A mysterious acronym: NFT. And an equally vague name: Non Fungible Token. Behind this new concept, what is really there? We talk a lot about NFTs, often to mock them or make fun of those who buy them at high prices. To understand exactly what it is and what is hidden behind these three letters, it is not so simple. Because you must already have assimilated other complex concepts – the blockchain, cryptocurrencies, the metaverse and the Web3 – before approaching NFTs.
Quick summary: blockchain is a kind of totally decentralized database, shared by all its users. It is a technology for storing and transmitting information in a traceable but also anonymous way (at least, in pseudonymity). Cryptocurrencies are virtual currencies that are based on the blockchain and an encrypted computer protocol. the metaverse is a virtual world where everyone is in the form of an avatar. the Web3 is the new Internet, which encompasses all these concepts and should gradually replace the centralized Net dominated by Gafam (Google, Amazon, Facebook, etc.) as we know it today.
1. What is the definition of an NFT?
NFTs are non-fungible tokens, i.e. unique virtual tokens. Data units stored in the blockchain. It is a kind of certificate of authenticity of a unique and non-interchangeable digital asset. In concrete terms, money is “fungible” because you can interchange one euro with another without changing anything. It can also be divided differently (1 euro, 5 euros, 10 euros) and the offer is unlimited or almost.
A non-fungible token is an unparalleled asset. This is the case of a work of art but also the proof of the possession of a house (its shape, its location, etc. are unique) or a collector’s card. Certainly, we can reproduce a painting but the original will always have more value. Then, stored in the blockchain, the NFT also serves as a certificate of authenticity thanks to the system’s cryptography. It cannot be modified or, in theory, stolen. At least as long as you do not provide personal information, such as the access code to your virtual wallet, the Wallet, in which your NFT is stored.
2. What is the interest of NFT?
In concrete terms, we are moving from a world where the creator of unique content – a digital work for example – publishes his work somewhere on the Internet. This may be reused (copied) without her knowledge without her having control and the work itself will be extremely difficult to monetize. With NFTs, the person will be able to issue an original work themselves and benefit from it throughout their life. Whatever happens, she will remain the author forever.
For example, she will sell it for the first time (with its certificate of authenticity which will follow the work all its life). If ever, later, it is resold, the author or author of the work may receive a small commission on the new transaction. Whatever happens over time, this person will always be considered to be at the origin of the work and will continue to benefit from it through resales. And she can manage the reproduction and copyright rights as she pleases. This is why owning a pair of Nike in NFT does not give you the right to use its image freely.
3. Are NFTs only about art?
Absolutely not. They’ve been reduced to that by the buzz effect but it can be about anything unique. It can be anything digital: a drawing, music, the original script of a film, a tweet, a fashion item to dress up your avatar in the metaverse… or even “phygital” goods, it’s i.e. a digital duplicate of something that exists in real life. For example, the purchase of a collector’s watch or a designer bag which is also reproduced virtually.
This may be to use it as an accessory in a metaverse but also more simply as a kind of identity card for good. In this NFT, would be stored the date and place of creation, the origin of the components (traceability), the carbon footprint, the name of the worker who manufactured the good, etc. To this can then be added data on the life of the product (date of repair, type of intervention, etc.). The same goes for owning an apartment. Rather than possessing notarized papers, one can imagine an NFT that stores all proof of ownership and transaction data.
4. How do I create NFTs (and who can do it)?
Anyone can create an NFT. The easiest way is obviously to create a unique work of art. Once the digital file has been created, you must choose the blockchain that you prefer. Most of the time, Ethereum wins out. You will then need to create a Crypto Wallet in order to be able to recover the money from the sale of your NFT. There are thousands of them (MetaMask, ZenGo, eToro, Coinbase, Binance…).
Third step: register on a marketplace. It is a portal where NFTs are sold. The best known platform is OpenSea but there are many others (Rarible, Mintable, Nifty Gateway, etc.). These digital art galleries sell your works in exchange for cryptocurrencies. Once your account has been created, you must fill in the information on your NFT and electronically sign the documents and authorizations for sale. After this step, your NFT is available on your Wallet. It will only disappear once the sale has been made and the agreed sum transferred.
5. What can NFTs be used for?
Besides art, NFTs are interesting in many other areas. We have mentioned the certificate of ownership of real estate or even a luxury watch. This is also true for tickets to a concert or a sports match, video games (not the property of the game itself but objects in this game) or even collectibles.
But beware, an NFT can be misleading. According to an analyst who has reviewed the OpenSea marketplace in depth, approximately 80% of NFT registered on this platform are plagiarized works of art, fake collections or spam. So beware if you ever dream of becoming an NFT collector or eyeing this market (90% of NFT buyers do so in the hope of becoming rich). Take a close look at who is selling this NFT and if they really own the rights.
Roller coaster values
Certainly the artist Mike Winkelmann aka Beeple, made an impression in 2021 during a spectacular auction at Christie’s where one of his works of digital art sold for 69 million dollars. But the value of an NFT is extremely fluctuating. As evidenced by the first tweet from Twitter founder Jack Dorsey.
Transformed into NFT, the latter was sold for 2.9 million dollars. When its owner put it up for sale, he asked for 48 million. Alas, the first offer was 280 dollars and, a week after the sale, the amount had painfully reached the equivalent of $6,000. In short, we must not lose sight of the fact that all this remains a risky bet.
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