What NFTs really are

What NFTs really are

Everywhere people talk about NFT, non-fungible tokens, often sold at exorbitant prices: it is estimated that their market value in 2021 was over 40 billion dollars. But what are they in practice? A speculative bubble ready to burst, as happened with the Dot-coms or the first obvious signs of a technological change taking place? Let's try to clarify.


What is an NFT (non fungible token)?

NFT stands for non-fungible tokens: we can translate them as tokens that represent the deed of ownership and the certificate of authenticity, registered on an immutable and decentralized database (the blockchain), of a unique and specific asset (for example a ' digital artwork). In fact, non-fungible means that they are not interchangeable with each other in the same way.

Put simply? NFTs are certificates of ownership of a specific asset. Consequently, I cannot exchange one certificate for another or divide it into parts and have the same thing, unlike what happens for example with cryptocurrencies or physical coins that we use every day, which are called "fungible" as they can be exchanged in the same way with each other (e.g. if I exchange one euro for another euro or with two 50-cent coins I always have the same value, one euro, same thing if I exchange a Bitcoin for another Bitcoin).

An NFT is therefore not an exchange tool, much less a digital object as is believed, although it can be associated with this.

If I purchase the NFT of a digital work of art, I purchase the ownership certificate associated with it and not the work of art itself. Nothing therefore prevents that work, that image, from being replicated, copied and resold by someone else, but only I can declare and prove that I own it. NFTs are born for this very reason: to certify the authenticity of an asset, mostly digital.

For example, imagine that you have purchased the original copy of a work by a renowned artist, how would you feel if you lent it to a friend and he gave you an identical print but it is not the original? Certainly not good, as it would not have the same value as the original you had lent. In other words, the original copy is a non-fungible collector's item and is not interchangeable with other similar items.

The same goes for an NFT. The architecture of blockchain technology allows you to enter unique identification codes and metadata to distinguish the NFTs from each other, to attribute an owner and an author to them, who can also earn on subsequent sales of the work.


How to buy NFT

To buy an NFT you will need to get a Wallet, a digital wallet that allows you to store NFTs and cryptocurrencies. You will likely need to purchase some cryptocurrency depending on the currencies your NFT provider accepts. You can buy cryptocurrencies using a credit card on platforms such as Binance, Coinbase, Kraken, eToro, and even PayPal and Robinhood. You will then be able to move it from the exchange to your preferred wallet.

We recommend that you keep the fees in mind as you search for options. Most exchanges charge at least a percentage of your transaction when you buy cryptocurrencies.


What are the types of NFT

When it comes to NFT, the connection to the world of digital art is almost immediate, we ourselves started to explain the term from this association, but in reality, due to their characteristics, non-fungible-tokens are used to manage:

  • digital identities
  • traceability and automation projects of supply chain processes (Digital Twin)
  • electronic voting
  • and yes, clearly the collectibles, the best known type of NFT, which has achieved popularity thanks to Meta, the spread of the term Metaverse and the concept of digital altereges. Collectibles can in fact be multimedia content such as music, videos, images, memes, or objects within a video game, such as the lands within Decentraland or Sandbox.


The value and future of NFTs

Beyond pure collecting, as we have seen NFTs can be used in a variety of industries. In the case of works of art, NFTs completely eliminate agents and connect artists to their audience, allowing them to certify, protect their works and make a profit even on its subsequent sales. When it comes to video games, NFTs can provide economic value to the hours played (e.g. the more I play the more I have the possibility of obtaining unique weapons, cards or upgrades that I can then resell to other players, even outside the game, since I am the one. owner and not the game manufacturer). From the supply chain point of view, NFTs prevent falsifying the identity of a product or otherwise interfering with the distribution process (e.g. to protect Made in Italy, NFTs can be associated via QR Code with product labels and guarantee their authenticity and origin, the same for luxury goods). But NFTs can also be associated with something real, such as an entrance to an event, a discount coupon for a dinner or a pair of shoes. From this point of view the advantages are evident from several points of view, especially on the marketing side.

But NFTs will also be able to help fight Fake News, simplify electronic voting and, in general, uniquely validate and authenticate what happens online.

Beyond the speculation that is emerging behind NFT collecting, to successfully exploit what will be, in the near future, the new technological paradigm, it will be increasingly important to have a strategic and valuable vision, which meets the interest of digital communities. 


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Published on 10 May 2022