NFT has attracted the attention of many people recently. Because, following the development of Blockchain technology is the emergence of a series of new concepts. When Bitcoin was still there, NFT appeared and brought a new wave to investors.
- What is NFT?
NFT (Non-Fungible Token) is a type of digital asset that uses Blockchain technology to create a unique code string. This code string represents a certain product and cannot be replaced. These code strings are often used to identify digital versions of products such as: Pictures, songs that are internet phenomena.
NFT refers to the exchange of an asset with a similar asset without reducing its value.
Non-Fungible Token
To better understand Non-Fungible Token, we will separate it into Fungible and Non-Fungible.
Fungible: This keyword is often used in the economic field. To define individual units of an asset that are essentially interchangeable, but indistinguishable from each other.
For example: 1 100,000 unit bill can be exchanged for 2 50,000 unit bills and can also be exchanged for another 100,000 unit bill. This means that the type of currency is not important, but only the real value of the currency.
Non-Fungible: In contrast to Fungible, this term means that each unit of the asset is different from all other units and cannot be replaced or exchanged with each other.
For example: Like an inheritance will, legally, you cannot exchange the will with another person. Or a work of art, each work has its own unique features, so it cannot be confused.
Token: It is understood as a utility that encodes any product. This helps products to be exchanged and traded on the Blockchain platform.
For example: Bitcoin, this is an encrypted cryptocurrency that can be exchanged and traded between investors.
- Some popular NFTs
Theta Network (THETA): This is a Blockchain platform that focuses on releasing online videos. This is a field that has exploded since the pandemic.
Axie Infinity (AXS): This is a video game. When participating, players will raise, fight, breed and trade characters in the game thanks to AXS Token.
Enjin Coin (ENJ): This is a Blockchain technology platform that helps participants earn money while playing video games.
- Why are NFTs becoming a trend today?
With its novel properties and applications, this type of digital asset is gradually becoming more popular among investors.
Characteristics of NFTs
Uniqueness: Each NFT has its own characteristics, making it different from other NFTs.
Scarcity: Each NFT is unique and cannot be replaced by any other form. This creates a unique value for NFT. (The more rare and unique, the higher the value).
Indivisible: NFT has a special characteristic that it cannot be divided into many parts. Just like a painting cannot be called complete when it is divided into many pieces.
Copyright assurance: Blockchain allows traceability. This helps NFT ensure property ownership and easily prevent fraud when transferring.
- Applications of NFT
Thanks to the special properties mentioned above, NFT is applied in many fields such as:
Art: With the nature of copyright assurance, NFT helps artists a lot in copyright protection.
Video games: When applying NFT to games, players can actually own characters and items. Therefore, buying and selling becomes less risky.
- What are the risks of NFT?
Despite its many highlights and novelties, NFT still contains risks that cannot be ignored, such as:
Creating many worthless Tokens
The problem is that anyone can create NFTs from anything. This creates a lot of worthless Tokens on the network. NFT players can suffer heavy losses when NFTs cool down. Because scarcity cannot guarantee the value of assets.
No asset valuation mechanism
The NFT market has not been recognized by many countries because there is no mechanism to value and guarantee assets. In such a risky market, impersonation to scam is entirely possible.
Risk of environmental pollution when operating NFTs
To maintain a Blockchain system, a large number of server systems need to operate 24/7. This means that the consumption of these servers is terrible.
Risk of money laundering through NFT
The nature of NFT is “virtual” and “anonymous”. For large transactions, traders must register the transaction with the relevant authority. But NFT is exchanged under an alias. Therefore, when money laundering occurs, the police can only know where the money goes but cannot know the exact recipient.
