What is NFT? This is a question that has attracted the attention of many people in recent times. Because, following the development of Blockchain technology is the emergence of a series of new concepts. When Bitcoin was still not “hot”, NFT appeared and brought a new wave to investors. However, what is the reason why NFT has become a trend and is it recognized in Vietnam? Let’s follow today’s topic with op10mmo.vn to get more perspective on this NFT fever.
What is NFT?
NFT (Non-Fungible Token) is a type of digital asset that uses Blockchain technology to generate a unique chain of code. This sequence of codes represents an item and cannot be replaced. These code sequences are often used to identify digital versions of products such as pictures, songs, internet phenomena, etc.
NFT refers to the exchange of an asset for a similar asset and does not reduce its value.
English NFT Decoding: Non-Fungible Token
To better understand Non-Fungible Token , we will break it down into the following definitions:
- Fungible: This keyword is often used in the economic field. To define individual units of an asset that are essentially interchangeable, but indistinguishable from one another.
For example: 1 bill of 100,000 VND can be completely exchanged for 2 bills of 50,000 VND and can also be exchanged for another 100,000 VND bill. That is, it does not matter which currency, but only cares about the true value of the currency.
- Non-Fungible: In contrast to Fungible, this term means: Each unit of an asset is distinct from all other units and cannot be substituted or exchanged.
Example: Like an inheritance will, legally you cannot swap a will with another person. Or a work of art, each work has its own unique features, so it cannot be confused.
- Token: Understood as a utility that encodes any product. This helps products to be exchanged and traded on the Blockchain platform.
For example: Bitcoin money, this is an encrypted electronic currency that can be exchanged and traded between investors.
Some popular NFTs
- Theta Network (THETA): This is a Blockchain platform that focuses on publishing online videos. This is an area that became explosive during the pandemic.
- Axie Infinity (AXS): This is a video game. When participating, players will raise, fight, breed and trade in-game characters thanks to the AXS Token.
- Enjin Coin (ENJ): This is a Blockchain technology platform that helps participants earn money while playing video games.
Why is NFT becoming the current trend?
With new properties and applications, this type of digital asset is gradually becoming more popular among investors.
Properties of NFT
NFT becomes special with the following 3 properties:
- Uniqueness: Each NFT has its own properties that set it apart from other NFTs.
- Scarcity: Each NFT is unique and cannot be replaced by any means. This creates a unique value for the NFT. (The more rare and unique, the higher the value)
- Inseparability: NFT has a special property that it cannot be divided into parts. Just like a picture cannot be called complete when t is divided into many pieces.
- Copyright Guarantee: Blockchain allows traceability. This helps NFT ensure asset ownership and easily prevent fraud when transferring.
Applications of NFT
Thanks to the above special properties, NFT is applied in many fields such as:
- Art: With a guarantee of copyright, NFT helps artists a lot with copyright protection.
- Video games: When NFT is applied to the game, the player can actually own the characters and items. Therefore, trading becomes less risky.
What are the risks of NFT?
Although there are many highlights and novelties, NFT still contains risks that cannot be ignored such as:
Generate many worthless Tokens
The problem is that anyone can create an NFT out of anything. This creates a lot of worthless tokens on the network. NFT players can suffer heavy losses when the NFT cools down. Because scarcity cannot guarantee the value of assets.
No asset pricing mechanism
The NFT market is still not recognized by many countries because there is no mechanism for valuing and insuring assets. In such a risky market, it is entirely possible to pretend to be a scam.
Risk of environmental pollution when operating NFT
To maintain a Blockchain system, it is necessary to have a large number of servers operating 24/7. This means that the consumption of this server is terrible.
Crime risk of money laundering via NFT
The nature of NFT is “virtual” and “anonymous”. For large deals, traders must register the deal with a specialized agency. But NFT is exchanged with alias. Therefore, when money laundering occurs, the police can only know where the money goes, but cannot know the name of the recipient.
Conclusion
“What is NFT?” is a hot topic with investors. Because NFT is widely spread by word of mouth because of its novel properties and applications in making money. However, the risks are not small. With its “virtual” and “anonymous” nature, NFT is very easy to be used by criminals for fraud and profiteering. Therefore, the Vietnamese government has not yet been able to recognize this type of investment because the risks are too great.
Hope the article helps you understand the nature of NFT and the huge risks of this type. Be a smart investor and be careful if participating in unlicensed forms.
