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What is NFT? As a unique digital asset on the blockchain, how does it relate to virtual currency? This article explains NFT’s definition, uniqueness principle, connection with virtual currency, application scenarios and common misunderstandings for a wide audience.

Introduction

In the digital asset field, NFT (Non-Fungible Token) has become a hot concept closely linked to virtual currency. As the title defines, NFT is essentially a unique digital asset based on blockchain technology—unlike interchangeable virtual currencies such as Bitcoin and Ethereum, each NFT has irreplaceable uniqueness and exclusive ownership attributes. For the public, the most intuitive connection between NFT and virtual currency is that almost all NFT transactions rely on mainstream virtual currencies as payment tools. Understanding NFT is not only grasping a new type of digital asset but also understanding the new form of value circulation between virtual currencies and unique digital assets in the blockchain era.

1. Core Definition: What Makes NFT a “Unique Digital Asset”?

The key to NFT’s uniqueness lies in the “non-fungible” attribute, which is fundamentally different from homogeneous virtual currencies. “Fungibility” means that assets of the same type can be replaced with each other—for example, 1 Bitcoin is equal to any other 1 Bitcoin, just like a 10-yuan note is interchangeable with another 10-yuan note. NFT, however, breaks this rule: each token has a unique “digital identity code” recorded on the blockchain, making it impossible to be replicated or replaced.

This uniqueness makes NFT a “digital certificate of ownership” for unique assets. For example:

• A digital painting issued as an NFT is the only “digital original” in the network, and its ownership is clearly bound to the NFT holder’s blockchain address.
• Game props in blockchain games (such as a rare weapon) exist in the form of NFT, and no two props have exactly the same attributes and ownership records.

It is worth noting that NFT itself does not directly equal “virtual currency”, but it relies on virtual currency to realize value circulation—this is the core connection between the two.

2. Technical Foundation: How Does Blockchain Endow NFT with Uniqueness?

NFT’s uniqueness and credibility originate from blockchain technology, which is also the common technical basis of NFT and virtual currency. Specifically, the technical support behind NFT includes three core points:

2.1 Decentralized Ledger: The “Notary” of NFT Ownership

Like virtual currency transactions, all NFT issuance, transfer, and ownership changes are recorded on a decentralized blockchain ledger. Every node in the network stores a complete copy of the ledger, and no individual or institution can tamper with the NFT’s ownership records. This means that the ownership of an NFT can be verified by anyone through the blockchain browser, solving the problem of “counterfeiting” and “ownership dispute” of digital assets.

2.2 Standardized Protocols: The “Production Specification” of NFT

Most NFTs are issued based on mature blockchain protocols, the most common of which is Ethereum’s ERC-721 standard (the homogeneous virtual currency on Ethereum follows the ERC-20 standard). This standardized protocol stipulates the basic attributes of NFT (such as unique ID, metadata link, ownership transfer rules), ensuring that NFT can run stably on the blockchain and be compatible with various platforms (such as NFT trading platforms, wallets).

2.3 Metadata Binding: The “Identity Card” of NFT

Each NFT is bound to a set of unique metadata, which records the core information of the digital asset it represents—such as the creator of the digital art, creation time, work description, and even the original file link. This metadata is usually stored on decentralized storage systems (such as IPFS) to avoid being tampered with, making NFT a “digital asset with a complete identity file”.

3. Core Connection: NFT and Virtual Currency Are “Partners” Rather Than “Alternatives”

Many people confuse NFT with virtual currency, but in fact, the two have clear divisions and close cooperation, mainly reflected in three aspects:

3.1 Virtual Currency: The “Payment Medium” for NFT Transactions

Almost all NFT transactions around the world use mainstream virtual currencies as the settlement tool. For example:

• NFT transactions on Ethereum-based platforms (such as OpenSea) must be paid with Ethereum (ETH), which also needs to pay a certain “gas fee” (network usage fee) in ETH.
• Solana-based NFT platforms usually use Solana (SOL) as the transaction currency.

The reason for this is that virtual currency’s decentralized circulation characteristics are consistent with NFT’s ecological needs, and it can realize cross-border, peer-to-peer NFT transactions without relying on traditional financial institutions.

3.2 Common Technical Ecosystem: Sharing Blockchain Infrastructure

NFT and virtual currency rely on the same blockchain infrastructure to operate. Taking Ethereum as an example: Ethereum not only issues its own virtual currency ETH but also provides a platform for developers to issue NFTs based on ERC-721. The security of the Ethereum network (ensured by node consensus) protects both the circulation of ETH and the ownership of NFTs, forming a “mutually reinforcing” ecological relationship.

3.3 Value Interaction: Promoting the Circulation of Digital Assets Together

NFT expands the application boundary of virtual currency. Originally, virtual currency was mainly used for value exchange and storage; with NFT, virtual currency has become a “bridge” connecting unique digital assets—users can use virtual currency to buy and sell NFTs, realizing the “value conversion” between homogeneous virtual currency and non-homogeneous digital assets. At the same time, the popularity of NFT has also increased the demand for corresponding virtual currencies (such as the rise of NFT leading to higher ETH usage), forming a positive interaction of value.

4. Typical Application Scenarios: Where Can We See NFT and Virtual Currency Working Together?

NFT’s unique attributes make it widely used in various fields, and in almost all scenarios, it is inseparable from the support of virtual currency. The most common scenarios include:

4.1 Digital Art and Collections

This is the most well-known application of NFT. Artists upload their digital works to the blockchain, issue them as NFTs, and sell them on platforms such as OpenSea. Collectors need to use virtual currencies such as ETH to purchase. For example, the digital artwork “Everydays: The First 5000 Days” was sold as an NFT for 69.34 million US dollars, and the transaction was settled in ETH.

4.2 GameFi (Game Finance)

In blockchain games (such as Axie Infinity), game props (such as characters, equipment, land) are issued in the form of NFT, and the in-game currency is homogeneous virtual currency. Players can use in-game virtual currency to buy NFT props, or sell the NFT props obtained in the game for mainstream virtual currency (such as ETH), realizing the “monetization” of game behavior.

4.3 Digital Identity and Certificates

NFT can be used as a unique digital identity certificate, such as concert electronic tickets, museum membership cards, etc. Users purchase NFT tickets with virtual currency, and the uniqueness of NFT ensures that the ticket cannot be counterfeited. When entering the venue, you only need to verify the NFT ownership on the blockchain to complete the check-in.

4.4 IP Derivatives

Many well-known IPs (such as movies, animations, stars) have launched NFT derivatives. For example, Marvel launched NFT digital collectibles of superheroes, and fans can collect them by purchasing with virtual currency. These NFTs not only have collection value but also may have additional rights (such as participating in IP offline activities).

5. Common Misunderstandings: Clarifying the Cognition of NFT and Virtual Currency

For the general public, there are many misunderstandings about NFT and its connection with virtual currency. Clarifying these misunderstandings is crucial to understanding the concept correctly:

5.1 Misunderstanding 1: NFT is a “new type of virtual currency”

Wrong. NFT is a “digital asset certificate” representing unique assets, while virtual currency is a “medium of exchange” with homogeneity. The two have different attributes and functions—NFT cannot be used as a universal payment tool like Bitcoin, and must rely on virtual currency for transactions.

5.2 Misunderstanding 2: Buying NFT is equivalent to “buying digital files”

Wrong. Buying NFT does not mean owning the physical digital file (the file can still be downloaded and viewed by others), but obtaining the unique ownership and right of use of the digital asset certified by the blockchain. This is like buying a limited-edition art print—others can see the picture, but only you have the legal (or ecological) ownership certificate.

5.3 Misunderstanding 3: NFT transactions are “unregulated speculation”

Not entirely. Although there are speculative behaviors in the NFT market, many countries are gradually introducing regulatory policies for NFT and virtual currency transactions. For example, some countries require NFT trading platforms to register and implement KYC (real-name authentication), and remind users of investment risks. The essence of NFT is a digital asset tool, and its value depends on application scenarios rather than speculative hype.

Conclusion

As a “unique digital asset” on the blockchain, NFT has opened up a new path for the digitization of unique assets. Its close connection with virtual currency—using virtual currency as a payment medium, sharing blockchain infrastructure, and interacting with value—has formed a new digital asset ecosystem. For the general public, understanding NFT is not only to keep up with the trend of digital economy but also to grasp the new logic of value circulation between virtual currencies and unique assets. With the maturity of technology and regulation, NFT’s application scenarios will be more extensive, and its cooperative relationship with virtual currency will also be more standardized, bringing more possibilities to the digital asset field.