Understand NFTs in 5 minutes

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The problem with crypto is that it takes time to understand the fundamentals…

… and if you think you have understood what “Block chain” or “DeFi” means, it is necessary to assimilate new concepts came out of nowhere.

It’s endless.

Fortunately, after your training in the blockchain and at the Challenge in my previous articles I will cover the latest crypto trend…

NFTs.

You’ve probably heard this name before, but you don’t know what it means?

To introduce the concept, know that it is thanks to this technology that the artist Beeple sold his digital work ” Every day: the 5000 first days for $69 million:

Every day: the 5000 first days is a “simple” web image.

What is an NFT?

NFT is the abbreviation of ” Non-functioning token “. In French, ” non-fungible token

A token is a digital asset: bitcoins and the ethers are, for example, tokens.

Coins fungible

When you’re a bitcoinit is a bitcoin† It doesn’t matter who mined it, when it was mined, who kept it… Just like a banknote: €10 is €10. The serial number on the ticket doesn’t matter.

That’s it, “fungible”: any representative of the category “bitcoin” or “€10 note” maybe replace with another one without changing anything.

Non-fungible, it’s the other way around.

A non-fungible token is a token uniquewhich has its own identity.

unlike a bitcoina non-fungible token is not interchangeable.

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Express Definition (if you get that, you get the gist)

An NFT is a unique digital asset.

It is defined by its 4 characteristics:

– a unique and identified maker;

– own identification code;

– an owner at time T;

– content associated with the token (image, video, document…)

An NFT is therefore: content AND the property title registered on the blockchain

Who pays for JPEG images?

What’s hard to understand with NFTs is that they can take shape very diverse

The best known are:

– digital artworks;

– collectible content;

– video game items.

Thanks to NFTs, you may be the authorized owner of a digital artworkwhether it is an image, a sound, a video…

So even if the image is copied, reproduced and distributed on the Internet, the registry remains (blockchain) declares that YOU are the owner.

This brings digital art closer to the seriousness and rules associated with physical art: there may be copies of a well-known painting, the original is always worth more – even if it is impossible to distinguish between the two.

The same goes for NFTs: you can own the image in JPEG format, you need the token to be regarded as owner.

Both physical art and digital art involve: agreements and from social prestige : the copied work can be exactly the same as the original…

But there will always be people willing to pay 100 times more to own the original of a work.

Think back to the example I took at the beginning of this letter: the work Every day: the first 5000 daysfrom digital artist Beeple is an NFT that sold for $69 million.

It may sound crazy, but when you buy a master painting, you pay for something as elusive as a web image

Because it is not the frame or the painting that is expensive, it’s genius at work – regardless of the format in which it is exercised.

The Return of Pokemon Cards

As for my second example, the collectable contentremember the madness of pokemon cardsin the early 2000s…

It’s the same, except that each card is unique, virtual and registered on the blockchain

For example, there are series of NFTs, 100% digital collections that are traded at gold prices.

A creator produces a limited set of NFTs, all different, but all belonging to the same collection…then he puts them up for sale, and each of them trades, the price of each NFT evolving independently of the others.

The CryptoPunks collection, consisting of 10,000 pixel art characters, is one of the most popular.

These collections can be simple images to hold, such as: CryptoPunksthat are close to digital art, as we saw above…

But other collections are not just works to collect or exchange – there can be a playful dimension.

This is the case, for example, with CryptoKitties

It’s a collection of little digital cats, collected as CryptoPunks…but who are also the protagonists of a video game blockchain where they can be bred and bred to create new CryptoKitties.

So the value of the CryptoKitty you own is correlated to the number of players, but also by the rarity or popularity of its features (color, hair, size…)as they may be transferred to the new little digital cat you will generate by letting it reproduce.

Which brings us to the third very popular use of NFTs: the video game

Video games in the age of hyper-individualization

When a video game is “connected” to the blockchain as is the case with CryptoKitties, the capabilities of monetize and from personalization are extremely large.

So new games like Aurora Where Axie Infinity make sure you buy your characters, which are unique, before you can play with them.

Anything in a video game can be brought on the market and auctioned as NFT: a character, attributes, new customization options, new objects, new missions, new game expansions…

From now on, in the ultra-standardized universe of MMORPGs (massive multiplayer role-playing games)everyone can be unique, give your character a unique touchthat others cannot copy…

This is why the world of video games, the first entertainment industry in the world, is mainly concerned with the development of NFTs.

But here we have only seen a very small part of what is enabled by NFTs. The playful-artistic part.

Because there are many more concrete outlets for NFTs…

“Serious” Applications of NFT Technology

The world of ticket sales is turned upside down by the appearance of NFTs.

For example, airline tickets or concert tickets can now be issued in the form of NFT: the service is linked (your seat on the plane or in the concert hall) to your identity, and we record everything in the blockchain

Impossible to steal or appropriate your identity: you scan the QR code of the NFT at the entrance, in addition to showing your ID.

It also allows you to resell your place by a smart contract which changes the identity of the service once a certain amount is sent to you: no more “black” auctions, but a secondary market that can regulate itself

It is also an opportunity to simplify real estate: an NFT can best contain a title deedwho designate you as the owner of an apartment, a house, a plot of land, etc.

Blockchain has the potential to take out agents, banks, notaries and lawyers when it comes to trading goods.

Today is more of a question of applications and from pressure of these indispensable intermediaries, slowing down the development and mass adoption of NFTs and smart contracts to exchange ownership of a good on a peer-to-peer basis.

In general, NFTs allow tokenization (i.e. associating ownership of a good with a token) many real-world assets and combat the fakes or the problems of traceability

When the industry logistics and supply chains have seriously understood the potential of NFTs, we will use them everywhere

Their only limit now is that of recognition in law.

As with tax issues, there is still no recognition of NFTs as title deeds, and you know how public structures can be subject to inertia

In the meantime, if you’re looking to buy NFTs, I recommend the more established platforms such as: specialopen sea Where super rare

Who is Mark Schneider?

Marc Schneider is the founder ofArgo Editions, a financial publishing and investment research firm. The free newsletter brings in more than 60,000 readers every week.

Old Risk managerMarc helps his readers understand the inner workings of investing in the stock market and cryptocurrencies to take control of their financial future.

The newsletter covers various topics: new technologies, cryptocurrencies, investment psychology or even geopolitics… with a common denominator: understand the world around us to better manage your finances

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