Posted Jan 11, 2022, 10:14 AMUpdated on Jan 11, 2022 at 10:16 a.m.
The three letters of the acronym NFT and the concept of metaverse make the rounds of economic news. However, like cryptocurrencies, these notions still face misunderstanding from the general public – for whom these booming markets are only a refuge for geeks or a speculative bubble. Here is a lexicon to better understand the trend.
The name NFT is an acronym for the English “non-fungible Token”, or in French a “non-fungible token”.
The adjective “fungible” is an economic and legal term that designates the ability of an asset to be exchanged for another asset of the same value. For example, a two-euro coin is fungible because it can be exchanged for another two-euro coin or two one-euro coins.
Conversely, a “non-fungible” item cannot be exchanged for something of equal value. A plot of land, a jewel, a work of art, a bottle of wine are for example non-fungible, since they each have their own characteristics which can be subjective. We can estimate their value in money but finding another asset of the same type whose value is strictly identical is much more difficult.
An NFT, therefore a “non-fungible token”, makes it possible to associate a non-fungible asset (an image, a video, a piece of music, a work of art) with a digital token. Holding this token means owning this asset, the authenticity of which is guaranteed by the blockchain. By comparison, anyone can buy a print of the Mona Lisa, but the owner remains the Louvre. In a dematerialized economy, NFTs thus make it possible to own a digital object.
The blockchain (translated into French by chain of blocks) is a technology that makes it possible to secure and verify in a transparent and tamper-proof manner a set of information.
This verification process is guaranteed by part of the users in an automatic and decentralized way thanks to cryptography which is an encryption technique at the origin of bitcoin. As soon as new information is recorded on the network, the previous one is recorded in a digital register and can no longer be modified.
The main advantage of the blockchain is therefore that the history of information can be kept without anyone being able to alter it and without an intermediary. Bitcoin is thus a financial application of the blockchain, where the information recorded is transactions that do without intermediaries, in particular banks.
NFTs are also based on the blockchain which makes it possible to register on a digital register the proof of the digital ownership of an asset with a set of information relating to this asset (the author if it is a work, its price, etc.).
Ethereum is the name of the platform based on blockchain technology on which the majority of NFTs are distributed today. Ethereum makes it possible to create digital tokens in a secure and tamper-proof way, where the information of the asset registered in the form of NFTs can be exchanged (bought or sold) on dedicated platforms.
To simply define the metaverse, it must be seen as a set of virtual universes (video games, social networks, online store) connected to each other. Thanks to the blockchain, it is thus possible to create an economy in which users of the metaverse can navigate between these different virtual universes and own objects via NFTs and carry out transactions in cryptocurrency.
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NFT, metaverse: four definitions to understand this new world
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