What is a non-fungible token (NFT)?
“Token” is like an electronic key, it is a physical device that generates a temporary password so that an individual can perform something, such as financial transactions, more securely. In the context of NFTs, “token” refers to the registered name of digital art. In turn, “non-fungible” means that goods are unique and irreplaceable.
Therefore, non-fungible tokens act as a cryptographic seal and can be used to prove the authenticity of goods in virtual environments. There are those who define NFT as a kind of contract in the blockchain that guarantees that a certain file is original and that a certain person is officially its owner.
Many compare non-fungible tokens to collectible cards, such as those from a sports or cartoon bankroll. Once you have a card, you can collect it, sell it or exchange it. All this depends on its rarity and the value attributed to it by society at that time.
At first glance, it’s a somewhat abstract and complicated concept, so we also need to understand its technological basis: the blockchain.
Blockchain
NFT is based on blockchain, the same technology that makes cryptocurrencies (like bitcoin) secure. The blockchain was described in 1991 as a way of validating digital documents over time, preventing them from being altered later and making them free from forgery. It began to be used in 2009 by Satoshi Nakamoto, who created the cryptographic digital currency called bitcoin.
Data is stored linearly and chronologically, always directed to the end of the chain. Each block has a code called a hash and also has the hash of the block before it. The hash is created from a mathematical function that transforms digital information into a sequence of numbers and letters. Therefore, if any block is edited, the hash changes and the other blocks afterward become invalid.
It is this change in hash that makes technology more difficult to steal – but not impossible, so much so that cryptocurrencies have already been stolen . For a hacker to be able to change a block, he needs to change all the other blocks that come in sequence and would need a more powerful computer than blockchain technology.
Most NFTs work from the blockchain called Ethereum , a platform in which the cryptocurrency (Ether) is equivalent to R$ 11,944.04.
crypto art
Jason Bailey, creator of the blog Artnome, says the blockchain impacts the art market in four ways:
- Driving digital art sales through scarcity;
- Democratizing investment in the arts;
- Reducing counterfeiting;
The non-fungible tokens also gave birth to a new universe: the crypto art, which are rare digital artwork associated with only NFTs.
This leads us to question what is the real value of an image in the digital environment, since we can reproduce it countless times even through a screenshot. NFT is based on the idea of digital scarcity, allowing you to buy and sell goods as if they were physical objects. The non-fungible token places the person as the owner of the digital asset. And this “property” cannot be copied as it is protected by blockchain technology.
In the universe of physical objects, such as works of art, this would be like having the original of a work or the artist’s signature. Everyone can have a copy or a replica, but only one individual has the original of the work.
Several markets have emerged for people to market NFTs, such as OpenSea, Rarible, Grimes and DADA , which functions as an online art gallery that allows the marketing of artworks.
Song
NFTs have expanded into other types of trades and not just visual arts. Music artists, for example, have also started using non-fungible tokens for their songs, albums, releases and a host of other possibilities.
In Brazil, musician André Abujamra sold one of the first Brazilian musical NFTs and is an ambassador for the Phonogram.me platform . It allows anyone to buy the NFT of phonograms that will be made available by the musicians.
When buying an NFT of a certain phonogram, the person has its pass, earning on what it is part of. In other words, it works as an investment in music. If the phonogram is played on some online platform or on the radio, whoever owns the NFT gets a share of the earnings.
the era of memes
Non-fungible tokens are also used for memes. The famous Nyan Cat , for example, had its gif sold for 300 ETH, which is equivalent to almost US$ 450,000.
Other memes are being traded for thousands of dollars, which led the creator of Nyan Cat to create the event called “Memeconomy” which is basically an auction of memes .
In short, NFTs have spread across the countless possibilities of the digital universe and several markets have taken advantage of tokens . The games were also not left out and are already rehearsing the possibility of collectible items that can be valued over time.
The CryptoKitties is a game that already was quite successful and caused controversy. Here, users can buy exclusive digital cats and breed them on the blockchain. One of the most expensive cats cost approximately $170,000.
The non-fungible tokens bring a reflection on the real value of a digital good, after all, which leads us to want to own something that can be easily reproduced? Everything indicates that the value of an NFT is defined according to the collective’s perception of its authenticity. It is the logic of scarcity and the need to possess something authentic and exclusive.
Despite pointing out benefits for artists, a new risk was also born: someone can create an NFT for the work even before the artist or even pass for him. And the downside is not just that, there are also serious environmental impacts from non-fungible tokens
