The acronym NFT literally stands for Non-Fungible Token. In case you are not very into the matter, we break down each of his words so that it is very clear to you what an NFT is.
The acronym NFT literally stands for Non-Fungible Token. In case you are not very into the matter, we break down each of his words so that it is very clear to you what an NFT is.
You know very well what "no" means, you visualize what can be "fungible" and you are looking forward to someone telling you what a "token" is. So…let's get to it.
FUNGIBLE GOODS VS NON-FUNGIBLE GOODS
To better understand what an NFT is, we will first distinguish between expendable and non-expendable property.
expendable goods
A fungible good, according to our legislation, is anything “of a movable and replaceable nature, which is depleted with its use. Above all, no proper use can be made of them without consuming them."
They are things whose value is usually established by number, measure or weight, and that are easily replaceable by items of the same characteristics.
The most typical example is money, we know that a €100 bill is worth the same as two €50 bills (although the €100 bill is more difficult to see).
Non-expendable property
A non-expendable good will be precisely that which cannot be so easily replaced. This good, in the case of loss, can only be compensated in money, since it cannot be replaced by another equal.
The most typical example used to explain what a non-expendable good is is a work of art: you cannot break it into pieces (literally and physically speaking) to distribute its value, because you destroy it.
In short, they are goods that cannot be exchanged directly with each other.
tokens
The literal translation is “tab”, which may help you visualize. But let's see examples:
If you are a festival-goer, you will have used a Token to pay for a beer, (those pieces of plastic that seem to be made on purpose to deceive you, because a Token is not exactly equal to one euro, and euros fly with each drink you order almost without realizing it). Precisely in the value that the organizing company of the festival gives it lies the matter. That piece of plastic is worth nothing outside the festival environment, nor will it be worth anything the following year, even if it is at the same festival.
In the digital world, a Token is “the unit of value that an organization creates to govern its business model, giving more power to its users to interact with its products, while facilitating the distribution and distribution of benefits to all its shareholders”.
If you are into the crypto world, you will know that we can also refer to a cryptocurrency as a token. After all, it is a unit of value that, in this case, is based on cryptography and linked to a blockchain.
So a token can be used for whatever whoever develops and designs it decides. The most common is that it is to grant a right to whoever owns it. In the cases we have seen, a specific economic value within the festival, and a volatile value in the case of cryptocurrencies.
NFTs serve to “tokenize” the property rights of a specific work.
Or what is the same, dividing the value of something that cannot be physically divided, generating a digital property certificate (which can be for the total value of the NFT or a part of it).
By their very nature, they are always traceable, as they have an innate traceability that can take you back to their original creator.
SO AN NFT IS…?
A unique non-modifiable digital asset. Similar to cryptocurrencies (for its virtual and encrypted part), but that has no counterpart in the market because it is unique.
As such, it can be used like any other property: by buying, owning (in many cases collecting), or selling.
Characteristics of an NFT
In the definition of NFT itself we have already seen some of its characteristics. In this list we leave them all clear.
1 – IT IS UNIQUE
What makes a collectible special is that it is rare or rare. We transfer this quality of the physical world to the virtual one, and in the case of NFT development, it can be said that no two are the same.
They may look similar, but they all have a unique certificate that gives them originality and exclusivity, which also protects intellectual property.
In the case of images, at first glance it might seem like it's just a jpg file. But its value lies precisely in the fact that it is certified and therefore it can be identified that it is authentic.
From this quality comes precisely its scarcity, its exclusivity. The fact that you can prove that you own the only token of a kind gives the buyer peace of mind.
Contrasting the originality of an asset, which as we said is measured by its scarcity, is as easy in the world of NFTs as reviewing a contract.
2 – IT IS BASED ON BLOCKCHAIN TECHNOLOGY
To achieve that originality, they are based on blockchain contract technology. Through it, a representation of the original content is created, which cannot be plagiarized without losing the certificate of originality.
In plain words: it is impossible that it can be duplicated and that is why it is so easy to affirm that it is unique.
In addition, precisely because of this technology it is fully traceable. If the creator of the NFT wanted, for example, to impose a fee for each resale, he could do so and continue to benefit from each transaction.
3 – IT IS INDESTRUCTIBLE
Just as they cannot be duplicated, they cannot be destroyed. Each NFT exists from the moment it is created, and its ownership is proven through the blockchain contract, which is unalterable. The innate properties of the NFT itself are also unalterable by the very contract that holds them.
NFTs are not linked to a specific server, nor to its issuer, everything remains in the hands of the owner. This decentralization is what makes them indestructible. (The same as when you buy a physical good, only the digital one, moreover, does not deteriorate).
4 – CAN BE USED IN MANY FIELDS
At the moment the applications where they are being used the most are related to the virtual world, specifically with artistic disciplines. But they are also being used in virtual fashion items, digital real estate, or collectible “cards,” such as those made available by the Lanzadera-backed startup Watafan.
Music groups such as Kings of Leon have opted for this format with extraordinary results. In February 2021 they decided to release their album When you see yourself only in a digital version. In parallel, they offered their fans to be able to buy rights to the songs that were included in it. The offer was clear: they could buy NFTs that included song credits. During the first week they raised more than 2 million dollars.
5 – NFTS BUYERS CAN ONLY PAY WITH CRYPTOCURRENCIES
Each platform or marketplace chooses the cryptocurrencies it uses to carry out transactions. Among them, the most used are Ethereum's Ether (ETH), or World Asset eXchange (WAX) for purchases related to video games.
In addition, they are bought through specific trading markets, such as Opensea, Foundation, or Rarible.
6 – LIKE EVERYTHING, IT HAS HATERS AND FANS
The haters (or detractors) consider that they do not add value, that it is merely speculative good. People buy and sell them for the sole purpose of making money.
Fans defend that, within the crypto world, they are one more asset in which you can invest. And having investment alternatives with high return possibilities always sounds good.
What is an NFT for and why is it worth money?
Let us think of work as a drawing. If you want it because you like it, it would be enough to take a screenshot or a photo, right? Or if we think of one of the Kings of Leon songs, you could listen to it or download it on some platform and it would already be “yours”.
So, an NFT is not paid for owning the work as such. Whoever acquires it does not want that digital asset, but the proof of ownership of that same asset. Making a parallel, the development of NFT would not be the house you buy, but the deed of the house that proves that as a buyer, you have the property.
What is an NFT for and why is it worth money?
Let us think of work as a drawing. If you want it because you like it, it would be enough to take a screenshot or a photo, right? Or if we think of one of the Kings of Leon songs, you could listen to it or download it on some platform and it would already be “yours”.
So, an NFT is not paid for owning the work as such. Whoever acquires it does not want that digital asset, but the proof of ownership of that same asset. Making a parallel, the NFT would not be the house you buy, but the deed of the house that proves that as a buyer, you have the property.
