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What is NFT, and how does it Work?

NFT,

Most cryptocurrencies currently issued use a technique called “blockchain” when performing procedures. Blockchain technology is a unique system that guarantees that cryptocurrency transactions are correct, but recently it has been talked about as having new possibilities. This time, we will introduce the digital art “NFT” that utilizes blockchain technology.

NFT (Non-Fungible Token) is a token that adds uniqueness to digital data such as images and sounds. It applies blockchain technology that is often used when trading in virtual currencies and most of it is distributed on the blockchain of the brand “Ethereum.”

Currently, it is a market for trading “artworks” such as paintings and music. Still, it is aimed to be put to practical use in various services beyond the realm of art, such as an electronic voting system at the time of elections and proof of real estate ownership.

How NFT works

The word “ERC721” is indispensable for explaining the mechanism of NFT. “ERC721” is one of the standards for a virtual currency called “Ethereum” that is often used for buying and selling NFTs and other standards such as “ERC-20” that is often used for issuing virtual currencies. Ethereum is famous among other peers.

The feature of “ERC721” is that independent value can be added to each piece of data. Many virtual currencies use blockchain technology, but basically, virtual currencies must be substitutable like legal tender, so “non-substitutable” such as “ERC721” is used.

I mentioned earlier that most NFTs are distributed on the Ethereum blockchain, but that’s actually the reason. By applying the non-substitution of NFT, NFT art, NFT games, and NFT music have been born and are attracting much attention.

Benefits of NFT

First, I would like to introduce the merits of NFT. I will explain why NFT is so much talked about from the three points. The benefits of NFT are:

●       Add value to your data

●       Anyone can create

●       No risk of damage or loss

Add value to your data.

Digital data was not valuable as a “one work” because it can be duplicated infinitely by itself, but by combining blockchain technology, we succeeded in creating “individuality” as an NFT.

In addition, NFTs are equipped with various additional functions, such as proof of ownership and setting of transaction conditions, so there is an environment suitable for buying and selling. Still, these are also one of the triggers for the “NFT bubble” to occur.

Anyone can create

Any item that can be listed on the NFT market is digital data. Not only paintings and music created on a personal computer, but even those who do not have an artistic sense can value various digital data such as NFT game items and their own Tweets as “NFT.”

Selling Tweets at a high price requires a certain amount of name recognition, but if you are interested, we recommend you first try selling digital data as an NFT.

No risk of damage or loss

“Digital data” that does not use blockchain technology has a risk of being damaged or lost unless the computer is backed up. On the other hand, NFT records digital data on each user’s blockchain, so even if your personal computer breaks down, there is no risk of damage or loss. In this way, the advantages of NFTs are “adding value to data,” “anyone can create,” and “no risk of damage or loss.”

Disadvantages of NFT

It turns out that NFTs have many advantages that digital art has never had before, but they also have disadvantages. Here, I will touch on the points to be noted in NFT. The disadvantages of NFT are:

●       Legal development is not catching up

●       Fees (gas charges) tend to rise

●       It cannot be owned physically.

Legal development is not catching up.

As the market for NFTs expands rapidly in 2021, legal developments at home and abroad have not yet caught up. In the first place, the legislation regarding virtual currencies such as Ethereum has not settled down, and it seems that it will take some time before the rules regarding NFTs become clear.

Depending on the country’s future response, the development speed of the NFT market may be significantly slowed down.

Fees (gas charges) tend to rise.

As of 2022, most NFT works are distributed on the blockchain of a virtual currency called Ethereum. The Ethereum blockchain requires a fee called a “gas fee” every time a user makes a transaction, but this gas fee will increase according to the congestion of the network.

Since the NFT market is expanding rapidly in 2021, this gas bill may become a bottleneck for those who trade.

It cannot be owned physically.

NFTs, like digital data, are managed on the Internet and cannot be owned in the real world. If you don’t feel like owning it even if you buy it, you may want to avoid buying an NFT. However, it is possible to exhibit NFTs in the Metaverse space, so you may not be interested.

Conclusion

NFT is a combination of digital data and virtual currency blockchain technology. It brings value by guaranteeing the “uniqueness” of digital art that is easy to duplicate. NFT can sell a wide variety of “art” such as game items and Tweets on the marketplace.

Currently, most NFTs are distributed on the Ethereum blockchain. Ethereum has a “scalability problem” where fees increase due to increased transaction volume.

Read also: avple

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