Since this is the first entry about NFT on our blog, let’s start from the basics. This acronym stands for non-fungible token. In simple language, it’s just some kind of digital content that is linked to the blockchain network. Blockchain is one of the Web 3.0 technologies, which we have also already written about on our blog. In a nutshell, it’s a way of transferring files and data in a way that ensures the privacy and security of all parties involved. NFTs fit well into this trend because they rely heavily on blockchain technology.
Why are NFTs “non-exchangeable?” Because they have no equivalent in other items or currencies. What does this mean in practice? Let’s use any cryptocurrency as an example. Cryptocurrencies are exchangeable because one bitcoin represents the same value as any other bitcoin. Every bitcoin is worth the same amount, just like every dollar and every euro. They can also be exchanged for something else (such as an item, service, or other currency). With NFT tokens, this is not possible. Each one is unique.This uniqueness is backed by an appropriate certificate confirming the owner’s rights and the authenticity of the token.
What are NFT tokens used for?
The possible uses are quite numerous. The most popular is the sale and purchase of digital goods, such as artwork. In this way, you can acquire rights to animations, graphics, music videos and other forms that do not necessarily have a physical form. The creation of such a token is carried out with the help of an appropriate exchange, which transforms a given digital good into a token and stores it in the blockchain. In practice, such a token can be anything, such as a photo or sound. To sell and buy NFT, cryptocurrencies are used, which are also based on the blockchain network. Currently, most transactions take place using Ethereum because NFTs are based on this blockchain network.
What can companies use NFT for?
Primarily to connect their physical products with the digital world. For example, Alfa Romeo, which starts selling the Tonale model for the first time this year, is selling the new car together with an accompanying token. Such a token will track all of the car’s data and record key milestones “from the life” of the vehicle. This will provide complete and unmistakable information about the vehicle, which can make a big difference when selling it later.
Tokens can help guarantee the authenticity of a product and increase customer loyalty to a brand.
How are tokens created and sold?
As we have already mentioned, this is most often done with the help of an appropriate exchange. It is required to send the given content to the exchange along with the other information that will enable the processing of the given work into an NFT token. To finalize the whole process, several elements will be needed. First, we need to have the Ethereum currency (and therefore a digital wallet to store the currency). And secondly, you will need an account on the NFT exchange in question.
As is the case with other digital goods, what we actually buy and sell depends on the specific case. Sometimes with NFT we acquire the right to freely dispose of the work in question, e.g. for commercial purposes. In other cases, it will simply be a purchase of the item itself, without copyright, and even more so without the right to further use it.
Is NFT a good investment?
The fact is that NFTs are becoming heavily popular among investors, although it should be noted, that this is a rather risky way to invest capital. For example, digital artist Beeple sold his work “Everydays – the First 5000 Days” for over $69 million. LeBron James, on the other hand, sold a 20-second video clip in NTF form for over $200,000. So why is it worth exercising restraint? For one thing, NFT is a relatively new “invention” and as such, is subject to a fad that may take hold, but could just as easily end quickly. Treating NFT as a good idea for long-term investment is definitely a risky move.
Let us also emphasize at this point that this technology has many contenders. Firstly, NFT transactions require huge computing power, which in turn translates into power consumption and carbon emissions. And secondly, many people say that it is a solution invented by force, which in fact does not bring anything new to the world of IT. So what will be the future of NFT? Time will tell.