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How to use NFT in business? Explain actual cases and points to note!

Official | 2022.12.12

Text by かにやま

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“I heard that ‘NFT is used for business’, but what kind of service is it actually used for?”

NFTs have started to be used in familiar services such as famous idols, athletes, and music, and you may be interested in businesses that use NFTs.

In this article, we will explain in an easy-to-understand manner how NFTs are used in business, together with examples and points to keep in mind .

If you are thinking of starting an NFT business, please read to the end.

1. NFTs and business

Until now, NFT art and NFT games have been the mainstream of NFT business, but recently NFTs are used in genres such as sports, music, and entertainment.

In the first place, NFT (Non-Fungible Token) is translated as a non-fungible token, and is a technology that proves that digital data is the only asset in the world and gives it scarcity value .

Since the transaction history can be confirmed by using blockchain technology, the risk of data copying or falsification is low, and NFTs are often used in business.

NFT x Music has a mechanism to return part of the revenue to the artist when the NFT music data is sold secondary.

In addition, since the transaction history of music data can be checked, copyrighted artists and label companies can also recommend secondary sales with peace of mind.

2. Business case using NFT

There are three business cases that utilize NFT.

  1. collector’s item
  2. event ticket sales
  3. Developed NFT electronic stamp

I will introduce them in order.

(1) Collector’s item

Quote: NFT trading card official Twitter

NFTs are often used in highly collectible businesses such as trading cards and anime-only items.

Collector’s items are characterized by good compatibility with NFT’s rarity and low risk of counterfeiting and falsification.

For example, NFT trading cards issued and sold by the popular idol group “SKE48” have attracted a lot of attention.

Idols, anime, and manga are highly collectable and have many enthusiastic fans, so the price of NFTs with high scarcity value tends to rise.

Shueisha, a major publishing company, has started selling manga manuscripts as NFTs with the goal of “passing on the art of manga to the next generation” .

By converting original paper drawings, which are vulnerable to deterioration over time, into NFTs, we expect to be able to pass them on to the next generation while maintaining their rarity value.

Quote: SHUEISHA MANGA-ART HERITAGE

In addition, due to the uniqueness that only the owner can view the NFT, its use in highly collectible businesses will increase in the future.

(2) Event ticket sales

Quote: LAWSON TICKET NFT

NFT is used for event tickets such as concerts and professional sports.

Since the transaction history of NFT tickets is recorded on the blockchain, it is possible to confirm “who obtained it and who transferred it”.

By checking the blockchain, in addition to being able to trade with peace of mind, it has become possible to investigate people who purchase for the purpose of resale .

Resale can be prevented by programmatically excluding people who purchase tickets frequently but transfer them every time, so-called “resale purpose”.

For example, Johnny’s Office has introduced NFT tickets on a trial basis at performances held in May 2022, and has begun measures to prevent unauthorized entry and unauthorized resale.

In addition, Lawson Ticket has launched the NFT service “LAWSON TICKET NFT” from the spring of 2022.

In addition to digitizing tickets for convenience, NFT is gaining popularity as a service that allows you to keep your own NFT ticket with your memories.

Since NFT can be stored semi-permanently, it is also recommended for use at commemorative events where you want to leave memories.

(3) Development of Japan’s first NFT electronic seal

Quote: Shachihata official website

By adding an NFT to the electronic seal, it is possible to authenticate the user, which solves the counterfeit risk that has been a problem with conventional electronic seals.

Shachihata Co., Ltd., which is famous for seals, has developed Japan’s first electronic seal service ” NFT seal ” using NFT .

An NFT seal is an electronic seal that can confirm the user of the seal by linking the seal data and user information to form an NFT.

Since the NFT seal is associated with the information of the seal holder and the NFT stamp, it is difficult to falsify the seal record.

The need for electronic contracts is increasing because it is possible to manage “when, who and what” on the blockchain.

Also, as telework is becoming more popular, many people are still worried about the seal problem, such as coming to work just to stamp their seal.

NFT seals can solve the seal problem and also lead to the promotion of DX , which is expected to spread , so it can be expected to be deployed in government and local governments.

3. Points to note when doing business using NFT

While businesses using NFTs are growing rapidly, there is the potential for confusion due to the lack of legal regulations in Japan .

Here are three points to keep in mind when using NFT for business.

  1. Are you violating copyright?
  2. be treated as gambling
  3. Is Your Privacy Appropriate?

I will explain in order.

(1) Does it infringe copyright?

NFT holders must be careful not to infringe the artist’s copyright .

This is because NFT purchasers can only prove ownership, not all rights such as copyrights and intellectual property rights.

It may be easier to understand if you imagine that you purchased a “Certificate of Authenticity” that certifies the NFT as a genuine product.

For example, if you purchase NFT art, the purchaser only owns the copyright, and the artist continues to own the copyright.

Therefore, we must be careful that the act of selling and sharing the reproduced NFT art infringes the artist’s copyright.

(2) Will it be treated as gambling?

When providing NFT services, it is necessary to confirm in advance whether the system design is a gambling crime .

If you meet the following four requirements, you may fall under gambling crime.

 ①By chance victory or defeat

 ② Property or property interests

 ③ Competing for profit or loss

 ④ Loss of property benefits is not for temporary entertainment.

Quote: NFT Business Guidelines 丨 Japan Crypto Asset Business Association

Specifically, the paid gacha provided in the NFT game is being viewed as a problem.

We examined four requirements to determine whether paid gacha falls under the crime of gambling.

①By chance victory or defeat

Due to the mechanism of gacha, it can be said that the requirement of “coincidence” is satisfied because NFTs that appear randomly are purchased.

②Property or property interests

NFTs can be said to meet the requirements of “property” because secondary distribution is active and they are recognized as having property value.

③ Competing for profit or loss

Since there is both the possibility of obtaining an NFT with a higher value than the payment amount and the possibility of obtaining an NFT with a lower value, it can be said that the “gain and loss” requirement is met.

Users who obtain NFTs with a higher value than the gacha fee will receive the difference, while in some cases they will obtain NFTs with a lower value.

④ Loss of property benefits is not for temporary entertainment.

It does not provide temporary entertainment, and there is a high possibility of secondary distribution.

Temporary entertainment is generally assumed to be of low financial value, such as juices and sweets that are consumed immediately.

(3) Is privacy properly maintained?

In developing services using NFT, it is necessary to consider whether there are any problems with privacy measures .

NFTs are characterized by high uniqueness and low risk of data falsification and copying.

However, since anyone can view the contents recorded in the blockchain, it can be said that certain personal information such as transaction history is disclosed.

Therefore, for example, if you link your SNS profile or icon used in the marketplace with online or real life, there is a possibility that information you do not want to be known through NFT will be investigated.

On the other hand, there are also cases where highly anonymous virtual currencies and NFTs are used for money laundering (money laundering: the act of hiding the source of money earned by crime and evading investigations).

A certain degree of non-disclosure is desirable for services that utilize NFTs, but services that comply with laws including money laundering must be provided.

Services with insufficient privacy measures may be able to view collected personal information, so be sure to carefully consider the system design.

4. Future of business utilizing NFT

Many companies are developing businesses using NFTs, and further growth can be expected in the future.

One example is the development of an electronic official document service that utilizes NFT electronic seals for official documents issued by government agencies.

For example, let’s assume an address change when the resident card and driver’s license are converted to NFT.

  1. Electronic application for change of address to government office
  2. Get an electronic resident card (new address) stamped with the NFT seal of the government office on the web
  3. Electronic application for change of address on driver’s license by attaching electronic resident card
  4. NFT driver’s license address updated

If you can use the electronic public documents that you have obtained by electronic application for the electronic application service, you can complete the procedure only with your smartphone without using paper even once.

In the future, it is expected that digitization will progress further, so it is thought that NFT will be used in cases where identity verification is required , such as many certificates and applications .

5. Expectations for various usage patterns

By managing NFT on the blockchain, we can prove that the digital data is unique and unique in the world.

In addition, since the risk of counterfeiting and falsification can be reduced, we can expect usage patterns in various businesses.

At HINATA, we have started offering a free service that uses NFT to turn important memories of photos into NFT art .

In addition to seeking convenience, there are also business methods such as leaving memories as NFTs , so please refer to them if you like.

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