How to understand NFT when the term “non-fungible token” is released

Non-Fungible Token (NFT for short). Under the background of the integration and innovation of the cultural entertainment retail industry and digital technology, new business forms such as digital collections and Metaverse are leading the new upsurge of cultural consumption and business models, but the public’s understanding of the underlying supporting technology NFT is very different. . Among them, “non-homogenization” can be intuitively understood as an attribute, and the certificate with this attribute cannot be exchanged with other certificates of this attribute. It can also be understood that the blockchain technology makes this type of The token is unique in the blockchain network. The purpose of non-fungible tokens is to realize the digitization of assets by using blockchain technology, while ensuring the uniqueness of the digital assets created on the chain, and providing public proof of ownership for digital assets, so as to realize the security of digital assets on the chain. , true, credible, effective confirmation and circulation, become a credible certificate. The non-homogeneous token technology is an important technology for the next generation of Internet applications to support the digitization of assets with blockchain technology as the core.

InfoBox:

Chinese name: non-homogeneous token

English name: Non-Fungible Token

Abbreviation: NFT

Subject: Computer Science and Technology

Essence: A trusted digital equity certificate with unique characteristics in the blockchain network

Introduction:

Under the background of the integration and innovation of the cultural entertainment retail industry and digital technology, new commercial forms such as digital collections and Metaverse are leading a new wave of cultural consumption and business models. Token) understandings vary widely. At present, NFTs are translated as non-fungible tokens in many places, and we believe that a more accurate translation should be non-fungible tokens.

The translation differences in the adoption of tokens or tokens mainly come from different cognitions and understandings of the multiple meanings of the English term Token in different occasions. The origin of Token comes from the field of computer information security, representing an object with the right to perform certain operations. Such as Access Token, Session Token, etc., are generally translated into tokens in computer terms. With the development of blockchain technology, the encrypted assets born on the blockchain represented by Bitcoin and Ethereum have gradually become well-known to the public; the English expression of these encrypted assets is generally Crypto Token, which is an asset in the blockchain network. An object that represents a certain interest. Because of the interchangeability and divisibility of such encrypted assets, in some countries and regions, they even replace legal currency as a financial medium to support the exchange of valuables; therefore, in the world, Crypto Token is also called Crypto Currency by many people, that is, cryptocurrency or token.

The reason why Crypto Token, represented by Bitcoin and Ethereum, becomes a token lies in its Fungible feature. The meaning of “homogenization” is that the assets generated and circulated on the blockchain network have exactly the same characteristics. For example, at any time, there is no difference between 1 bitcoin held by A and 1 bitcoin held by B; the only difference between 0.25 bitcoin and 0.5 bitcoin is quantity, and there is no difference in any other attributes. The homogeneity feature supports the divisibility and interchangeability of such assets, and other attributes such as scarcity and portability supported by the blockchain protocol make such assets into encrypted tokens.

The biggest difference between NFT and these encrypted tokens is precisely its Non-Fungible feature. “Non-homogenization” can be intuitively understood as such a property, that is, there is no interchangeability between objects with this property, and these objects are also indivisible, so they are unique in the blockchain network . This uniqueness and indivisibility make NFTs very different from tokens, so we believe that translating NFTs as “non-fungible tokens” is a contradictory statement. What would be a more appropriate translation?

Token also has another translation in the blockchain field called “token”, which is also derived from the earliest meaning of “token”. In Baidu Encyclopedia, the interpretation of the token is “the certificate of rights and interests in the digital form”; here is a more comprehensive expression, that is: the token exists in the digital form on the blockchain, and can be encrypted through an encryption algorithm. Verified certificates of interest that support trusted circulation. We believe that NFT is a trusted digital equity certificate with unique characteristics in the blockchain network, so the more accurate translation name should be “non-homogeneous certificate”.

research summary:

At present, the research on Token mainly involves the three major research fields of computer information security, economics and blockchain, and its meaning is also completely different. Therefore, if Non-Fungible Token is simply translated into a non-fungible token, people will mistakenly believe that NFT can also have the financial properties of virtual tokens in China, which will seriously hinder the healthy development of NFT in China. We believe that clear terminology and clear concepts will help practitioners, regulators and users better distinguish the difference between technological innovation and hype and even financial crimes, and can better support the orderly and healthy development of the industry.

Here we first introduce the representative work of Token at the macro level from the three research fields of computer information security, economics and blockchain:

computer information security

Token represents a token object or identifier in computer software and hardware, the token object or identifier represents the object of the right to perform certain operations, and represents the right to perform certain operations. According to different application scenarios, it is divided into Session Token (session token), Security Token (security token), Access Token (access token), Token Ring (token ring) and so on. Among them, the session token is mainly used to generate a session by the system after the user logs in to the system and obtains verification, and assigns a unique token for identifying the session, which identifies that the user has been authorized to log in. A security token is a physical device used by a computer to authenticate a user’s identity, so it is also called a hardware token, authentication token or electronic key. An access token is a token in a computer system that uniquely identifies a user’s access rights. Token Ring is a medium access control commonly used in ring networks to control network nodes to send data. From the application of Token in the field of computer information security, it is not difficult to see that the essence of Token is a unique credential certificate for performing computer system operations.

field of economics

In the field of economics, various rights and interests with economic value are collectively referred to as rights and interests. The holders of rights and interests need to prove their rights and interests with various certificates. Such equity certificates can be paper or electronic forms of stocks, bonds, IOUs, bills of lading, warehouse receipts, waybills, etc. As an encrypted digital carrier based on blockchain technology, once Token is used to represent some kind of rights and interests with economic value, then Token becomes a new type of rights certificate. The difference between this kind of equity certificate and other electronic certificates lies in encryption, immutability and traceability.

Blockchain field

Blockchain itself is an interdisciplinary technology that integrates computer science, cryptography, economics and other multidisciplinary theories. The early blockchain came into the public eye in the form of a public chain, especially the Token issued on the public chain, which became a medium for recording participants’ contributions to the consensus algorithm of the entire public chain, especially the transaction exchange between Token and legal currency More participants are encouraged to participate in the decentralized consensus of the public chain, thus ensuring the security and stability of the public chain, and Tokens can also circulate freely on the public chain. At this level, Token has the attributes of equity in the field of economics and becomes an encrypted token, but it is still essentially a credible proof certificate for measuring consensus workload. With the development of blockchain technology, a currencyless blockchain form has emerged—the consortium chain. The data that reaches the consensus of the whole network through the consortium chain consensus algorithm is also a credible certificate. This data can represent the points and bills with ownership. , coupons, etc. Therefore, the understanding of Token should not be limited to tokens, but should be interpreted as a certificate, that is, a certificate of equity in digital form. Tokens contain proof of ownership and value associated with digital or physical assets.

Overview of NFTs

NFT (Non-Fungible Token), the Chinese translation of non-fungible token, is a data object that can record and process multi-dimensional and complex attributes on the blockchain. The data object can be a digital asset generated on the chain, or it can be a “digital twin” of any type of physical asset on the chain. NFT provides a public proof of ownership, which is uniquely identifiable and inseparable. These features ensure the authenticity of data objects in circulation on the chain; NFT can be transferred by the owner, and the transfer process is tamper-proof and traceable, thus ensuring NFT credible flow. In addition to the NFTs that represent copyright or digital artwork commodity rights in digital collection applications that you have already learned about. NFT can also support the asset digitization needs of the digital transformation of the real economy. For example, NFT can be applied to supply chain finance, and on-chain digital modeling of various non-standard assets (such as invoices, receipts, warehousing), etc., to form a trusted chain on the chain. A data object also contains digital rights to the object. NFTs can also be used for carbon neutrality to support carbon source and carbon sink data on the chain to support the formation of carbon assets and so on.

The key steps and operations in the whole life cycle of NFT, including the minting, issuance, transfer and destruction of NFT.

Step 1. The casting of NFT generally defines the attributes of the data objects to be issued, such as data objects, by writing NFT smart contracts (hereinafter referred to as contracts, for non-smart contract architectures such as the COSMOS system also has a corresponding Module concept, here is an example of a smart contract). categories, data object metadata specifications, etc.; it also defines the relevant operation methods for data objects, such as issuance, transfer, and destruction; finally, the contract is successfully deployed to the blockchain. The above process is the creation of NFT, also known as NFT casting.

Step 2. The owner (issuer) of the NFT initiates a transaction on the blockchain to call the issuance method in the contract. The transaction contains specific metadata of the data object attributes that conform to the contract. The contract responds to the transaction, and generates a trusted data object (referred to as a token hereinafter) on the blockchain according to the metadata in the transaction according to the issuance method. The above process is the issuance of NFT. The essence is the generation and confirmation of rights on the NFT chain. The owner of the NFT can perform corresponding operations on the NFT, including transfer and destruction.

Step 3. The owner of the NFT can transfer the token to a third party. The application side initiates a transaction on the blockchain to call the transfer method in the contract. The contract responds to the transaction and verifies the ownership of the token. After the verification is passed, the owner of the token is changed to a third party. The above process is the transfer of NFT. The essence is the transfer of NFT ownership.

Step 4. The owner of the NFT can destroy the token. Call the destroy method in the contract by initiating a transaction on the blockchain. The contract responds to the transaction and verifies the ownership of the data object, and deletes the token after the verification is passed. Different chain technologies implement deletion differently. For example, Ethereum transfers the deleted NFT to an inaccessible null address, while the COSMOS system deletes relevant data from the blockchain state machine. The above process is the destruction of NFT. After the NFT is destroyed, the on-chain history information related to the NFT will still be retained on the chain, but no further operations can be performed on the NFT.

Logical association between NFT and equity certificates

As a certificate for the owner to prove that he actually owns the right, the equity certificate clarifies the ownership of the equity on the one hand, and proves the authenticity of the ownership of the equity on the other hand. As a trusted digital equity certificate with unique and indivisible characteristics in the blockchain network, NFT’s unique unique characteristics firmly bind the rights and interests associated with it, and the on-chain ownership relationship of NFT is also Indirectly clarifies the ownership of the associated rights and interests. With the help of the tamper-proof and traceable technical advantages of the blockchain, the authenticity of the NFT is ensured, and it also proves the authenticity of the ownership of the rights and interests associated with the NFT.

NFT’s right to digital objects and physical objects

For a digital object native to the digital world, if its owner generates NFT on the chain, the owner of the NFT is the owner. From a technical point of view, we bind the ownership of the NFT to the owner’s account address on the blockchain, which is generated by the owner’s own private key and is unique on the chain.Only those who have the private key can transfer or destroy the NFT associated with the account address. In this way, we realize the right of NFT through cryptography.

For the mapping of physical objects in the physical world to digital objects in the digital world, when generating NFT, the digital objects must contain the digital characteristics of the physical objects, such as the identification number of the physical object, the digital information of the physical object and its hash value, etc. Through these digital features on the chain, the real relationship between NFT and the real thing is established, and the NFT owner’s right to the real thing is confirmed.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/how-to-understand-nft-when-the-term-non-fungible-token-is-released/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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