Non-Fungible Token (NFT): Overview, Evaluation, Opportunities and Challenges

TL;DR

This paper provides a comprehensive overview of NFTs, including their technical standards, ecosystem components, security aspects, opportunities, and challenges, highlighting their rapid growth and early-stage development.

Contribution

It is the first systematic study offering an in-depth analysis of NFT ecosystems, standards, security, and future prospects.

Findings

NFT market value exceeded $34 million by May 2021

NFT standards and protocols are still evolving

Security and technological challenges remain significant

Abstract

The Non-Fungible Token (NFT) market is mushrooming in recent years. The concept of NFT originally comes from a token standard of Ethereum, aiming to distinguish each token with distinguishable signs. This type of token can be bound with virtual/digital properties as their unique identifications. With NFTs, all marked properties can be freely traded with customized values according to their ages, rarity, liquidity, etc. It has greatly stimulated the prosperity of the decentralized application (DApp) market. At the time of writing (May 2021), the total money used on completed NFT sales has reached $34,530,649.86$ USD. The thousandfold return on its increasing market draws huge attention worldwide. However, the development of the NFT ecosystem is still in its early stage, and the technologies of NFTs are pre-mature. Newcomers may get lost in their frenetic evolution due to the lack of systematic summaries. In this technical report, we explore the NFT ecosystems in several aspects. We start with an overview of state-of-the-art NFT solutions, then provide their technical components, protocols, standards, and desired proprieties. Afterward, we give a security evolution, with discussions on the perspectives of their design models, opportunities, and challenges. To the best of our knowledge, this is the first systematic study on the current NFT ecosystems.