The popularity of non-fungible tokens or Non-fungible tokens (NFT) has skyrocketed in recent months and, with it, the doubts surrounding this new phenomenon. Therefore, and to clarify possible doubts about what exactly this concept consists of, in this article we explain what NFTs are and we predict their evolution in 2021.
What are NFTs?
We could define a token as a “contract” in which it is stipulated that a person owns a unique and irreplaceable copy of a digital asset, along with that asset. To ensure that the “contract” is safe and truthful, it is stored on a public network, which is blockchain technology . The fact of being on the blockchain development company guarantees that it is auditable and that if these buyers decided to sell said contract for the possession of a single asset, it could be followed up.
Tangible assets that can be touched and seen, such as stamps, works of art, or jewelry are often given value. Now more and more it is also being done with intangible goods that, although we see, are not material. Although cryptocurrencies come close to this definition, NFTs go further, applying this concept to objects oriented, especially to collecting.
Unlike cryptocurrencies, NFTs are not interchangeable because they are unique, although there may be copies outside. However, an NFT can be sold to someone else. Also, most of these “tokens” are written on the Ethereum network .
The relevance of the NFT’s comes from the fact that its origin can be assured by introducing a code in the programming . This allows that if the work is sold to another owner, the transaction is recorded in this public network, which can be ethereum or another, and the creator or artist will be remunerated with a percentage for each transmission of the same. In this way, digital targets with many business possibilities can be uniquely represented.
Examples of NFT’s
As in the world of cryptocurrencies, tokens work as something speculative. One of the most famous sales of NFT’s was carried out by the renowned American boxer and youtuber Logan Paul. A few months ago he put 3,000 NFT’s of Pokemon cards up for sale and in a few days he sold all the assets for 5 million euros.
The interesting thing about this action is the value that these cards will have in the future , since in 2021 they have cost 2,000, but it is estimated that in 2030 it could increase to 30,000.
Another well-known case is that of artist Mike Winkelmann, nicknamed Beeple, who sold his NFT “EveryDay — The First 5000 Days” in March for $ 69 million.
On February 19, the GIF of Nyan Cat or “cosmic cat,” probably the best-known cat meme since 2011, sold for $ 500,000.
A few weeks later, Canadian singer Grimes sold a collection of digital works for more than $ 6 million. But art is not only sold through NFTs. Jack Dorsey, the founder of Twitter, decided to put his first tweet on the social network up for sale for $ 2.9 million.
NFT ARTWORK THEFT
With the rise of NFTs, thefts of digital works of art have also increased . At the end of March, the NFT platform Nifty Gateway reported the theft of its entire collections of NFTs being their accounts hacked, which triggered the theft of digital assets valued at $ 150,000 and the purchase of others through their credit cards.
The platform assured that users who had been hacked for not having two-step authentication activated. This is the main problem with tokens. Even if there is an original version of the artistic product, it does not prevent multiple copies from being made. However, there is only one original, whose ownership is recorded on the blockchain.
How to do an NFT step by step
An NFT is simply the stamp we put on something to say that it has a single or multiple owner. We can make NFT’s with everything, with music, images, with land in a virtual field, etc. It is a new way of verifying ownership.
We can all create an NFT and the process is very simple. You just have to follow the following steps:
1. Scan a file
The first thing we have to do is digitize a file. Although it sounds very complicated, we all do it day by day. For example, when we take a photo with the mobile, a screenshot, when we record an audio on WhatsApp, etc. We are making something that surrounds us something digital. If we take a picture of a plant and upload it to a social network there we already have an image that, if we wanted, we could create an NFT with it.
2. Register a “node” on the blockchain network
We could auction this image that we have created so that someone could buy it from me for a value of one ether, for example. Let us remember that this contract that we put on the image to say that it belongs to someone, what we do is deliver the digital asset (image) with the seal.
In order to transfer this image with the seal to someone, you must be within the blockchain network, which is the one that works. To do this, you have to register a node. This is like registering your IP address on the blockchain network. It has an associated cost that is moderately low, currently ranging between 19 and 40 dollars.
3. Minting or coined
Finally, once inside the network, all that remains is to put the seal on your digital asset, which is the process called minting or coining. It is currently a fully automatic process with many platforms. One of the platforms with which you can do it is Open Sea.
How to measure the price of an NFT
To understand how the price of an NFT is measured, you have to understand where the value resides. It depends fundamentally on three factors:
1. Rarity or scarcity
When we talk about rarity or scarcity, the fact that an element is unique or that there are very few series of something gives it a lot of value. Imagine a painting by Picasso. We have a unique copy of a painting that has been hand painted by Picasso. It is scarce because only that painting exists, despite the fact that there are thousands of replicas. No matter how similar they are to the original, that does not make the copies have value, since the value of the painting is given by the fact that it was painted by Picasso.
Therefore, that scarcity and that rarity is what gives value to that digital asset.
2. Utility
Second, the usefulness of the asset must be taken into account. You may be selling tokens of something that has a value. For example, you can sell a piece of land from a virtual world, since that virtual world is a kind of game and people can do things in it. This has a specific utility which is that you can later build a house or whatever you want.
In short, if the token is useful this will give it a value.
3. Property history
Lastly, the ownership history is also very important. If I have created an image because I am a digital artist, I auction it off and a very famous person you know buys it, this will also add a lot of value to the NFT.
If you try to sell any digital asset, they can buy it from you but surely you cannot give it the value you want because it does not depend on you.
The Future of NTFs and the Blockchain Industry
This market for crypto art and Non-fungible tokens or NFTs is expected to maintain the same growth curve despite the slight drop in popularity in recent weeks. In fact, according to a study carried out by the firm Invezz, there are no signs that the NFT market is a bubble and the volume of operations is expected to reach 145 million euros by October .
It is true that the NFTs have had a boom in the press for these large purchases that we have mentioned above. There have been a lot of purchases that apparently may seem useless to us. These large purchases are likely to stop because in the end it is a technology that is being born.
However, it is a great opportunity for digital artists to have control over the ownership of assets and then they can have a greater right to royalties. It is a system that greatly benefits artists and creators of digital content.
Apart from what happens with NFTs, blockchain technology and decentralized finance have come to stay. A fairly large growth is anticipated in the market and it will create a huge disruption in terms of the accessibility and availability of basic financial products.
What did you think of this article about what NFTs are ? Leave your comments and share!
Finally and to help understand the global panorama of blockchain and financial technologies, at IEBS we offer the Master in Blockchain and Fintech , an innovative program to learn about the operation of the blockchain as distributed systems and understand the architecture and fundamental algorithms that are based, among other things. We will wait for you!
