What are NFTs? Easy-to-understand explanations Introducing the reasons for attention, examples, and trading methods

Official | 2022.03.31

Text by Hinata official

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Web news about NFT has increased. It is often featured on TV, and you can see the high degree of attention.

However, the explanation of NFT itself is often simplified, and many people say, “I have heard the word NFT, but I don’t know what it is.”

In this article, NFT is explained in an easy-to-understand manner with a parable. It also summarizes the reasons for the topic, specific usage scenes, issues, etc., so I hope it will be helpful when you want to deepen your understanding of NFT.

1. What are NFTs?

NFT is an abbreviation for Non-Fungible Token , which is a non-fungible token in Japanese.

Non-fungibility means “one and only”, and tokens refer to “crypto assets”. Since cryptocurrency is a word of property value, NFT can be rephrased as “something with unique property value” .

For example, let’s say you draw a random picture using paints on a single sketchbook in front of you. The picture is, of course, irreplaceable. If you burn it, it will be gone forever. This is called non-substitutability.

On the other hand, suppose you draw a similar picture on your computer and upload it on the Internet so that anyone can see it. At this time, even if you accidentally delete the original image, if someone else has a copy, you can get the same one immediately. This is called substitutability.

So, what about digital paintings that have this substitutability? Suppose that information such as “, how much money is exchanged” is written.

You can see that it is clearly different from other copy images, it is unique.

There is great value in things that are known to be the only one in the world. For example, the NFT digital art auctioned on March 11, 2021 (US time) was priced at approximately 7.5 billion yen in Japanese yen .

NFT is a technology that writes information in this way to give it non-fungibility and increase its property value.

2. Why are NFTs attracting attention?

NFT is now attracting attention from all over the world.

The Emergen Research, a group company of Marketysers Global Consulting LLP in New York, USA, said that the global NFT market size was 340 million US dollars in 2020, but will reach 3,57,316.3 million US dollars in 2030. ( Global non-fungible token (NFT) market size to reach US$3,57,316.3 million in 2030┃PR TIMES ).

NFTs are attracting attention because they have greatly changed the way we look at digital things.

Digital things can be duplicated, and works like digital art are regarded as “everyone has them”, and in many cases they are not evaluated in comparison with works that actually exist. However, NFT has made it possible for digital works to be regarded as “one-of-a-kind things that no one else has”. All of a sudden, various digital things are being treated in the same way as they are in the real world .

Also, as I will explain in detail later, it is common to buy and sell NFTs in virtual currency. Therefore, one of the reasons for the attention is the growing investment expectation that the value of virtual currency will increase due to the high exchange rate of NFTs .

3. Specific usage scenes of NFT

As mentioned above, the size of the NFT market is expanding, and it is actually used in various places. I will introduce the main scenes.

(1) NFT art

NFT art is an NFT version of an art work, and is currently one of the most talked about fields.

Various illustrations are sold at NFT Art, and many people buy them to use them as SNS icons.

NFT art has brand value because it cannot be altered or duplicated. Similar to the feeling of owning branded items in the real world, many people consider owning the works of topical NFT creators to be fashion.

In addition, many creators are entering because it is easy for anyone to sell their works. It has become a hot topic on SNS, and it is possible that the market scale will continue to expand in the future.

(2) NFT game

In NFT games , in-game items are converted to NFT. Making good use of it to make a profit is called “play to earn” and is becoming a hot topic.

For example, in a trading card game, cards are converted into NFTs and values ​​are assigned to each card. So there are players who profit from selling high-value cards.

There are also players who participate in games that distribute virtual currency as rewards and earn money for outstanding play.

(3) Online ticket

NFT is also used for online tickets such as artist LIVE . By converting online tickets into NFTs, we prevent resale and allow people who really want to see them to purchase them at the regular price.

Various companies such as Johnny’s and Avex have already introduced it, and it may become common sense in the future.

4. Challenges of NFTs

NFTs are used in various scenes, but they are not without problems. Here, we will introduce the three main ones while looking at actual examples.

(1) Insufficient legislation

Current Japanese law does not recognize ownership of things like data . Therefore, there is a risk of trouble in case of theft or fraud using the lack of ownership.

(2) Fees (gas costs) may soar

Currently, many NFT transactions use a virtual currency called Ethereum . The fee for transactions on Ethereum is called the gas fee , and there are cases where this gas fee rises, which is also an issue for NFT.

The main reason for the surge is the increased trading volume. Higher demand for NFTs could also lead to higher gas prices. It seems that there are cases where gas costs of about 10,000 yen are taken to sell works .

* Naturally, the Ethereum issuing side and the NFT marketplace side are also concerned about the soaring fees. HINATA , an NFT marketplace, uses technology that allows the use of fiat currency and does not incur gas charges. Please see below.

(3) Frequent fraud

Another issue is the prevalence of fraud . For example, in a phishing scam using the name of a famous NFT marketplace called Open Sea , a total of 300 million yen worth of NFTs were leaked from 32 user accounts ( NFT OpenSea phishing scam? CEO stolen ┃ Yahoo! News ).

5. How to buy and sell NFTs

NFTs can be purchased on the NFT Marketplace on the Internet . Also, if you upload digital data there, you can easily create an NFT and sell it as it is.

Finally, we will introduce the main NFT marketplaces, the flow of purchases and sales, and points to note when using the NFT marketplace.

(1) Major NFT marketplaces

The NFT marketplace is a marketplace where you can buy and sell NFT works. There are things like:

featureHandling work
HINATA・Sell works unique to Japan
・Low usage fees
 (no gas bills)
・Compatible with legal currency
・Digital works of traditional crafts
・Digital art
Coincheck NFT
(beta version)
・Supports popular NFT games
・Usage fee: gas fee + sales fee: 10%
・Supported currencies such as Ethereum and Bitcoin
 (Sorare, The Sand Box, etc.)
Nanakusa・Sold by artists approved by the management
・Platform fee + partner fee + network fee
・Supported currencies such as Ethereum and Polygon
・Digital art
Open Sea・Supports various NFTs
・Usage fee: gas fee + sales fee: 2.5%
・Supported currencies such as Ethereum and Polygon
・Digital art
・3D model
Rarible・Issuing a unique token
・Usage fee: gas fee + sales fee: 2.5%
・Supports Ethereum
・Digital art

(2) Purchasing/sales flow

Next, I will explain the flow of purchasing and selling.

① Purchasing flow

Purchasing is generally done in 6 steps:

  1. Open an account on a virtual currency exchange
  2. buy virtual currency
  3. create a wallet
  4. Send cryptocurrency to wallet
  5. Link NFT marketplace and wallet
  6. select and purchase

Virtual currency is required when purchasing NFT works (if the NFT marketplace only accepts virtual currency). Therefore, you must first open an account on the virtual currency exchange . The exchange should be a place that handles Ethereum (for example, coin check or bitflyer ).

After opening an account, create a wallet ( usually MetaMask ), which is a virtual currency wallet. You will be able to purchase after sending virtual currency and linking your wallet with the NFT marketplace.

② Sales flow

Selling is generally done in 7 steps:

  1. Open an account on a virtual currency exchange
  2. buy virtual currency
  3. create a wallet
  4. Send cryptocurrency to wallet
  5. Link NFT marketplace and wallet
  6. prepare the work
  7. Upload your work to the NFT Marketplace

In order to sell NFT, it is necessary to upload the work prepared in advance on the marketplace. Let’s do it while looking at the guide of each marketplace.

(3) Points to note when using the NFT Marketplace

Basically, you cannot cancel or return products on the NFT Marketplace. Also, unlike general shopping, the cooling-off system is not applicable . When purchasing, please check and pay close attention.

6. HINATA is the place to buy and sell NFTs

NFT is a technology that gives scarcity to digital data that has been taken for granted that it can be duplicated. Looking at how the market scale is growing, it may be said that the current utilization is still only a small part. In the future, more and more uses will be developed, and it is possible that common sense in various fields will change.

However, NFT has some challenges that must be cleared. High fees are a point that cannot be ignored.

In response to these NFT issues, HINATA , an NFT marketplace, has incorporated technologies to make it easier for first-time users to use it without paying for gas and to make transactions smoother.

What did you think. Thank you very much for reading through to the end. A sequel will be released in the near future. We hope you will look forward to it.


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