A Non-Fungible Token (NFT) is a token that represents a unique digital asset, realized based on blockchain technology.
The blockchain technology used in NFT is a decentralized database technology. Due to its decentralized nature, recorded transactions and data cannot be easily altered. This immutability is used for security aspects such as reliability and assurance of NFT.
NFTs are also recorded as transactions on the blockchain. This transaction contains information about the NFT (e.g., author information, artwork information, etc.) that can guarantee the uniqueness and immutability of the NFT. For example, NFTs of digital artworks in limited quantities can be bought and sold at high prices, creating value through the guaranteed immutability ensured by the blockchain and the unique technology of the NFT.
Blockchain technology and NFT are closely related, and it is with the support of blockchain technology that NFT can provide accurate and reliable digital assets.
Because of these properties, NFT is used in a variety of fields.
Buying and selling artwork：Use NFT to buy and sell digital artwork. This guarantees the originality of the work and allows the owner to be accurately tracked. 10,000 unique digital artworks published by Larva Labs called CryptoPunks are bought and sold as NFTs.
Music Licenses：Musicians and record labels can use NFT to buy and sell song licenses. This ensures that song licenses are accurately tracked and that songwriters are properly compensated. Various examples exist, such as AmPm’s auction-style sale of the unreleased song “Intro” NFT on the NFT marketplace “OpenSea” for 12 days from March 19 to March 30, 2021.
Management of collectibles：Collectors can use NFT to manage their collections. The originality and history of collectibles are guaranteed, and buyers can get accurate information.
Trading sports cards：Sports card collectors can use NFT to trade sports cards; NFT guarantees the originality of the cards and provides traders with accurate information. Basketball card collectors use NFT’s NBA Top Shot platform to trade their cards.
Trading video game items：Video game players can use NFTs to trade in-game items. As with sports cards, the authenticity of the item is guaranteed and traders can receive accurate information. Game developers can also generate new revenue streams through these trading activities. The game Axie Infinity allows game items to be traded using NFTs. Various items produced in the game are treated as NFTs and can be traded.
In addition, NFTs can be used as electronic certificates by attaching various information to them, and are already being used in a variety of fields.
Issues and problems in NFT
Currently, there are a variety of issues and problems that exist in the NFT. Some are directly related to security, while others are seemingly unrelated, and solving them is an urgent task for us.
Environmental problems：Although seemingly unrelated issues, NFT uses distributed database technology, which requires large amounts of computing resources. This raises the issue of increased environmental impact.
Unauthorized access：Although blockchain technology is considered to be highly secure, it is not entirely free from the security risks of unauthorized access. It is possible that hacking and unauthorized transactions may occur in the future, as with other technologies.
High transaction costs：NFTs, like virtual currencies, can have high transaction costs. This is due to a mechanism that increases costs as the number of transactions that do not conform to the blockchain increases.
Investment risks：Although NFTs may be treated as investments, investment risk also exists. It may be difficult to assess the risks involved in investing, such as price fluctuations and the reliability of the investment.
Compatibility：Since NFT is a new technology, there are compatibility issues with some older technologies. For example, it is expected that some wallets and exchanges may not be compatible with NFT.
Technological development and standardization are underway to address these issues and problems.
Knowledge of new technologies and methods in Web 3.0, such as NFT, which is expected to develop rapidly in the future, will certainly be an advantage in an information society that is expected to grow even larger in the future.