Non-fungible tokens (NFTs) are crypto assets that have taken the crypto world by storm. In the early days of trading new virtual assets online, uncertainty reigned; but today, the numerical value associated with NFTs is reaching dizzying heights. Some new digital assets take on the character of collector’s items that are snapped up.
These stratospheric prices reflect the uniqueness of an expanding market, where digital assets are bought and sold just like tangible collectibles. Headline-grabbing deals include the auction of Twitter CEO Jack Dorsey’s very first tweet, which sold for $2.9 million, and a video of basketball player LeBron James, which sold for $200,000 on the NBA Top Shot digital trading card platform.
What Is A Non-Fungible Token?
NFTs are crypto tokens that are proof of ownership of digital crypto assets. All the trade of these tokens is done through blockchain technology. Anyone who owns a valuable item such as a car or a work of art usually has supporting evidence that attests to their ownership rights, said Andreas Park, associate professor of finance at the University of Toronto. In the case of a car, this is the registration certificate. The same is true for NFTs, but the form that proof of ownership takes and where it resides has transformed.
NFTs can represent any intangible object, such as a video, a digital collectible, a piece of music, or even video game skin (such as an additional piece of code that customizes a character’s appearance). “The NFT exists, just like the physical object,” says Aws Al-Hasani, fintech consultant and co-founder of Auxiun, a Montreal-based in-game operations company. can be hand-held, the other is virtual. »
The Concept Of Non-Fungibility
The opposition between fungibility and non-fungibility is the basis of NFTs. A fungible object has the same value as another object: it can be exchanged because its value is equal.
Non-fungible items are not interchangeable, as they have exclusive properties. “They are unique, like original works of art, which only exist in one copy,” says Mr. Al-Hasani.
How Does It Work?
Each hokk NFT comes with a unique contract, the terms of which are often stipulated by the creator of the content. If the creator retains the rights to the NFT, he may receive royalties each time that the NFT changes ownership. In the case of Jack Dorsey’s first tweet, he attested to the authenticity of the NFT, effectively providing a kind of virtual autograph that imprints a permanent mark on the digital asset, asserting its own identity. By doing so, the CEO of Twitter likely increased its value.
Since NFTs exist in a public ledger (like all crypto assets), the product’s ownership history is public knowledge, says Aws Al-Hasani. The traditional art market, on the Internet and elsewhere, is riddled with fraudulent copies, but counterfeiting is simply impossible in the case of non-fungible tokens. Verification on the blockchain helps distinguish an original from a duplicate. While it is possible to create counterfeit copies of an item, just like in the art world, the authenticated original will still be there – and the owner of the token will be assured of its true status.
Essentially, NFTs exert the same appeal as baseball cards or comic books, Datardina adds; they are seen as collectibles. The fact that the market is decentralized (as is the case with all cryptocurrencies) is an additional factor to consider. For NFTs, in the absence of a structured model, a pure asset is traded. Just as there are virtually no regulations in the example of the collectible comics market, so are the famously non-fungible tokens.
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Why NFT?
Ultimately, the appeal of NFTs comes down to the psychology of ownership: people like to know that something belongs to them.
And, let’s face it, sometimes it’s a matter of ego. Just as we like to treat ourselves to a nice car or a work of art, we may want to turn to a coveted digital asset. Those who have chosen virtual assets may one day abandon platforms like Zoom and instead hold meetings in bespoke virtual spaces, where their collection of digital assets will be showcased.
Our lives intertwine in the digital and in new meta-universes. Experts agree that NFT sales will become mainstream. The best thing about it is that this whole field is changing. It will be exciting to watch the universe expand, to see where we end up.