Understand what an NFT is in 14 questions

6

Tired of listening to your friends talking about NFT without really understanding what it is? The preparation of Digital describes for you in 14 questions what these digital assets are, which are sometimes exchanged for gold prices.

What is an NFT?

NFT is an abbreviation for Non-Fungible Token. These are unique digital goods whose transactions are carried out in cryptocurrencies and which are exchanged using a blockchain protocol (blockchain). A non-fungible token is often presented as a deed, recorded in a public, decentralized digital ledger.

Why “non-fungible”?

A non-fungible object is a single object that is not replaceable. For example, money is fungible: you can exchange one € 10 banknote for two € 5 banknotes or cryptocurrencies between them; but not a work of art against a piece of land, because the nature of their value is not the same.

What is the difference compared to a cryptocurrency?

The answer to this question follows largely from the foregoing. Although NFT transactions are mostly carried out in cryptocurrencies (bitcoin, ethereum, etc.), they are not themselves cryptocurrencies. Technically, it is possible to exchange an NFT for one or more NFTs in a decentralized way, but the assessment of the value will be very subjective between the two parties, just like in an exchange system.

© Getty Images

Before an item becomes an NFT and is offered for sale, it must be listed on blockchain. We then talk about “minting an NFT”, which means registering the digital asset on blockchain through one smart contract (smart contract, independent contract). Platforms specialize in this process, which is a paid service.

Yes, but what is one smart contract ?

That smart contracts are contracts that rely on technology blockchain to make their terms and conditions of performance unadulterated. These are computer programs that automatically execute a set of predefined instructions.

Advertising, your content continues below

What can an NFT be?

Almost everything. Clearly, it is the art market that seems to be the fastest to address the issue, but metaverse specialists, for example, also sell virtual land. Jack Dorsey has sold his first tweet in NFT format. On Sorarea game halfway between the Panini album and the concept of My little lawn, NFTs are football player cards. Recently, a 1.2 kg truffle was even offered in NFT format. In this particular case, the buyer receives nothing but a certificate of ownership and not the truffle itself.

Ok, but what kind of files?

It can be an image, a video, an audio file, an animated file, a 3D object … On OpenSea, the maximum size of downloadable files is 100 MB. CryptoPunks, which is worth millions of dollars, is nothing more than a collection of jpeg files that have become NFTs. Moreover, often the NFTs are only the certificates of ownership of a link that returns to a server that stores that image or video.

Advertising, your content continues below

© Getty Images

Where to buy an NFT?

There are several platforms. The best known and most used is OpenSea. It allows you to sell and buy NFTs and it is compatible with blockchains Ethereum, Polygon and Solana. There are tens of thousands of NFTs.

Can we buy with a few clicks?

None. You must first have cryptocurrencies, regardless of the platform used, but also have a wallet (for example a Metamask) connected to the platform. This portfolio allows you to perform the purchase operation with the NFT platform. This therefore requires mastering a little, or even a lot, the various tools related to cryptocurrencies.

Advertising, your content continues below

Finally, what do we have?

This is a somewhat special point with NFTs. When you “own” one, you ultimately own only what proves the purchase of the underlying asset. It’s a bit like buying an item in a store and only leaving with the invoice or a customer reference. As for the digitized object, it remains stored by the issuer of the token … on a highly centralized server.

What’s wrong with NFTs?

Many things. NFTs are being criticized – and we will let everyone freely think what they want on this subject – for their speculative aspect. Cases of plagiarism and recycling for commercial purposes without permission from well-known brands have also been identified.

© Getty Images

And the organic footprint then?

This is definitely the point that has caused the most ink to flow. Most people use “proof of work” to function, which requires high computing power. And who says that high computing power says high power consumption, which especially feeds the bitcoin debate. However, the consumption of these blockchains is pretty much the same whether or not NFTs are issued. Many blockchains, such as Flow or Tezos, try to respond to this ecological challenge with the “proof of stake” method of validating exchanges. These exchanges are secured by computers or servers that operate and consume more conventionally, just like other networks of computers or conventional computer servers. The Ethereum Foundation has also announced that it intends to switch to this system in the long term.

Proof of work? Proof of effort?

Work certificate is appropriately named. To control the exchanges within a blockchain thus forming new blocks, certain nodes on the network seek to solve a cryptographic riddle by using the computing power of their computer hardware. The first to bring the right solution (the proof of work) wins the right to create a new block and is paid with the network crypto as a thank you for the effort.

Without going into too much technical detail, proof of effort replaces the mechanism based on computing power with another, based on the active use of its capital: it is enough to deposit a certain amount of the network’s cryptocurrency to participate in the validation, and be paid for that.

What is the most expensive NFT ever sold?

The work The merger was sold on the Nifty Gateway website for the neat sum of $ 91.8 million. This work is composed of 266,445 digital devices shared between 28,983 buyers. Technically, therefore, it does not represent a single NFT. In this case, it would rather be so Every day: The first five thousand daysa collage of 5,000 images, sold for $ 69.3 million.

Advertising, your content continues below

Advertising, your content continues below

Leave a Comment