Introduction:
In today’s world, the term “NFT” has gained significant attention, leaving many people curious about its meaning. NFT, short for Non-Fungible Token, represents a groundbreaking mechanism for owning exclusive digital assets. This article aims to provide beginners with a simplified explanation of NFT, showcase specific examples, and offer a user-friendly guide to getting started in this exciting realm.
Table of Contents:
1. What is NFT in Simple Terms?
2. Examples of NFT Works
3. Understanding Non-Fungible Tokens
4. How to Begin NFT Trading?
5. Important Considerations for NFT Trading
6. Conclusion
1. What is NFT in Simple Terms?
Let’s start by explaining NFT (Non-Fungible Token) in simple terms, focusing on making it accessible to beginners.
NFT is a mechanism that allows you to own a one-of-a-kind digital asset in the world. Until recently, it was impossible to establish clear ownership of digital data due to the ease with which exact copies could be created. However, the introduction of NFTs linked to digital data has revolutionized ownership verification.
NFTs are created on a “blockchain,” a technology that records transactions of linked digital data. Blockchains, which are shared among all participants, can detect any tampering through mutual comparison. This virtually eliminates the possibility of tampering and ensures the authenticity of transaction records. When the owner is recorded on the blockchain, it serves as proof of ownership for the associated digital data.
With the emergence of NFTs, various digital assets such as digital art (illustrations, images, etc.), online game items, manga, and music have become tradable. Notably, in 2021, Twitter founder Jack Dorsey’s first tweet was sold for approximately 300 million yen, attracting significant attention. Moreover, new NFT marketplaces (exchanges) are continuously emerging, making trading more vibrant than ever.
2. Examples of NFT Works
Numerous NFT works have been sold in recent years, some of which fetched high prices. Here are a few noteworthy examples:
2-1. Twitter Founder Jack Dorsey’s First Tweet
In March 2021, Twitter founder Jack Dorsey auctioned his first tweet, which sold for over 300 million yen. This event marked a significant milestone in the rise of NFTs. Dorsey generously donated all proceeds to a non-profit organization supporting African communities.
2-2. In-Game Cat Character in “Cryptokitties”
One of the pioneering NFT projects was the game “Cryptokitties,” launched in 2017. This game allowed players to buy, sell, and breed cats as in-game characters. Some cats were even traded for around 19 million yen.
2-3. Cryptopunk Digital Art
The “Cryptopunk” series, consisting of 10,000 unique digital art pieces, is renowned as the world’s most valuable NFT collection. In February 2022, one of these works sold for approximately 2.7 billion yen.
2-4. Mr. Beeple’s Digital Art
As of June 2022, the highest-priced NFT artwork is “Everydays: The First 5,000 Days” by digital artist Beeple, fetching around 7.5 billion yen. This price also stands as the third-highest auction record for a living artist as of March 2021.
2-5. Takashi Murakami’s Digital Art
Japanese artists, such as Takashi Murakami, are actively selling NFT works. Collaborating with the NFT art designer group “RTFKT Studios,” Murakami has exhibited approximately 20,000 3D characters on the marketplace OpenSea. As of June 20, 2022, one of his works is being bid for approximately 3.6 million yen (23 ETH).
2-6. Digital Art by Aimi Sekiguchi
In April 2021, VR artist Aimi Sekiguchi exhibited the digital art piece “Alternate dimension Genso Kenran” on the marketplace OpenSea, which sold on the same day for about 13 million yen.
2-7. Ryuichi Sakamoto’s Musical Works
In December 2021, musician Ryuichi Sakamoto split the 595 sounds of the right-hand melody from his renowned work, “Merry Christmas Mr. Lawrence,” into NFTs, selling them for 10,000 yen each.
3. Understanding Non-Fungible Tokens
Now, let’s delve deeper into NFTs (Non-Fungible Tokens), often translated as “non-substitutable tokens” in Japanese.
3-1. What is a Token?
To understand NFTs, we first need to grasp the concept of a “token.” A token refers to data issued using blockchain technology. As mentioned earlier, NFTs are tokens since they utilize blockchain technology. However, it’s essential to note that virtual currencies (crypto assets) are also classified as tokens.
Tokens encompass various types, such as DeFi tokens (with financial functionalities), governance tokens (enabling group management), and security tokens (fulfilling the role of securities).
3-2. Substitutability and Non-Substitutability
Next, let’s discuss “substitutability” and “non-substitutability.” Substitutability refers to the ability to replace or interchange something.
Currencies are prime examples of substitutability. For instance, the value of a 100 yen coin in your wallet is identical to that in someone else’s wallet. Exchanging 100 yen coins between individuals does not alter the fact that each person possesses 100 yen.
Therefore, virtual currencies, a form of currency, are often referred to as “Fungible Tokens.”
In contrast, non-fungibility signifies uniqueness and irreplaceability. Artworks exemplify this characteristic. Leonardo da Vinci’s “Mona Lisa” holds inherent value as a one-of-a-kind painting and cannot be exchanged for other works from the same period.
NTFs grant unique and unparalleled value to digital data, hence the term “non-fungible token.”
3-3. Characteristics of NFTs
NFTs possess the following distinct characteristics:
– Uniqueness: As previously mentioned, NFTs provide proof of ownership for linked digital data, endowing them with the value of exclusive assets.
– Trading Potential: NFTs enable transactions by bestowing digital data with uniqueness and asset characteristics. Transaction records are securely stored on tamper-resistant blockchains, ensuring highly secure trades.
– Interoperability: NFTs adhere to common standards for issuance and distribution. Consequently, they can be utilized across platforms, allowing the sale of a particular NFT work on a site different from the one where it was purchased.
– Programmability: NFT data can incorporate various additional functionalities. For instance, when a specific NFT work is resold, it is possible to program it such that a portion of the purchase price is automatically transferred to the creator.
4. How to Begin NFT Trading?
If you’re interested in starting your NFT journey, here’s a step-by-step guide:
4-1. Purchase Virtual Currency and Set Up a Wallet
NFT transactions are conducted using the virtual currency Ethereum (ETH). Begin by purchasing Ethereum from a reliable virtual currency exchange and deposit it into your “virtual currency wallet.”
4-2. Choose an NFT Marketplace and Connect Your Wallet
After acquiring the virtual currency and storing it in your wallet, select an NFT marketplace for your transactions. Connect your virtual wallet to the chosen marketplace.
4-3. Engage in Transactions
Once you have purchased the virtual currency and connected your wallet to the NFT marketplace, you can freely list and purchase NFT works according to your preferences.
5. Important Considerations for NFT Trading
There are certain factors to bear in mind when engaging in NFT transactions. Here are a few key points:
5-1. Lack of Legislation
NFTs have experienced rapid development in a short period, outpacing the establishment of corresponding legal frameworks. Currently, Japanese law does not recognize ownership of intangible assets like data, which could potentially lead to ownership disputes.
Furthermore, fraudulent NFT issuances may not necessarily be illegal due to the ambiguous legal position of NFTs. The legal development surrounding NFTs is a significant issue that requires future attention.
5-2. Unstable Fees
When trading NFTs, you will incur network fees known as “gas fees.” It’s crucial to note that these fees are volatile and often prone to increase.
5-3. Physical Ownership Limitations
Since NFT works are digital data, they cannot be physically owned. For instance, if you wish to “display artwork in your room,” you would need a monitor or suitable device for viewing.
6. In Conclusion
NFTs serve as a mechanism for owning unique digital assets. By storing transaction records on highly tamper-resistant blockchains linked to digital data, ownership can be reliably established.
In recent years, NFTs have revolutionized the trading of digital art, game items, manga, music, and more on numerous marketplaces. The future implications of NFTs remain a captivating prospect, and their transformative potential continues to capture our attention.
Conclusion:
NFTs have revolutionized the concept of ownership in the digital world. By leveraging blockchain technology, these non-fungible tokens enable individuals to possess unique digital assets and engage in trading activities. From digital art to game items and music, the NFT market continues to expand, promising exciting possibilities for the future. Embrace the world of NFTs and unlock the potential of owning one-of-a-kind digital creations.
Sure! Here are 10 frequently asked questions (FAQs) based on the provided article:
1. What is the simple definition of NFT?
Answer: NFT stands for Non-Fungible Token, which represents a mechanism for owning unique digital assets that can be traded.
2. Can you provide some examples of NFT works?
Answer: Yes, some examples of NFT works include Twitter founder Jack Dorsey’s first tweet, in-game characters from “Cryptokitties,” the Cryptopunk digital art collection, Beeple’s digital art, Takashi Murakami’s digital art, and Ryuichi Sakamoto’s musical works, among others.
3. What is the difference between fungible and non-fungible tokens?
Answer: Fungible tokens, like virtual currencies, are interchangeable and can be replaced with identical units. Non-fungible tokens (NFTs) are unique and cannot be exchanged on a one-to-one basis because they represent one-of-a-kind digital assets.
4. How can I start trading NFTs?
Answer: To begin trading NFTs, you need to purchase the virtual currency Ethereum (ETH) and set up a virtual currency wallet. Then, choose an NFT marketplace, connect your wallet to it, and engage in transactions.
5. What should I consider when trading NFTs?
Answer: Important considerations for NFT trading include the lack of legislation surrounding NFT ownership, the volatility of network fees (gas fees), and the fact that NFTs represent digital data and not physical ownership of assets.
6. What are the characteristics of NFTs?
Answer: NFTs possess unique characteristics such as uniqueness, trading potential, interoperability across platforms, and programmability. They provide proof of ownership for digital data and allow secure and customizable transactions.
7. What is a token in the context of NFTs?
Answer: In the context of NFTs, a token refers to data issued using blockchain technology. NFTs utilize blockchain technology to establish ownership of unique digital assets.
8. Can NFTs be used for purposes other than digital art?
Answer: Yes, NFTs can be used for various purposes beyond digital art, including trading game items, manga, music, and more. They provide a mechanism for establishing ownership and enabling secure transactions for unique digital assets.
9. Are there any legal considerations for NFTs?
Answer: Currently, there is a lack of legislation specifically addressing NFTs, which can create uncertainties regarding ownership and potential disputes. The legal development surrounding NFTs is an important issue that requires future attention.
10. What is the future potential of NFTs?
Answer: NFTs have the potential to transform various industries by revolutionizing the ownership and trading of digital assets. Their future implications remain captivating, and they continue to garner attention for their transformative possibilities.