This note is from a live broadcast of Mars Finance. The guest of dialogue is Wang Dong, the founder of the Loopring Agreement. The notes are divided into two parts according to investment and technology, and some adjustments have been made to the order of the questions. Today is the first part. Wang Dong talked about his views on the two recent hot tracks of NFT and Defi, and gave suggestions for ordinary people to invest in the currency circle.
Below, Enjoy:
Mars Finance Editor Zou Zhengdong (hereinafter referred to as the host): For this live broadcast, we invited Mr. Wang Dong, the founder of the Loopring Protocol. Mainly talk about NFT, the hot spot in this market.
I noticed that Teacher Wang Dong has published his own opinions on NFT in the circle of friends. First, please ask Teacher Wang Dong to say hello to everyone.
Wang Dong: I am glad to have the opportunity to have a chat with you all. Actually, I didn't intend to talk about NFT. It’s just that some points of view are not necessarily correct. I hope I can give you some reference. That’s it.
Moderator: When did you start following NFT? What is the first impression of NFT?
Dong Wang: Maybe it was two or three years ago, when we were most concerned about Security Token.
Moderator: I know that NFT was originally a "cryptocat". Recently, the NBA Top Shot on FLOW once again brought the NFT into flames, and the sales once reached 200 million US dollars.
(NFT paintings that were sold at a high price at Christie: Everydays-The First 5000 Day)
With the rising price of NFT, do you think BFT can represent the unique value of collectibles? Is there a phenomenon in which speculators increase prices by enlarging the scarcity of collections?
Wang Dong: My views on NFT are actually quite straightforward. In the short term, NFTs are not very optimistic and no one is recommended to invest. In the long run, NFT has great value, but it needs legal support.
First, let's analyze what is NFT. For example, if you make the property rights of the house into a token, if the government says that those who own the token can live in the house, those who do not have the token will be driven out. If this can be achieved, the value of NFT is huge. Because the ownership of any goods and assets in the real economy can be traded and booked through NFT, this value is large enough to cover the human economy.
But the reason why I am not optimistic about it in the short term is that in the short term, many NFTs are not supported by law. Most NFTs are linked to small things such as artworks and game equipment. Of course it is also valuable. Only from an investment perspective, NFT is a very unreliable investment target.
Reliable investment target:
1. There needs to be a broad consensus
For example, there are hundreds of thousands or more Bitcoin holders in the market, and they all agree with the current price of Bitcoin, otherwise they will lose the market. At this time, the basis of consensus is large enough, and its value or price support is also strong enough.
Conversely, the current NFT oil paintings or artworks have only a few people's consensus, and there is no more people's consensus basis. Therefore, its true value is not easy to reflect, or the relative relationship between price and value is not stable.
2. Good investment targets must have good liquidity
When you want to sell the investment target, you can quickly change back to currency. However, the current NFT does not have enough liquidity and cannot be sold when you want to sell it.
3. The historical price of NFT has no reference significance
For example, the first tweet (produced NFT) sent by the founder of Twitter was auctioned for more than $2 million. But this more than 2 million US dollars does not represent any value of this NFT. As long as the two parties agree with the transaction, the transaction can be completed, but whoever wants to buy the NFT Twitter of more than 2 million US dollars, and then wants to sell it, is estimated to be difficult to sell.
Historical transaction prices are easy to make. For example, I can draw an abstract painting and trade with each other with left and right hands. The cost is zero and the price can be made. I can continue to trade, after trading more than ten or twenty times, the price will change from 100,000 to 1 million. Suddenly there was a fool who took the order of 1.1 million. For me, there is no cost, but the other party fell into a trap immediately.
From an investment perspective, historical NFT transaction prices have no meaning. It is too easy to be operated. Some investors think that you can make money through NFT. But you don't actually know who made the transaction between the two sides. Maybe it's the relationship between the left hand and the right hand.
In the absence of legal support, a strong enough consensus foundation, no good liquidity, and no good historical reference price for NFT, this kind of investment product cannot truly meet investment needs. It's basically all hype. It's a game made by a certain party, waiting to see others make money and jump in jealousy. I am determined not to be optimistic about short-term NFT investment. Long-term value, but this is a long time later. This is my understanding of NFT.
Moderator: In fact, it took many years for Bitcoin to give everyone a consensus value. I would like to ask, how long do you think it will take for NFT to gain consensus from the public?
Wang Dong: It is not an absolute point in time. For example, game equipment may reach a consensus among game enthusiasts relatively quickly. This equipment is worth ten or twenty yuan. However, the value of equipment is generally reflected in the user experience of the game, and it can be used once it is bought. It is not an investment product. From an investment perspective, it is not worth it.
If it is a property that has a valuable attribute in the real economy, it must wait for legal support (NFT) ownership. For example, if you want to own the "Mona Lisa", you must be able to take this painting away from the Louvre. It can't be said that I bought the "Mona Lisa" token and I have to buy a ticket to go to the Louvre. There is no point.
Therefore, if NFT wants to gain a consensus, it is a process that requires legal support. It depends on the legislation of each country, not the support of technology. Technology can only support those purely virtual NFT assets, but there is no way to support any physical assets.
Moderator: You just talked about the poor liquidity of NFT. Now Opensea is doing NFT transactions, and it is indeed very liquid. I noticed that many wallets cannot be checked after receiving the NFT, and there is no way to conduct transactions. In your opinion, what are the good solutions to the problem of poor liquidity?
Wang Dong: There is no solution. We look at NFTs in the real economy, including paintings, calligraphy, jewelry, and exchanges of post-money cards that were popular many years ago. To put it hard, some people will spend hundreds of millions of dollars to buy a painting, not for the painting itself, but for the appeal of the interested parties, such as transferring the money through a transaction.
The currency card is actually very liquid, but why has the transaction volume been so hot in the past few years? It is because there are dealers making the market. You can compare the traditional auction house, the currency card market model and the NFT model, and then compare the trading volume of the stock market and the trading volume of encrypted tokens, you will find that the liquidity of the NFT itself is very poor.
why? Because there is no demand. Smart people will not make it an investment product, and will not buy or sell it. Without demand, you will not always buy and sell, and there will be no liquidity. Just like a painting, every day there will be 1 million people who have to shoot and rush to buy it? It's impossible. If the demand is not established, the NFT should have poor liquidity. So it is not a problem of solutions, but there is no demand for NFT itself.
Moderator: What you just talked about is more about NFT of artworks and collectibles. If music is made into NFT, will it be more fluid?
Wang Dong: I don't think this is called NFT. NFT represents a unique thing, it is transfer, not copy. For example, in music, a copyright can be sold to ten people, 10,000 people, but not everyone gets an NFT, only those who own the music copyright have an NFT. He just sold the right to listen to music for a period of time to someone. The selling process just copied the NFT, so the value of the NFT formed in this way will be even smaller.
This does involve the question of how to define NFT. Maybe everyone has a different way of defining it, and I haven't studied it too deeply.
Moderator: Let's talk about DeFi again. Defi may not even think of Ethereum founder Vitalik himself. In June 2020, Compound detonated the boom of liquid mining. Various DeFI leading agreements have been born one after another, and the market is also booming. But there was another period of silence after October. From the beginning of the Spring Festival, the Defi agreement began to show explosive development.
Teacher Wang Dong, in your opinion, what stage of development is DeFi now? In which directions will DeFi continue to develop in 2021?
Wang Dong: To be honest, I don't know the answer to this question. Vitalik did not expect it, and it also shows that the development of DeFi has exceeded many people's expectations.
There are many real innovations in Defi. For example, the mature ideas of Wall Street are brought to the DeFI field, and smart contracts are used to replace commercial contracts, and smart contracts are used to implement them. But there will also be some unreliable projects on DeFI for hype, or directly copy other people's code.
At present, we have not studied many DeFi projects too deeply. To be honest, no matter which project we study, the team that studies them is a waste of time, and we don't want to do it.
In general, DeFi, and even the value capture of NFT mentioned earlier, is actually not necessary for small investors to go ahead. In the traditional entrepreneurial field, VCs are basically rushing ahead. They look at a new project and do various background checks. Those so-called retail investors or small investors only need to choose projects that have been screened by VCs from the mature stock market to invest.
Suppose that NFT can quickly become popular, and that DeFi can be a new wave of enthusiasm. I don't think there is any need to rush to the front to take risks. After all, not everyone is a qualified investor. If DeFi and NFT become popular, then its value capture will definitely be transferred to Ethereum indirectly. The value capture of the entire blockchain will be indirectly transferred to Bitcoin. In fact, as long as you hold ETH and BTC, you can basically make a steady profit without losing it.
But if you have to rush to the front, you have to feel that you have a competitive winning rate with VC, your judgment is better than others, you have to rush to the NFT field to buy a painting, you have to participate in mining on Defi, or Let's go to venture capital first. If there are too many such people, I guess there will be many projects to cut leeks. The so-called leek is that you feel that you are capable if you are not capable. This will cause problems.
I can't understand DeFi, so I won't rush forward. I don't know how to vote if I don't understand. I often want to share it and warn others to invest in a certain project, not to invest in a certain project. This is a problem, and you shouldn't tell others about these things. But I always see some projects that are not so pleasing to the eye, and there are too many small breaks. So early investment is left to professional people, so you don't want to be greedy.
Moderator: You just mentioned that ordinary investors just buy ETH and BTC. But I know that there are still many people who want to analyze some fresh tracks and are not satisfied with just buying these two coins. What advice would you give to this group of people? How to analyze and judge whether the new track is valuable?
Wang Dong: I have actually met some of the so-called "investors" face to face. My suggestion is simple, I don't want to hurt the self-esteem of others. But it's best to take a mirror and ask yourself: Why should I make this money? Why do you make this money? How much money have you invested in your educational resume in the past and have you built up your analytical skills? Or do you have first-hand information, does it matter? You have to ask yourself, why should I make money compared to so many people?
If you don’t have a clear answer, just think I might make money. Then you are reading a Ph.D. Anyway, when I sometimes look in the mirror and ask myself why I can make money on this project, I cannot answer this question. Although I am a technology, I think the white paper is well written, I am not a mathematician, and I can't understand some mathematical formulas. So I will give myself a question mark, maybe I will become a small leek too.
Sometimes people will swell if they make a little money. You see, I have made money before, and I should make money next time. The rules of the game are not like this. You may have made money because of luck, not ability. Most people in the currency circle make money by luck, not ability. It is very important to have a knowledge of yourself. If anyone can make money continuously, what's the fairness? Why do people who work hard at Tsinghua University and Peking University do not make money, and those who work hard do not make money, so why do you make money? It is important to ask yourself these questions.
There is no shortcut to making money. Investment is investing in people, and investing in cognition and realizing. When you don't have cognition, you still think about realizing it, which is a bit of a high regard for yourself.
The above is the entire content of the interview.