NFT: what are non-fungible tokens?
Nft Development company - Blockchainx
An NFT is a “non-substitutable digitally protected object” and is considered title to unique digital items . Above all, digital art is sold with the help of non-fungible tokens. Blockchain technology is used for this: information about the work, the owner, the rights of use, etc., is stored and transferred tamper-proof.
What is an NFT?
To better understand what a non-fungible token is we can first take a look at the real world. In it, a unique and non-substitutable token would be a painting or a handmade jewel. The piece of exchange, the fungible token, would be a 10 euro bill, for example. The painting or the jewel are unique and cannot be substituted or exchanged for an equivalent object . A 10 euro note, on the other hand, has many equivalents, that is, all the other 10 euro notes that exist.
Let's go back to the digital world: in it, fungible tokens are bitcoins, for example, which can be exchanged for any other bitcoin of the same value. But what about all the memes, videos, pieces of music and works of art in virtual space? In theory, anyone can duplicate them with a couple of clicks and save them to their own hard drive. To mark the original and be able to trade with it , non-fungible tokens have been developed.
How does a non-fungible token work?
This type of token consists of several blocks of information that are chained together: the blockchain . The blocks contain various information about the work , such as author, buyer, seller, etc. In addition, a unique fingerprint (the hash value) is stored in each block , along with the hash value of the previous block, thus creating the aforementioned chain. What makes this technology almost tamper-proof is decentralized storage on a peer-to-peer network . All computers connected to it have a copy of the blockchain and check the conclusiveness of the new blocks and the hash values specified therein, so errors or forgeries are immediately detected.
This technology is not only used for non-fungible tokens, but also for most cryptocurrencies such as Bitcoin and Ethereum. If you want to buy an NFT, you will usually pay for it with Ethereum , as it is the most widely used blockchain for NFTs.
What types of NFTs are there?
The development of Non-fungible tokens are especially prevalent in the art world, whether to protect simple videos and images or elaborate digital works of art . However, in principle, any virtual good can be linked or protected with a token. For example, valuables from computer games are provided with an NFT that can only be used by their owner. Virtual properties and events can also be traded with tokens.
Specifically, there are the following uses:
NFTs for art, called NFT ARTs : for works of art, collectibles, GIFs, music, etc.
NFT for games: for unique items in games.
NFT certificate: for titles, certificates, identities, patents, property rights, identifications, etc.
Reward-NFT: for promotions and events.
Trade with NFTs
As with cryptocurrencies, non-fungible tokens are also traded on special online markets . Some crypto exchanges also offer NFTs. The best known, as the oldest and now the largest NFT exchange in the world, is OpenSea : since 2017, NFTs from various sectors can be traded on it.
The sale takes place on OpenSea, as well as on many other platforms such as Binance or SuperRare, in two ways: at a fixed price or by auction to the highest bidder. To participate you need a wallet and the necessary cryptocurrency, in most cases Ethereum.
The currency also forms the basis for being able to “mint” NFTs yourself . In short, the corresponding image, video or piece of music is uploaded and the token is created, with which you can later negotiate.
Featured Examples of NFT Trading
Perhaps the most well-known example of the use of non-fungible tokens (and one that many find difficult to understand) is the sale of a work of art by the artist Beeple. Beeple posted a photo on Tumblr every day since 2007 and ended up assembling a mosaic of images from 5,000 individual photos. Beeple later auctioned off the NFT at Christie's for some €57.8 million , even though the image could theoretically be reproduced by anyone.
However, this artist is not the only one who has achieved such high sums: the NFT of the source code of the World Wide Web was sold for about 5.4 million US dollars through Sotheby's. The first tweet on Twitter , from 2006, went for $2.9 million, and basketball player LeBron James, with a video of a shot, fetched a purchase price of about $200,000.
The hope of all buyers is that the respective non-fungible tokens will increase in value over time , similar to true works of art and collectibles.
Possible problems and dangers of NFTs
The question of how useful the development of NFTs are is raised by many: works associated with them are easy to copy in most cases, purely virtual possession remains abstract and of unclear value. Developer Geoffrey Huntley also demonstrated this absurdity with a practical example. He stole or copied all available NFT images and collectively uploaded them to The NFT Bay platform. This resulted in 17.96 terabytes of imaging material. The actual non-fungible tokens were not affected, but the images easily changed hands.
There are also much more specific criticisms regarding the CO2 footprint of NFTs . The electricity consumption for the generation of blockchains is very high. A British artist and technologist calculated the electricity consumption of a total of 18,000 non-fungible tokens and this came out to 340 kWh, just under ten percent of the average annual electricity consumption of a home. Converted, this amounts to CO2 emissions of 211 kilograms per NFT , the same as a two-hour flight.