They can be any virtual object and their name appears in the media with increasing frequency. Nft means “non-fungible digital token” (Non-fungible token). But how do they work?
The term Nft appears with some regularity in the media, whether these are generalist or industry-specific. The latest news of some depth, in chronological order, encroaches on the world of soccer: Ronaldo and Mbappé have decided to embrace the world of Nft, albeit in a different way.
- US concludes that journalist Abu Aqileh was probably shot by Israel
- A company that produces plant-based meat products has produced hamburgers that taste like human meat!
To understand what they are, let’s start with what lies behind this three-letter acronym: Nft means “digital non-fungible token” (from the English Non fungible token).
The concept of infungibility leads us to the first explanation: while in the virtual world there can also be fungible assets (cryptocurrencies can be traded, spent and then repurchased) Nfts, though virtual, are unique pieces, just as in offline life a painting out of a painter’s studio is.
What are Nfts
They can be any virtual object, text, photograph, audio file, or video that, when accompanied by an Nft certification, is claimed to be unique and non-reproducible. A simple concept that represents a digital evolution of the art world, a concept that overturns the sense of ownership and right of use. Someone who, in offline life, bought a picture would be its rightful owner and could even make use of it as he or she saw fit. One who buys a digital Nft photograph does not become its owner, but can enjoy the rights it generates.
Strange as it may seem, Nfts have a considerable market, they are even auctioned by houses such as Christie’s, and there are those who pay significant sums to buy them.
There are more and more people who want them and, as a result, the number of people who create them is growing and helping to enliven the market for them, stimulating the interest of collectors.
The fact that they can increase in value does the rest: there are those who buy an Nft betting mainly on the artist who created it, somewhat as happens in the traditional art world, hoping to make a prospective investment.
A speculative bubble?
This is a question that only time will tell, but there are aspects to consider that may play a role. There are several online platforms on which to buy or sell Nft. OpenSea is among the most renowned and generates close to 7 billion euros in turnover. There are also specialized platforms, such as Valuables on which one can buy tweets. Yes, tweets-the messages written on Twitter. The first message transited on the microblogging platform, namely the test message written on March 21, 2006 by Twitter co-founder Jack Dorsey, was bought for nearly $3 million in 2021.
Why buy a Tweet (or a video, or a photo, …) if you can save it to your computer or create a screenshot and keep it all to yourself? Because Nfts are certified: in this particular case, Jack Dorsey remains the undisputed owner of the tweet but, the wealthy Malaysian entrepreneur who decided to spend that amount of money, will be able to resell it achieving a profit that could be lavish.
There is no way to say that this is a speculative bubble, however, it is clear that it will be difficult to find a measure to the limits that this market can reach. The ever-increasing number of those producing Nfts, combined with the number of those buying and selling them for the ultimate purpose of generating profit, may trigger a reaction that is difficult to predict.
Nfts use blockchain
Nfts are governed by what are called Smart contracts, an abstract and complicated concept that we can define on par with a contract that is executed automatically as soon as conditions are met. These Smart contracts in turn run on the blockchain, and although transactions can also be done in current currency (typically in U.S. dollars), they are mostly done via cryptocurrency. Typically, the Ethereum blockchain is used.
The blockchain prevents Nfts from being modified, duplicated or deleted, and on the transaction side, the blockchain ensures traceability of transfers, as well as their transparency.
