What is an NFT used for? The unique digital token market in six questions

1. What are the characteristics of an NFT?

Appeared with the blockchain protocol, a “chain of blocks” – mainly the Ethereum computer protocol -, NFT (non-fungible token) is a digital token that authenticates and tracks the value of an item on the Internet. Specifically, a unique token (a small computer program) is registered on a chain of blocks. Particular feature of this digital token, it integrates in its code computer instructions called smart contracts (smart contracts) that define its characteristics and make it possible to identify them by assigning a unique address on the blockchain.

The token thus makes it possible to generate a unique and non-hackable proof of existence (this is a principle similar to cryptocurrencies, which is also based on proof of encrypted transactions). Therefore, like cryptocurrencies, this non-fungible token promises to move the Internet from its inception – information highways – to values ​​and property.

2. What can an NFT be used for?

And with good reason. On the Internet, if it is not intended to be purchased, all items are by definition irrelevant.

“A NFT is neither a work nor a file. It is a certificate or an extended contract. These tokens embed links in their metadata that point to a work (a jpeg, a gif, etc.) Summarizes Matthieu Quiniou, lawyer and co-founder of the Legal Brain firm specializing in digital law.

Therefore, any digital creation can be collected and privatized.

Thanks to these certified valuations of the digital asset, NFT sales are exploding. In the third quarter, sales increased $ 10.7 billion, eight times more than the previous quarter, according to Reuters, which cites the specialized site DappRadar. Also a testament to this enthusiasm, ” web searches for ‘NFT’ sometimes exceed searches for ‘cryptocurrencies’ this year »noted the online comparator MoneyTransfers.com.

In terms of capitalization, the market for all of these new tokens will weigh nearly $ 5 billion, according to the NFTGO data site. “ The tokens have been removed since August at a growth rate that has been five times, due to the proliferation of NFT projects », Explains the specialized site trustnodes.com

3. Which sectors are currently affected?

For now, the properties of NFT have resonated with collectors and art lovers. Boost especially off NFT and sales online auction, sales contemporary art auctions have thus reached a historic level $ 2.7 billion in fiscal year 2020/2021according to Artprice’s annual report published in early October.

Now NFTs even represent 2% of the global art marketaccording to this report.

As a result, the large auction houses are positioning themselves. In mid-October, the British Sotheby’s announced the creation of their “Sotheby’s Metaverse”, a digital space reserved for NFT collectors and a now semi-annual sale of these digital objects.

Buyers will be able to create a personal profile with “an avatar designed by the famous crypto designer Pak“, and payments can be made in fiat currency or in certain cryptocurrencies (Ethereum, bitcoin, USDC), Sotheby’s explains.

At the competition, Christie’s have auctioned the American artist’s all-digital work for $ 69.3 million in March Beeple, and NFT. Another example of the art world’s enthusiasm, a Banksy collector deliberately destroyed the support for one of his works (worth $ 100,000) for the sole purpose of creating a NFT associated with this destruction.

Digital creation, games, real estate …

In addition to the traditional art world, the issue of intellectual property and copyright arises all the more with digital creation. Among the big names in the sector is Sorare, a company that uses NFT technology to create an online game for exchanging pictures of football players. Valued at $ 4.3 billion (3.7 billion euros), the Parisian companyfounded in 2018, announced a fundraising of $ 680 million (580 million euros), a record for the tech sector in France.

On the home page, Kalart aims to become the first French NFT platform dedicated to YouTubers, Instagrammers, ” and all those who produce works on social networks With these tokens, these creators of the web and their fans must thus have the opportunity to sell at auction, buy or collect. Another start-up, Starname has developed one technology that makes it possible to create an irrevocable connection between the creator and a work (or an issuer and its NFT).

Finally, real estate also looks at the subject NFTs. In Portugal, developer Prometheus International has announced that it has sold two luxury properties paid for in cryptocurrencies. The deed is available in the form of an NFT to allow future owners to ” resell their properties with a single click ‘, He assures.

4. At what stage of maturity is the market?

In the summer of 2020, NFTs were described by the Gartner Institute as a “new technology” in its “Hype” cycle. He estimates between 2 and 5 years the duration of his “top of rising expectations“before going through the cave of”disillusions“, then go up to”the plateau of productivity“.

Therefore, NFTs are in this bubble of promises that attract venture capital. Like the star trading platforms for cryptocurrencies (Coinbase, FTXtrading estimated in billions), NFTs have their own online marketplaces. Including the heavyweight Opensea, who raised $ 23 million.

These new specialized companies are also beginning to enter the stock markets. Like Crypto Blokchain Industries (CBI), a French company that develops, operates and invests in video games, professional applications and selective projects related to blockchain, NFTs and cryptocurrencies. CBI was recently listed on the Euronext Growth Paris market.

5. Why can NFTs become a turning point in the digital economy?

While cryptocurrencies have not yet found all of their uses in daily purchases, NFTs can be accelerated with the emergence of virtual worlds, such as the “metaverse” revolution that Facebook has promised.

“It is very likely that trading within metavers is based on NFTfurther accelerating the emergence of these tokens against official currencies “predicts Matthieu Quiniou.

On Decentralandan online platform that is considered to be one of the forerunners of the “metaverse”, for example, it is possible to buy plots of land in the form of NFTs (digital certificates of authenticity for online content) via an associated cryptocurrency called “MANA”.

This promise to create its own world is being taken up by other companies such as The sandbox, which has just raised $ 93 million. But also the virtual worlds OVRLand and Cryptovoxels, where tokens are used to buy parts of the planet in the metaverse. In these worlds, everything would then be possible externally: shopping, sales, training, investing, exchanging …

In France, Mainbot, a young shot created within the Ecole Polytechique, announces that it wants to launch its cryptocurrency too “ than a collection of 12,111 NFTs ” to to develop “ the first metavers in the world dedicated to educational games ”.

6. What are the current constraints that NFTs encounter?

Will NFTs encounter mass use, apart from the speculation and trading on which cryptocurrencies have built their fame?

The payment world is already starting to take an interest in it. The US Visa has thus made its first purchase of NFTs through a digital cryptoPunk plant. But the ambition is to experiment with the new practice of online commerce. Its competitor Mastercard has also just announced the creation of its first work NFT, with football coach José Mourinho.

Above all, NFTs provide a golden opportunity for scammers to get into it. Several cases of NFT fraud have surfaced, such as a fake Banksy artwork that was sold in NFT for $ 336,000 in August. With its project called “Ond abe“, – a collection of 10,000 NFT graphic works yet to be referenced by the OpenSea platform -, a developer mysteriously disappeared in early October, after earning $ 2.7 million, the site reports Vice.

Then there is the question of the valuation of these works:

Faced with such transactions, the market value of certain NFT seems established, but on closer inspection, the consideration of these amounts is not always clearly established or understood by sellers and buyers asks Mathieu Quiniou.

Similarly, what will the regulation on NFTs be? What will the KYC rules be in virtual universes (Know your customer)?

“The publishers of the metaverse irreversibly delegate publishing and editing rights to token holders in their metaverse, complicating the issues of civil and criminal liability mentioned above,” explains Matthieu Quiniou. As the meta-verse is international, disputes can e.g. oppose a European user and a user from a “third country” (outside the EU). In this case, if everyone grabs the judge in his state, it would lead to more jurisdictional disputes. »

Finally, while the value created on the Internet is now largely captured by GAFA platforms, can NFTs be a game-changer? So far, nothing less is certain.

Trading cards, NFT and football: the explosive cocktail behind Sorare’s success