Are virtual assets an inevitable product of the digital age?

Figure 1 SandBox Virtual World Source: SandBox Game Platform

What is a virtual asset

Regarding the definition of Virtual Asset, the author has not found a reasonable authoritative definition. On November 26, 2021, Gou Wenjun, director of the Anti-Money Laundering Monitoring and Analysis Center of Chinese Min bank, said at the first Lujiazui National Financial Security Summit that the supervision of emerging virtual assets should be strengthened. He believes that virtual assets are assets that meet certain privacy, currency trust and wealth appreciation needs, and have the characteristics of centralization, anonymity and borderlessness; virtual assets will not stop at the current virtual currency, NFT, metaverse, etc., but there is a natural isolation from the real world.

Director Gou Wenjun believes that it is necessary to strengthen the supervision of virtual assets. It is also mentioned that since 2013, China has issued a series of laws and regulations, which negate the legitimacy of virtual currency as a currency, securities in the domestic transaction and free convertibility from the level of system and implementation.

Therefore, virtual currency is not issued by monetary authorities, does not have legal and mandatory monetary attributes, is not a currency in the true sense, does not have the same legal status as money, cannot and should not be used as a currency in circulation in the market, and citizens investing in and trading virtual currency are not protected by law. Virtual currencies are mentioned here, and cryptocurrencies (Crypto Currency) are the most important virtual currencies, corresponding to crypto assets (Crypto assets). According to the Prudent Treatment of Crypto Assets[i] published by the Basel Committee on Commercial Banking Supervision, crypto assets are private digital assets that rely primarily on cryptography, distributed ledgers or similar technologies, while Digital Assets are digital representations of value that can be used to pay, invest or obtain goods or services. From this definition, the value of virtual assets can be considered to be derived from digital, virtual, non-real-world currencies, goods, and services.

Whether it is China's regulatory ban on cryptocurrencies and crypto assets, and the continued strengthening of virtual asset supervision, or the international commercial banking regulators treat crypto assets with caution, virtual assets are already one of the assets that cannot be ignored.

Is sky-high virtual asset a bubble?

On November 30, 2021, a piece of virtual land on the gaming platform Sandbox (https://www.sandbox.game) sold for $4.3 million. What a jaw-dropping price. Sandbox is a metaverse game based on the Ethereum blockchain, where players can use the tools provided by the platform to create, explore and trade with each other. Another well-known virtual world platform is Decentraland (https://decentraland.org). More and more investors are starting to snap up "land" in virtual worlds like Sandbox and Decentraland.

Real-world land values are assessed at discounted future rental cash flows. That's also to assess the value of the land in the virtual world. If an imaginative world is built in the virtual land on the Sandbox platform, players all over the world are willing to pay to play there, and its crowd flow is definitely greater than that of Nanjing East Road in Shanghai during the National Day holiday, and the throughput of virtual land is theoretically unlimited. Such an assessment is very much the meaning of some market dream rate, but the company that can be valued at the market dream rate is more valuable. Isn't there a professional securities analyst who calculates the valuation of catheter era to account for 15% to 25% of the world market share by 2060? I have to say that if you imagine it, it is also reasonable.

Famous singer Lin Junjie is rumored to be known for being good at digital operation. Recently, he claimed on Twitter that he had spent about $123,000 on three virtual plots of land on the Decentraland platform. There is a virtual space where membership can be established, so that fans can reach idols.

The usual judgment is that the sky-high price of virtual assets is a bubble, but when this bubble bursts is not known. It depends on the multi-party game of regulation, virtual asset investors, and other social participants.

Is there no turning back for developing a virtual world?

Liu Cixin, a famous science fiction writer, said that the metaverse advocated by Zuckerberg, the founder of Meta (former Facebook), is not the future, and the metacosm will lead mankind to a dead end. Long ago, Liu Cixin wrote a short science fiction novel "The Festival That Cannot Coexist", describing two festivals that cannot coexist, the Birth Festival and the Abortion Day. The Birth Festival refers to the day when the first astronauts of mankind entered space on April 12, 1961, representing the true birth of human beings from the womb of the earth that gave birth to us, to the vast universe, and began to explore and seek the mysteries of the mysterious universe. The abortion day represented by October 5, 2050 (imaginary in the novel) for the first time to realize the direct connection between humans and computers marks that we are lost in the virtual world, abandoning the exploration of the starry sky, and becoming lost in the virtual world, becoming the short-lived civilization in the universe.

In the novel, the earth scientist describes that "the virtual world is indeed heaven, and in it everyone is indeed a god, and its beauty is beyond any imagination." I just want to be like the real world at that time. In the beginning, there will be fewer and fewer people in reality, and the virtual paradise is so good, who is still willing to stay in the harsh reality, all compete to upload themselves. "This is how familiar it is with the slogan of the Official Decentraland website." Welcome to Decentraland where you will be immersed in an imaginative, evolving world. From outer space planets to medieval dungeon mazes, use your imagination and experience incredible worlds with like-minded friends to create the ideal hideaway. (Translated by the author)

Humans, on the other hand, could sink into the digital virtual world. But as for the reasons for the demise of mankind, the author is more inclined to believe the story in Liu Cixin's other science fiction novel, "The Three-Body Problem". The book describes the law of a cosmic dark forest that assumes that once one cosmic civilization is discovered, it will inevitably be attacked by other cosmic civilizations. The demise of mankind in the novel is due to the scientist Ye Wenjie's reply to the information of the Trisolaran, exposing the coordinates of the earth. In this way, it seems that exploring the universe is something more harmful to mankind. Of course, humans will not give up exploring the universe because science fiction has a certain rationality.

Will the digital virtual world obliterate human creativity?

Humanity needs diversity, and this view comes from What Technology Wants[ii], and in the book of Kevin Kelly, the prophet of technology, one of the directions of biological evolution is diversity, and one of the directions of technology is also diversity. The diversity of genes, the diversity of science, the diversity of human development, will produce more options, more opportunities, more relationships. These diversities are the source of human progress.

Kevin Kelly compares King Henry VIII of England with his own list of items. When the king died in 1547, the family property (the national wealth of England) on the list of his possessions was 18,000 items. There are nearly 10,000 kinds of items in Kevin Kelly's home. Indeed, after industrial civilization, with the progress of mankind, in order to meet the increasingly diverse needs of people, the variety of goods has also multiplied.

The famous Portuguese writer Fernando Pessoa likes to write under a different name. What is a "different name"? According to the famous book critic Liang Wendao, "Pessoa is really like an actor acting, when he writes under a pen name, it is like recreating a character, he will imagine his personality, birth background, occupation, lifestyle for this pen name, and then find a literary voice for him, so that the pen name produces an independent personality." In this way, he continued to create different characters, different characters, and each character was a writer, each of whom had his own work, including poetry, novels, essays, literary reviews, and even astrological reviews. "It's how rich the genius of the spiritual world is to write like this. Literature such as novels brings people a different kind of life experience, as do games and virtual worlds. Therefore, the author believes that the virtual world will enrich the human spiritual world, and will not lead to the lack of creativity of the spiritual world. Many science fiction films and anime depict scenes in which humans are imprisoned in the digital world, and the protagonists mostly strive to return to the real world, even those supporting characters who are immersed in the virtual world also live a spiritually rich virtual life, who wants to live in a room with sunshine and beaches, facing the sea, how boring is that?

People who are lost in the virtual world are equally lost in the real world. There is a saying:

The illusion of the virtual is the same as the reality. [iii]

Virtual assets are an inevitable product of the digital age

According to the description of social psychology, human needs are divided into five levels, and when basic physiological needs such as food, clothing, shelter and transportation are solved, the other levels are spiritual needs. In September 2021, the Tianjin Institute of Industrial Biotechnology of the Chinese Academy of Sciences published the research results of synthetic starch in the journal "Science", which did not rely on plant photosynthesis, and successfully produced starch with carbon dioxide and hydrogen produced by electrolysis as raw materials, making it possible for starch production to change from traditional agricultural planting mode to industrial workshop production mode. It is foreseeable that when human beings solve the food problem, the spiritual world will account for a greater proportion of future economic life.

The first task of a market is to gather the participants of the transaction to a certain degree of density. Operations such as asset securitization are to build more standard financial products to increase market density and thus improve asset liquidity. In the digital age, with the help of seamless reach in the digital world, it is easier for both parties to a transaction to gather, and technologies such as blockchain smart contracts will likely build a more diverse market. The spiritual need for diversity will be met, and at the same time, virtual asset sizes are likely to continue to explode.

About the Author:

[i] https://www.bis.org/bcbs/publ/d519.htm

[ii] Kevin Kelly. What technology wants[M]. CITIC Publishing House. 2011.

[iii] The author fabricated that Lu Xun's original sentence was "Despair is delusion, which is the same as hope".

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