At a historical moment when blockchain is becoming increasingly adopted and widespread, in an environment still unknown to many. NFTs are making their appearance.
What are they, what are they for and how do they work?
NFT stands for Non Fungible Token, it is a digital asset with specific characteristics that is not directly exchangeable in fiat currency but requires a bilateral agreement between buyer and seller.
It is usually made with the same kind of programming language as a cryptocurrency, such as Bitcoin or Ethereum, but they are actually very different.
Both physical money and cryptocurrencies are ‘fungible’, or interchangeable. Additionally, they are equal in value: one dollar is always equivalent to another $1, and one bitcoin is always worth one other bitcoin. Cryptocurrencies are a trustworthy way to carry out blockchain transactions due to their fungibility.
NFTs are different. Since each one has a digital signature, it is impossible for NFTs to be traded or identical to one another (hence non-fungible).
What form can NFTs take?
Non-fungible tokens can digitally represent any asset, some of the most common examples are:
- Graphic art
- Virtual lands
- Domain name
- Sports videos and highlights
- Collector’s items
- Virtual avatars and skins for video games
- Designer sneakers
NFTs allow any digital object to be stored and circulated virtually on a blockchain. It can be used, thanks to the blockchain, as public proof of ownership of a specific digital asset.
The underlying of the NFT can be copied by anyone in the form of .png .jpeg or other… But the public proof of ownership of the underlying cannot be emulated.
What do you mean? Imagine you see a passer-by with a Rolex on his wrist, at a distance you cannot determine whether the watch is original or a perfect copy, but for those who are able, to open the watch and inspect the inside it becomes very easy to determine its nature.
The same applies to NFTs, for those who know how to interact with the blockchain it is very easy to determine whether it is an original NFT or a copy.
How are NFTs bought and sold?
NFTs can be bought and traded on numerous blockchains: Ethereum, Polygon, Solana, Cardano and many others.
The currency used to carry out the transaction is the blockchain’s native token (in some cases, other cryptocurrencies compatible with the underlying blockchain can also be used). There are public marketplaces where thousands of different collections are available for exchange, and others that are limited to their own dedicated marketplace.
Just like the other digital assets on the blockchain, you can view NFTs directly within your wallet, and check their nature on the blockchain, to see their information (creation date, date of first sale, date of subsequent sales, price paid for the exchange, etc.).