This spring, over $ 69 million was paid for one NFT token. After that, they started talking about the new technology all over the world. However, few people still understand what NFT is – and why they are so highly regarded. Someone thinks this is just another entertainment that will pass quickly. Others are convinced that NFT will become as much a cultural element as games, films and music. In this article, we will understand what NFT tokens really are – and what they are for.
Basic concepts: blockchain, token, cryptocurrency
Perhaps the conversation should start with an explanation of the basic technologies: cryptocurrency and blockchain. They appeared about ten years ago – and without them, no tokens would be possible.
Blockchain is essentially a decentralized database. It is a chain of information blocks, each of which contains information about transactions carried out during a certain time. Can be public or private. In the first case, the software has an open code that can be used by all network participants. Many cryptocurrencies are built on existing public blockchains. Private use the same principle, but the software is patented and hosted on private servers. All network members have common access to a single source of reliable information. They can view all transaction details at any time.
A token is a virtual certificate that proves ownership of an asset. It can have monetary value on its own. Or it can be tied to the value of tangible assets – for example, a company’s stock. Tokens have different purposes. Today we will focus on non-fungible tokens – NFT (Non-fungible token), working on blockchain technology.
Cryptocurrency is a type of digital currency. It works, as a rule, on the basis of blockchain technology. It got its name because extended coding is used to verify transactions. The purpose of encryption is security. The rate of electronic “coins” does not depend on the policy of banks or states – therefore there is a fairly large speculative component. At the same time, cryptocurrency can be exchanged for real money, it has an official rate.
In fact, cryptocurrencies are digital records in an online database. These are not physical banknotes. It is stored in users’ digital wallets or on an exchange.
Everything you need to know about NFT
NFT is, roughly speaking, a certificate for the possession of a unique digital object. For example, a picture or gif-animation. This is a kind of analogue of the certificate of authenticity. Every transaction is recorded in the blockchain ledger, so it is almost impossible to change or falsify it. There is, however, a catch. Most often, the buyer does not acquire the rights to the digital content itself. Roughly speaking, he only receives a link to a file on the Internet and an entry in the registry.
It is with copyright that the major complications of NFT are associated. The technology was expected to revolutionize the world of digital art and video gambling. For creators of various content, tokenization would be a way to secure copyright. We are talking about a commission on a digital asset that the author will receive – by analogy with the current situation with songs. In fact, this never happened. There is still no normal regulation in this area.
The purchase of such tokens is somewhat reminiscent of the purchase of originals of famous paintings in our time. Roughly speaking, a reproduction of Monet’s painting can be downloaded from the Web and printed for free. But there are people willing to pay for the original.
Also, non-fungible digital assets “spin” in the world of computer games. You can buy avatars, skins, swords, and then, for example, resell them to another gamer.
Non-fungible, in essence, means “one of a kind.” That is, such a token has no analogues (like, for example, a banknote). Let’s take an example, since we’re talking about art. Each handwritten text by Mikhail Lermontov is unique, which means it is not interchangeable: it has no analogues. Books with the works of the poet, published in the same edition, are interchangeable, because they are identical. One book can be replaced with another. Thus, NFTs are more collectible.
Why is this necessary?
NFTs are sold on various platforms such as OpenSea or Known. The choice depends on what the person wants to buy. To complete a transaction, you need to register an electronic wallet, which is used for payment on a specific site, and “load” it with cryptocurrency. To store a digital asset, you need to acquire an NTF wallet. Such “storages” are available in different versions: desktop, web, smartphone application. The best wallets for NFT are the following: NFT wallet Metamask, Enjin, Math Wallet, Trust Wallet, AlphaWallet.
What is the practical point of buying?
Resale. Perhaps the main reason for such acquisitions. Pricing in this area is largely speculative. At the same time, a significant number of NFT tokens cost mere pennies – sometimes several hundred rubles. Acquiring real digital art with ownership is often more expensive.
Entertainment and collecting. Someone collects a virtual gallery, someone supports crypto art. There are plenty of such NFT owners. After all, if there is money and a desire to spend it, who can stop it?
Investment. The most risky option – but not devoid of meaning. There is a high probability that NFT technology will not die in the future, but will simply adjust normally. With this development of events, many non-fungible tokens will prove to be a good investment.
Today, the high cost of NFT is a combination of two factors. The first is uniqueness. People are willing to spend money to become the owner of a truly unique asset. Which, moreover, can be resold at a higher price. The second is speculation and hype on new technology.
The marketing potential of NFT is actively exploited by brands. For example, Taco Bell posted 25 gif-animations on the token sale site. Each was accompanied by a certificate for $ 500 for the purchase of brand goods. The collection sold out in half an hour. Today the tokens are being resold, the cost of the most expensive is $ 3500.
Technically anyone can create a job and turn it into an NFT. Or borrow someone else’s work and make a token out of it: unscrupulous sellers actively use this. But for such operations, you need a wallet “stuffed” with cryptocurrency, since you need to make an advance payment. Websites charge overwhelming commissions for buying / selling. It is worth considering payments for transferring to an account, fluctuations in price, depending on the time of day. You can spend more on fees than you get from the sale of the token.