Non-fungible token
lastmod 2022-05-09created 2021-04-166 edits
A non-fungible token (NFT, ERC-721) is a type of cryptocurrency and refers to a specific non-fungible cryptographic digital asset issued on Ethereum. By storing ownership of a digital file on the blockchain, it makes forgery and tampering impossible, preserves it permanently, and allows its ownership to be verified in a decentralized way.
The 'non-fungible' characteristic of NFTs (non-fungible tokens) is based on non-exchangeability, which differs from existing cryptocurrencies. Whereas an existing cryptocurrency could be exchanged 1:1 with another cryptocurrency, non-fungible tokens are each non-tradable cryptocurrencies, so 1:1 trades are not possible. As a result, each non-fungible token has scarcity, and irreversible proof of transactions is possible. Thanks to the advantage that almost anything can be tokenized, non-fungible tokens are already used in games, music, art, and transactions in virtual spaces. Among these, they are growing fast especially around artworks, and the market expanded more than about sevenfold, from 40 million dollars in 2017 to 250 million dollars (about 284.1 billion won) in 2019.
Overview
- NFT: short for Non-Fungible Token, "non-fungible token"
- ERC-721 (Korean: 이더리움)
- Existing cryptocurrencies, precious metals, bonds, etc. are fungible
- Guarantees uniqueness by permanently recording encrypted transaction history on the blockchain
- Ethereum is currently the most widely used blockchain platform for issuing NFTs
- An NFT is like a certificate of title, so it cannot be swapped for someone else's NFT
Structure of an NFT
- NFT Media Data: the original digital content itself. Mainly kept on external storage media (IPFS/Warm)
- NFT Metadata: the title of the media data and a brief description of it, information about the creator, and the internet address where the actual media data is stored. Kept on IPFS, etc.
- NFT Smart Contract: a computer program, stored directly on the blockchain, that codes functions such as ownership verification, ownership transfer, and royalty payments, along with the internet address where the NFT metadata is kept
Composition and understanding of NFT tokenomics
Analysis of tokenomics design elements in the NFT ecosystem
- Token purpose: how will it guide participants' behavior?
- Token value: how will value be given to the token?
- Token distribution: on what basis will tokens be distributed? And how many will be distributed?
- Token adjustment: how will the token's value be maintained and raised? How will price volatility be addressed?
- Token usability: how easy can it be made to use?
- Token security: how will trust in the token be secured?