain unchanged. We should not be overly pessimistic about the current NFT bear market.

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