The Boom of the NFT Market

NFT (Non-fungible Token), also known as a non-divisible and unique digital certificate, is capable of mapping to specific assets. It records relevant ownership information, transaction history, and other related details of the specific asset in its smart contract's metadata. Additionally, it generates an immutable and unique code on the corresponding blockchain, ensuring its uniqueness and authenticity. NFTs enable the digitization and tradability of virtual items, granting digital assets tangible value.

1. Characteristics of NFT

• Ownership of specific assets: NFTs utilize blockchain technology to establish ownership of specific assets, becoming recognized tradable entities. The price of an NFT reflects market recognition of the asset's value and scarcity.

• Authenticity and uniqueness: Leveraging blockchain's immutability and traceability, NFTs authenticate and ensure the uniqueness of the recorded ownership. NFTs can represent various assets such as virtual collectibles, in-game items, virtual properties, digital artworks, and real estate.

• Anchoring value to non-fungible assets: In contrast to fungible tokens (e.g., fiat currencies, cryptocurrencies), NFTs fundamentally anchor the value of non-fungible assets. Fungible tokens anchor value to interchangeable assets like gold or USD. While both are tradable, the value of each NFT is distinct and unparalleled.

2. Comparison between Fungible Tokens (FT) and Non-Fungible Tokens (NFT)

• Fungible Tokens (FT): Fungibility refers to assets that adhere to the same rules and can be freely exchanged or divided. For example, cryptocurrencies like Bitcoin have the same price at a given time, allowing one Bitcoin to be exchanged for another. Bitcoin can also be divided into fractions such as 0.1, 0.01, or 0.0001 BTC.

• Non-Fungible Tokens (NFT): Non-fungibility signifies complete uniqueness and indivisibility. Examples include real-world assets like real estate, cars, or passports. Each property differs in layout, price, developer, location, management, and size. Ownerships are distinct, and a property cannot be divided and sold to multiple individuals.

We can clearly see that the current major application areas for NFTs include gaming, artwork, domain names, collectibles, virtual assets, and the tokenization of real-world assets (STO). Artwork and gaming, in particular, have gained significant attention in the market. Some game items and artworks naturally possess uniqueness and indivisibility, making them a perfect fit for NFTs, effectively preventing counterfeiting and fraud. The rise of NFTs has provided substantial support to the market, as observed from the development journey of DeFi.

• Innovative experimentation: NFTs represent an attempt to bridge the gap between the cryptocurrency market and the real world, bringing additional value to real-world assets. NFTs impart characteristics of the crypto market to real-world creations, ensuring complete privacy, security, uniqueness, and convenience.

• Immutability and protection against plagiarism: NFTs are tamper-proof digital works, addressing ownership concerns. Unlike previous digital artworks, which were easily copied, NFTs are immutable.

• Increased awareness of digital assets: NFTs have raised awareness regarding the ownership and security of digital assets. Incidents such as bank card theft and game account/item theft have emphasized the desire for absolute security and ownership. By possessing the private key to an NFT token, one has complete ownership. In traditional industries, digital assets and accounts are centralized, depriving users of full ownership and long-term security.

Since the end of 2020, the NFT market has experienced rapid growth. Traditional companies seeking new business opportunities have become increasingly interested in this domain. Moreover, with ongoing technological advancements, more funds are entering the NFT space.

3. Popular NFT Application Markets

Currently, NFTs are most prevalent in the gaming and art collectibles sectors. Specific domains within the NFT industry will play a significant role. Digital art, virtual land, and DeFi NFTs are set to explode in growth in 2021. Digital art is leading the way and will become a prominent category within the space.

In the realm of art collectibles, NFTs not only provide a new programmable means for artistic creation but also replicate the collectibility of physical artworks, imbuing digital artworks with individuality and uniqueness. In the future, digital collectibles, including artworks, will thrive. On NFT art platforms, artists can earn a percentage of profits from all secondary sales, a distinctive difference from the traditional art market.

In the gaming industry, the combination of NFTs and DeFi opens up limitless possibilities. NFTs and gaming are closely related, as many people may not be familiar with certain artworks, but they are well-acquainted with in-game items and equipment. This will bring about significant changes to the entire industry. Many games are currently unable to introduce new elements and are limited to recreating existing content. For example, in some DeFi + NFT games, each character represents the user's deposit on a lending platform. Game characters can battle, level up, and equip items.

Additionally, concepts like zero-knowledge proofs bring changes to game rules, eliminating the need for highly centralized servers. Local computations can be performed, and proofs can be conducted on-chain, allowing for the scalability of games. Currently, online games typically host a few thousand or tens of thousands of players simultaneously due to server limitations. However, in the future, we can expect a new era of decentralized games with millions or even tens of millions of players online, resulting in a vast number of NFTs and significant value creation.

Against the backdrop of global digital transformation, NFTs will play an irreplaceable role in the future blockchain ecosystem. They may even become key drivers and cornerstones for many industries to achieve digital economic transformation. Exchanges must contemplate how to seize opportunities in this emerging trend and use them to drive digital economic development. As more NFT applications materialize, people are glimpsing the broader possibilities offered by blockchain technology, and the market eagerly awaits the profound changes it will bring to public lifestyles.

Last updated