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The problem with crypto is that it takes time to understand the fundamentals…
… and when you think you have understood what “Blockchain” or “DeFi” means, it is necessary to assimilate new ideas popped up out of nowhere.
Fortunately, after training you in the blockchain and at the Challenge in my previous articles, I tackle the latest crypto trend…
Surely you’ve heard this name before, but you don’t know what it means?
To introduce the notion, know that it is thanks to this technology that the artist Beeple sold his digital work ” Everydays: The 5000 First Days for $69 million:
What is an NFT?
NFT is the abbreviation of ” Non-Fungible Token “. In French, ” non-fungible token “.
A token is a digital asset: bitcoins and the ethers are tokens, for example.
When you have a bitcoinit’s a bitcoin. It doesn’t matter who mined it, when it was mined, who held it… As with a banknote: €10 is €10. The serial number printed on the ticket doesn’t matter.
That’s it, “fungible”: each representative of the category “bitcoin” or “€10 note” maybe replaced by another without that changing anything.
Non-fungible, it’s the other way around.
A non-fungible token is a token uniquewhich has its own identity.
Unlike a bitcoina non-fungible token is not interchangeable.
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Express definition (when you get that, you get the gist)
An NFT is a unique digital asset.
It is defined by its 4 characteristics:
– a unique and identified creator;
– an identifier of its own;
– an owner at time T;
– content associated with the token (image, video, document…).
An NFT is therefore content AND its title of ownership registered on the blockchain.
Who pays for JPEG images?
What is difficult to understand with NFTs is that they can take forms very diverse.
The best known are:
– digital works of art;
– collectible content;
– video game items.
Thanks to NFTs, you may be the recognized owner of a digital artworkwhether it is an image, a sound, a video…
Thus, even if the image is copied, reproduced and disseminated on the Internet, the register (Blockchain) states that YOU are the owner.
This brings digital art closer to the seriousness and rules that concern physical art: there can be copies of a known painting, the original will always be worth more – even if it is impossible to distinguish between the two.
It’s the same for NFTs: you can own the image in JPEG format, you need the token to be considered its owner.
In physical art as in digital art, it is a question of agreements and of social prestige : the copied work may be exactly the same as the original…
But there will always be people willing to pay 100 times more to own the original of a work.
Think back to the example I took at the beginning of this letter: the work Everydays: The First 5000 Daysfrom digital artist Beeple is an NFT… that sold for $69 million.
It may sound crazy to you, but when you buy a master painting, you’re paying for something as intangible as a web image.
Because it is not the frame or the painting that is expensive, it’s genius at work – regardless of the format in which it is exercised.
The return of Pokemon cards
Regarding my second example, the collectible contentremember the madness of pokemon cardsat the beginning of the 2000’s…
It’s the same thing, except that each card is unique, virtual and registered on the blockchain.
Thus, there are series of NFTs, 100% digital collections that are traded at gold prices.
A creator produces a limited series of NFTs, all different, but all belonging to the same collection… then he puts them on sale, and each of them trades, the price of each NFT evolving independently of the others.
These collections can be simple images to hold, such as CryptoPunkswhich are close to digital art as we saw above…
But other collections are not just works to be accumulated or exchanged – there can be a playful dimension.
This is the case, for example, of CryptoKitties.
It’s a collection of little digital cats, which are collected like CryptoPunks… but who are also the protagonists of a video game blockchain where they can be bred and bred to create new CryptoKitties.
So the value of the CryptoKitty you own is correlated to the number of players, but also to the rarity or popularity of its characteristics (color, hair, size…)given that they will possibly be transmitted to the new little digital cat that you will generate by making it reproduce.
Which brings us to the third ultra-popular use of NFTs: the video game.
Video games in the age of hyper-individualisation
When a video game is “plugged in” to the blockchain as is the case with CryptoKitties, the possibilities of monetization and of personalization are extremely large.
Thus, new games like Aurora Where Axie Infinity make you buy your characters, which are unique, before you can play with them.
Everything in a video game can be marketed and auctioned as NFT: a character, characteristics, new customization options, new objects, new quests, new game extensions…
From now on, in the ultra-standardized universe of MMORPGs (massively multiplayer role-playing games)everyone can be unique, give your character a unique touchwhich others will not be able to copy…
This is why the world of video games, which is the first entertainment industry in the world, is primarily concerned by the development of NFTs.
But here we have only seen a very small part of what is made possible by NFTs. The ludic-artistic part.
Because there are much more concrete outlets for NFTs…
“Serious” applications of NFT technology
The world of Ticketing is turned upside down by the appearance of NFTs.
Thus, plane tickets or concert tickets can now be issued in the form of NFT: the service is associated (your seat on the plane or in the concert hall) to your identity, and we record everything in the blockchain.
Impossible to steal or usurp your identity: you scan the QR code of the NFT at the entrance, in addition to presenting your identity document.
This also allows you to resell your place, by running a smart contract which will change the identity associated with the service as soon as a certain amount is sent to you: no more “black” auctions, but a secondary market that can regulate itself.
It is also an opportunity to simplify real estate: an NFT may well contain a deed of ownershipwhich designates you as the owner of an apartment, a house, a plot of land, etc.
Blockchain has the potential to cut out agents, banks, notaries and lawyers when it comes to trading goods.
Today is more a question of uses and of pressure from these dispensable intermediaries which slows the development and mass adoption of NFTs and smart contracts to exchange ownership of a good on a peer-to-peer basis.
Generally speaking, NFTs make it possible to tokenize (i.e., associating the ownership of a good with a token) many real-world assets and combat the counterfeits or the problems of traceability.
When the industry logistics and supply chains will have seriously understood the potential of NFTs, we will use them everywhere.
Their only limit now is that of recognition in law.
As with taxation issues, recognition of NFTs as property deeds is still non-existent, and you know how public structures can be subject to inertia.
In the meantime, if you want to buy NFTs, I recommend the more established platforms like rare, OpenSea Where SuperRare.
Who is Mark Schneider?
Marc Schneider is the founder ofArgo Editions, a financial publishing and investment research company. Its free newsletter brings together more than 60,000 readers each week.
Ancient Risk ManagerMarc helps his readers understand the inner workings of investing in the stock market and cryptocurrencies to take charge of their financial future.
Its newsletter deals with various subjects: new technologies, cryptocurrencies, investment psychology or even geopolitics… with a common denominator: understand the world around us to better manage your finances.
We wish to thank the author of this write-up for this incredible content
Understanding NFTs in 5 Minutes – Righteous Middle
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