NFT token (non–fungible token) is a unique digital certificate that is stored in the blockchain, guarantees the originality of the item and gives exclusive rights to it. This concept came from the world of cryptocurrency.
Non–fungible tokens cannot be imperceptibly substituted, divided, or replaced. The system is suitable for securing rights to a unique object – a work of art, real estate, an artifact in a computer game.
Simply put, every record on the blockchain is called a token. In an open blockchain, all tokens are like coins of the same monetary denomination, are equal and fungible. This is how cryptocurrency money works: for example, one bitcoin can be easily replaced with another, and nothing will change.
But Non Fungible Token (NFT) technology is a game changer and works in a different way. A non–fungible token is a digital coin that cannot be replaced with another token without changing the value and essence of the object.
Like cryptocurrency, NFT is created on the blockchain, which acts as a database for recording all transactions. The blockchain development guarantees the authenticity of non–fungible tokens. Thanks to this system, any user can check the original and history of a specific NFT through the blockchain.
By purchasing an NFT token, the user purchases a certificate for the work. In this case, the work itself does not move anywhere. It resides on eternal storage (IPFS). This certificate is, in essence, lines of code that confirm that the owner of the token is the owner of the original copy of the object. An NFT token has been compared to a painting that may belong to a gallery, museum, or individual, but the audience may see it in a catalog or at an exhibition.
NFT tokens are sold in online marketplaces that work like AliExpress or Wildberries. The creators of non–fungible tokens put them on trading platforms and wait for offers from buyers.
You can even create an NFT token yourself. To do this, you need to take a digital object (picture, music track, photograph, etc.), register in a special marketplace (for example, on the Rarible or OpenSea sites) and upload the object with a description and price there. On many services, you will have to pay a commission for creating a record in the blockchain, that is, a unique token.
Pros and cons of NFT
Pros
- Unique identifying digital tags make NFT spoofing difficult
- A tool for creatives to understand the value of their online work.
- Online buying and storing NFTs can remove some of the problems associated with physical collectibles.
Cons
- Gaining popularity in 2020 and 2021, when speculators raise prices.
- Internet security can be a problem
- Can be confusing for buyers and sellers unfamiliar with blockchain and related technologies.
History
NFT technology was created in 2017 based on Ethereum smart contracts.
The first piece of art to be turned into an NFT token was a black and white work by artist Banksy – a 2007 stencil titled Morons (White). Blockchain company Injective Protocol bought it, burned it and created an NFT token – a virtual asset tied to a “digital image of an art object.”
The first musician to turn his own album into a token was DJ 3LAU. He sold the album as a limited edition and made $ 11.6 million.
Singer Grimes, known as the mother of the child Elon Musk, sold 400 NFT tokens, which were tied to four drawings personally created by her and her brother. In just 20 minutes, the token sale brought Grimes $ 5.8 million.
In general, for creatives, NFT is a way to monetize their skills and expand their audience. Due to the lack of difficulties with logistics, it is easier to sell works of art digitally than offline.
Not only works of art are sold in the form of non–fungible tokens. Even a popular meme can have a new owner. The Nyan Cat gif, in which a cat rushes through space and leaves behind a rainbow train, was auctioned for $ 590,000.
Key findings
- Non–fungible tokens (NFT) are blockchain–verified digital assets. Art, collectibles, films, and a variety of other digital materials can all be used.
- NFTs are distinct from cryptocurrencies in that they are one–of–a–kind and cannot be swapped for other NFTs the way cryptocurrencies can. Both rely on blockchain technology.
- There are still a lot of legal and regulatory questions around NFTs to be resolved.
- In 2020 and 2021, NFTs grew in popularity, making them attractive to speculators and even scammers.
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