We will explain what NFTs are and how they work to understand what is behind news like the one about that person who paid 260,000 euros for a rock drawing. In Xataka, you already have an article explaining it more wholly and technically. Still, in Xataka Basics, we will try that anyone can understand the concept of how it works.
Therefore, we will avoid technicalities to make the explanation as straightforward as possible. First, we will tell you what non-expendable property is, as it is vital in understanding NFTs. Then, we will say to you what NFTs are, and we will also briefly go into how they work.
What are NFTs
NFT stands for Non-Fungible Token, a non-fungible token. Tokens are value units assigned to a business model, such as cryptocurrencies. And it is that NFTs have a close relationship with cryptocurrencies, at least technologically. However, they are opposites since a Bitcoin is a fungible good, and an NFT is a non-fungible good, but in essence, they are like the two sides of a technological currency.
How do NFTs work?
NFTs work through blockchain or blockchain skills. It is the same skill as cryptocurrencies, which work through a decentralized computer network, with blocks or nodes linked and secured using cryptography. Each block connects to a previous block and date and transaction data and is resistant to data modification by design.
NFTs are assigned a digital certificate of authenticity, a series of metadata that cannot be modified. In this metadata, its authenticity is guaranteed. The preliminary value and all the acquisitions or transactions that have been made are recorded and its author.
Why do People Buy NFTs?
If NFTs can’t be accepted and sold as quickly as Bitcoin, why do people buy and spend so much money on them? Well, it’s simply because they believe that its value will increase over time, and then they can sell it for more money. Nobody spends 260,000 euros for a rock drawing because they like rock drawings, since they can have them for free, but because of the value of this particular drawing as it is an NFT.
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Cryptocurrencies, NFT and Metaverse
Cryptocurrencies have changed the way of doing financial transactions in the United States and worldwide; They shortened the procedures and commissions to send money from one country to another safely. The technology behind these digital currencies can serve as the basis for many more products, including NFTs or non-fungible tokens. However, there is still ignorance and suspicion in a large part of the population.
Sergio Urzua, economist and professor at the University of Maryland, explained to El Tiempo Latino that the innovation of cryptocurrencies brings doubts that strengthen by seeing the volatility in the value of cryptocurrencies, whether it is bitcoin or ether, the two most acquaintances.
Possible Use cases of NFTs
Sotheby’s, Christie’s and other auction houses are exploring NFTs to expand their traditional business. 7 With creator rights built-in, it’s understandable why digital artists, who often have unattributed or stolen work, are interested. On the buyer side, displaying one’s NFT, such as on social media profiles, increases user identity and has the potential for big dividends if the art rises in value. 8
The digital version of hobbyist trading cards where scarcity helps drive value. The NBA, for example, sold NFTs of a video clip of memorable moments from the game. Only one fan can own a particular clip. Marvel creates a limited number of 3D digital figures for its Spider-Man and Captain America franchises. 9 Celebrities are also using NFTs to limited edition collectable artwork to their fans. 10
Memberships and Tickets
Club memberships or season passes for sports teams may be verified, held, and transferred as NFTs. Many digital art NFTs, such as those from the Bored Ape Yacht Club, Gutter Cat Gang, and Goat Society, serve as tokens that allow access to exclusive social clubs. 11 Using NFTs to issue tickets to events would enable them to be legally resold. Allowing seats to fill and royalties to pay.
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NFTs, Art for Cryptocurrencies
Is a cryptocurrency the same as an NFT? No. While cryptocurrencies serve as an investment vehicle or means of payment, non-fungible tokens are a way to sell previously priceless things, Urzua explained.
Aarón Olmos, the director of Olmos Group Venezuela, specified that NFTs are digital data that allow signing imminently (they cannot change or alter). Unique digital assets, be it an image, a photograph, a sound, sheet music, etc.
NFTs locate within a database and give the owner a unique asset in the world. They relate to the world of art and photography, and anyone can participate in this market on platforms such as OpenSEA or Raible.
So What Exactly is an NFT?
NFTs are represented on a blockchain. So far, they are possible on the Ethereum blockchain, a particular blockchain that can power intelligent contracts (it also has its cryptocurrency, Ether, which use to buy and sell things, like NFTs). In an example of digital art, the metadata of the art file, including who the creator is, who buys and owns it, the royalties that would pay if it resell, and so on, would reside on the chain.
A non-fungible token can be sold under the auction modality, and the payment is in some cryptocurrency. “Large companies have begun to place images of products and franchise characters in an immutable and unique way available to consumers. Who can treasure this as something exclusive,” Olmos said in an exclusive conversation with El Tiempo Latino.
Anyone can create a user profile on NFT platforms. Is open a virtual wallet and upload photos or files that they want to convert into tokens to sell. Then, interest parties bid to win the auction.
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