NFT: NOT FUNGIBLE-TOKEN
A novelty that has been making waves around the world for the past few weeks, achieving sudden, resounding and extraordinary success...
Let's talk about NFTs, or non-fungible tokens, the new frontier of Blockchain technology and online intellectual property.
But what are they, how do they work, and why are they so successful?
What are they?
NFTs are systems for certifying the digital rarity of an asset-a work of art, a video, even a tweet.
Also referred to as "cryptographic tokens," they enable people to securely buy, sell and collect digital works of art or design through Blockchain technology.
To simplify: when certifying that a work by, say, Velázquez is by Velázquez and not a copy, a gallery or museum needs specialists to certify that it is the original. But what to do with computer-generated works?
Until now, a digital artist could create authentic works of art without being able to earn money like any other artist does. Collaborations with brands were one of the few sources of funding available to them, as anyone could get the photograph, collage or other type of file without having to buy it directly from the artist. Artists' highly prestigious works lost value by being reproducible countless times. There was no real way to securely collect, own and establish authorship of a work. Thanks to this digital certificate that verifies ownership, the work can now be sold, all thanks to a blockchain that registers it. Whoever buys, becomes the owner of what they have purchased, receiving a certificate through a smart contract.
This does not mean that the work in question becomes private, but on the contrary, it can safely remain online, accessible to all.
NFTs open up several possibilities for those who use them. Let us imagine that we have legally downloaded a song from Spotify or Apple Music. We can use the file in the living room of our home, but we have no "ownership" over that work. Buying the NFT related to it, on the other hand, allows us to claim "publicly" that the song is ours.
Investment
But NFTs, as well as classical art-paintings, sculptures, paintings-can also be considered as investments. How to ride the trend and try to capitalize on this overwhelming success?
To buy an NFT a potential investor will have to make use of a blockchain, usually that of Ethereum, although the market is expanding and also counts entities such as Flow Blockchain-where NBA NFTs have been sold-Binance Smart Chain, TRON, and EOS.
At the moment, the most accessible platform is OpenSea, which is based on the Ethereum blockchain and calls itself the largest NFT marketplace, but to create or purchase tokens, one must have an Ethereum wallet.
Then there are more specialized marketplaces, such as NBA Top Shot, where you can buy moment-videos of the U.S. basketball championship, Valuables, to buy tweets, or even CryptoKitties, the platform that kicked off the NFT revolution with its crypto kittens.
Reverse side of the coin
NFTs have opened up a world of possibilities for digital artists, who can now sell their works by certifying ownership to those who pay for them. But it has also opened another world in which scams and theft are common and difficult to report.
Because the NFT system does not require people to own the copyright to something to coin it, it is a perfect marketplace for fraud. Just pay transaction money to put anything on the blockchain and translate it into NFT, it being possible that the creator of a work of art is not the person selling it.
Because of this, many artists have reported on social media that they have found their works for sale with fake profiles.
Speculative bubble and the environment
Euphoria, soaring prices, lurking investors. Is yet another speculative bubble inflating, then? According to what Nadya Ivanova, director of l'Atelier-BNP Paribas, told the French newspaper Le Monde, it is difficult to tell: "To determine whether there is a bubble in the physical economy or in the financial markets, you need a reference point. That allows you to establish a price versus a real value. In this case, we do not have such data available in the NFT sector. The virtual economy is completely different from the physical economy."
What is known is that the average price of an NFT was about $4,000 in February, and it has already dropped to $1,250 in April, according to CNN, which cites data from a specialized site. The coming months may tell whether it is already the bursting of a bubble or just a definite correction. What has certainly already exploded, however, is data consumption.
In fact, the "fabrication" of NFTs requires gigantic computing power. Based on numerous facilities (server farms) scattered all over the world. This is the principle on which the creation of cyptocurrencies, called "mining," is also based. A mechanism that is extremely energy-intensive and consequently results in huge greenhouse gas emissions.
Federica Berandi
Content Creator Trainee | Digital Innovation Days