In recent years, with the evolution of the Internet, the digital market has become very popular. Among them, there are many opportunities to hear the word “NFT”.
Today, NFT is attracting increasing attention worldwide, but there are still many people who do not know the basic knowledge and characteristics of NFT.
Although NFT is still at a relatively early stage of development, there is no doubt that it is a technology that is attracting attention and is expected to rapidly develop worldwide in the future.
In this article, we will explain the basics of “What is NFT?” and will also introduce the reasons why it is attracting attention.
What is NFT?
Recently, I have been hearing the term “NFT” more and more often. To begin with, “NFT” is an abbreviation that stands for “Non-Fungible Token.” Keep in mind that when translated into Japanese, it means “non-fungible token.”
To explain the non-fungible token a little bit, the “non-fungible” part, as the name suggests, means “cannot be replaced.” The word “token” has various meanings, such as virtual currency data, evidence, and proof.
For those who are learning about the existence of NFTs for the first time, there are some difficult phrases, but to explain NFTs simply, it is “a technology that can accurately prove that something is irreplaceable and unique.”
Digital files such as images, videos, audio, and physical objects can be easily duplicated. However, NFTs are used to publicly prove the unique ownership of individual items, and are used to determine asset values by licensing specific items. NFT transactions are actively conducted in the market.
While digitalization is progressing in various aspects, in the previous digital market it was not possible to identify the ownership of content, but the advent of NFT can be said to have brought about a revolutionary change in the digital market.
Why NFTs are needed
From here, we will briefly introduce the reasons why NFTs are attracting attention, supported by many users, and needed.
So, is it really necessary to prove that NFTs are unique, which is a characteristic of NFTs?
This is because we humans are attracted to and find great value in things that are unique or rare.
Digital and Internet markets have created countless amounts of value by improving the convenience and expanding the functionality of various things. Anyone can easily access digital and internet markets without being restricted by location or time, and the exchange of money and goods is becoming more active, and the trends surrounding this are accelerating day by day.
On the other hand, while much of the information that exists in the digital and internet markets is close to the users, there is a risk that it may be copied without permission or falsified, making it difficult to properly prove its value. It is said that
Additionally, as we experience a global pandemic, expectations for contactless services have increased, and more users than ever are using online shopping and online auctions. However, transactions under such circumstances are often fraught with fraud and various other troubles, and many people are feeling increasingly anxious about using them.
With the advancement of technology in the digital market, creative products such as music, videos, and images have become more familiar than ever before, and anyone can easily use them. However, on the other hand, due to the issue of copyright infringement and the manufacture and reproduction of copies, items have lost their rarity, and their value has diminished, making it difficult for them to receive just recognition.
The reason for this is that there was no clear proof that it was unique.
If you can compare the real thing and the fake up close and see even the smallest details, you may be able to notice a decisive difference in value and gain confidence that it is genuine, but in the digital market It is difficult to distinguish between genuine and fake items created and produced by the industry, resulting in variations in their existential value.
“NFT” is a technology that enables accurate differentiation in such cases and is effective in representing “proof of uniqueness.”
By using NFT, it is not only effective in distinguishing between real and fake products in digital and internet markets, but also guarantees and correctly establishes uniqueness and scarcity, which had been considered difficult in the past.
The advent of NFTs will have an immeasurable impact on the digital and internet markets, and there is a possibility that new ways to enjoy the digital and internet markets and new businesses will appear one after another.
Difference between substitutability and non-substitutability
Here, we will explain the difference between substitutability and non-substitutability using concrete examples.
First, let’s introduce “substitutability”. Currency is a typical example of fungibility. Regardless of who owns 1,000 yen, the value of 1,000 yen will never collapse. You can also use this 1,000 yen for buying and selling or exchange it. Therefore, the “1,000 yen = currency” introduced here can be considered to be fungible.
On the other hand, an example of non-substitutability would be a photo book signed by a popular celebrity. Let’s assume that the normal selling price is 5,000 yen. The moment you receive a handwritten autograph at an autograph session, etc., that photobook becomes unique. In addition, even though the list price is 5,000 yen, for passionate fans, just a handwritten autograph can be worth tens of thousands of yen or more, and there are cases where it is actually traded on the market.
In this way, the photo book has a value that cannot be replaced with anything else: an autographed photo book. This is what is called non-substitutability.
Characteristics of NFT
NFTs are now rapidly becoming a trend, and there are a variety of ways to use them, and they are growing day by day. It is also very important to understand the various characteristics.
From here, we will introduce three representative ones.
Having value as a “unique” asset
Because NFTs are directly linked to specific works, each linked work transforms into an asset and has a unique existence value, which is the real thrill. When it comes to actual works of art, including paintings, the history of the owner can sometimes affect the value of the work. Similarly, with NFT, a system has been built that allows the ownership history of assets to be kept.
Additionally, in the past, reselling was often prohibited because the copyright holder would not benefit from repeated reselling.
On the other hand, with NFT, it is possible to set up a system in which the author is compensated every time an act of resale is performed. There is a possibility that reselling, which was previously unthinkable, could become a viable business.
Eliminating data fraud and realizing safe and secure transactions
Even in contactless transactions, safe and secure transactions are realized. Auctions and shopping are actively used by many users within the Internet environment. In some cases, there are works that are auctioned that have a high value that everyone recognizes.
However, there was no material available to determine whether the work itself was genuine or fake, making it extremely difficult to tell the difference.
Therefore, by conducting transactions on an NFT-based market, it is possible to accurately represent the proof that the exhibited work is genuine.
Even if a particular work has been damaged by copying, if the existence of NFT cannot be confirmed, it will be clear that “this work is a fake copy.” NFTs accurately represent the real existence value of the item and have a great effect.
What are virtual currencies that have many connections with NFTs?
One of the things that has become a hot topic these days is “virtual currency.” As many of you may already be familiar with, NFTs are heavily related to virtual currencies.
In the first place, virtual currency, as introduced above, refers to currency that utilizes blockchain technology. A major feature of the currency itself is that it is traded digitally.
This is a revolutionary feature that eliminates the need for fraudulent transactions such as counterfeiting or deletion of virtual currencies that are traded through the use of blockchain technology.
Normally, currencies are managed by each country to maintain a balance in their value. It is an asset that is relatively familiar, highly secure, and can be used with peace of mind.
However, there are extremely rare cases where a serious situation occurs, such as the value of the currency itself plummeting.
Such cases occur because the credibility of the targeted country declines. A decline in a country’s credibility leads directly to a collapse in the value of its currency.
To avoid such cases, currencies are generally kept under state control to prevent various frauds from occurring. To explain briefly, please understand that it is centrally managed.
On the other hand, virtual currencies have the major characteristic that there is no centrally controlled organization. The control of value seen specifically in virtual currencies is maintained by the supply balance between “sellers” and “buyers” that occurs in response to actual transactions.
Inevitably, as the number of users who desire a particular virtual currency increases, the value of that currency will increase. Conversely, if the number of users who wish to sell increases, the value will decline to a certain extent.
For this reason, virtual currencies that have a strong relationship with NFTs do not require the management of a centralized organization due to the active functioning of blockchain technology. This “decentralized Internet era” or “decentralized Internet era” is called “Web3 (Web3.0)” and has become well known in the digital market.
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summary
In this article, we have introduced various features from the basics of “What is NFT?”.
Despite the current global trend, NFTs are expected to continue to develop rapidly in the future. Before NFT evolves into a more familiar presence, it is important to deepen your knowledge and prepare to respond to the trends of the times.