NFT & Blockchain: Everything You Need to Know About Non-Fungible Tokens.

Intro.

The market for non-fungible tokens (NFTs) seems to have exploded this year. From art to music, from jewelry to cartoons, these digital assets have seen an increase in transactions and prices comparable only to the Dutch tulip market in the 17th century, with some traded for millions of dollars.

But are NFTs really worth their price? Some experts believe that it is a speculative bubble ready to burst, as happened with tokens issued with ICO (Initial Coin Offering). Others believe that NFTs are here to stay and will change the world of assets forever.

What is an NFT and how does it work?

An NFT is a digital asset that represents real-world objects such as art, music, video, texts, etc., but also assets produced directly in digital format, such as works in the digital art field. They are bought and sold online, almost always using cryptocurrencies, and traded on specific marketplaces.

NFTs are generally unique and have unique identifying codes generated on blockchain technology; their issuance therefore follows the principle of scarcity. This is in stark contrast to most digital creations, which are almost always available in unlimited quantities.

Recently, many NFTs have been used for digital creations of existing works in different formats, such as the iconic NBA game video clips or securitized versions of digital art that already circulate on Instagram.

For example, the famous digital artist Mike Winklemann, better known as “Beeple,” created a composite of 5000 daily drawings to create perhaps the world’s most famous NFT: “EVERYDAYS: The First 5000 Days,” sold by Christie’s for the record sum of $69.3 million.

Anyone can view the individual images or even the entire collage of images online for free.

So why are people willing to spend millions on something they could easily photograph or download?

Because an NFT allows the buyer to own the original object.

Not only that, but the NFT contains an embedded authentication, which serves as proof of ownership. Collectors appreciate these “digital rights” almost as much as the object itself.

How an NFT differs from cryptocurrencies.

NFT stands for Non-Fungible Token and is generally made using the same type of programming as cryptocurrencies, such as Bitcoin or Ethereum, but the similarity ends there.

Physical money (USD, EUR, CHF, etc.) and cryptocurrencies (Bitcoin, Ether, etc.) are “fungible,” which means they can be exchanged with each other and their value is and remains identical; for example, a dollar is always worth a dollar, just as one Bitcoin is always equal to another Bitcoin. The fungibility of cryptocurrencies makes them a reliable means of conducting transactions on the blockchain.

NFTs are different; each one possesses a unique digital signature that makes it impossible to exchange with an identical NFT of the same value (thus, non-fungible). A Veefriends work, for example, is not the same as EVERYDAYS simply because both are NFTs, or an NBA video will not be the same as another NBA video.

How an NFT works.

NFTs are traded on the blockchain, just like cryptocurrencies.

In particular, the most well-known NFTs are traded on the Ethereum blockchain, although other blockchains support them as well.

An NFT is created, or “minted,” from digital objects that represent both material and immaterial objects, including:

• Art
• Texts
• Video
• Collectibles
• Jewelry
• Music

Even tweets have joined this world. Twitter co-founder Jack Dorsey sold his first tweet as an NFT for nearly $3 million.

We can say that NFTs are like physical collectible items, but in digital format. Instead of buying a real painting to hang on the wall, the buyer gets a digital file and exclusive ownership rights.

NFTs can only have one owner at a time. The unique data makes it easy to verify ownership and transfer tokens safely. The owner or artist can also store specific information within them. For example, artists can sign their artwork by including a signature in the metadata of an NFT, or offer the buyer unique experiences, a user experience purchased jointly with the artwork.

The role of NFTs

Blockchain technology and NFTs offer artists and content creators a unique opportunity to monetize their activity. Thanks to NFTs, artists no longer have to rely exclusively on galleries or auction houses to sell their works; through NFTs, they can sell them directly to the end consumer and thus ensure future profits through the collection of royalties. In fact, artists can program the digital sales contract so that they receive a percentage every time the work is resold, in what is called the “secondary market” to a new owner. This is a very interesting feature since artists generally do not receive any further income after their artwork is sold for the first time.

How the purchase of an NFT works.

Anyone who wants to approach the world of NFTs will have to follow a specific procedure.

First, it is necessary to obtain a digital wallet that allows the custody of NFTs and cryptocurrencies. It will probably be useful to buy some cryptocurrencies, such as Ether or others according to the seller’s request. Cryptocurrencies can be purchased using a credit card or using exchange platforms, such as Coinbase or Kraken, which, once obtained, will then need to be transferred to the enabled wallet to store NFTs.

Throughout the process, the commissions must be kept in mind, as most transactions involve charging a percentage.

The marketplace.

Once the wallet has been set up and credited, it will be possible to proceed with the purchase of the NFT by accessing the marketplace where the works of interest are for sale.

At the moment, the most important NFT marketplaces are:

• OpenSea: This peer-to-peer platform defines itself as a provider of “rare and collectible digital items”. To start, all you have to do is create an account so you can browse all NFT collections. An emerging and very interesting marketplace based on OpenSea is Tokenance.Art; an invitation-only platform that will soon feature NFTs of internationally known celebrities. The projects are curated and managed by a unique group of highly qualified international experts in art, design, communication, marketing, graphics, blockchain, law, and finance. Invited artists have the exclusive opportunity to insert a unique blockchain code generated on a twin site, tokenance.app, inside the NFT for sale to establish and doubly confirm the originality of the work.
• Rarible: Similar to OpenSea, Rarible is an NFT marketplace focused on the creator and is an issuance platform that uses the RARI token to give power to users who interact actively with the protocol.
• Foundation: artists must receive “upvotes” or an invitation from fellow creators to publish their art. The exclusivity of the community is given by the entry cost; artists must purchase “gas” to mint NFTs, which means that the platform can boast high-quality artwork. This can mean higher prices, not necessarily a negative thing for artists and collectors looking to capitalize, assuming that the demand for NFTs remains at current levels or even increases over time.

These platforms host thousands of NFT artists and collectors, so be sure to do thorough research before buying. Some artists have fallen victim to imitators who have listed and sold their works without permission. I want to go back to Tokenance.Art’s unique feature, which has created a “curator” procedure to protect artists, collectors, crypto enthusiasts, gallery owners, etc.

Lastly, the verification processes for artists and NFT listings are not always consistent across platforms, with some being more stringent than others. OpenSea and Rarible, for example, do not require owner verification when listing. Buyer protection, except in rare cases, still seems to be lacking, so when buying an NFT, it is necessary to proceed in an informed and conscious manner.

Who can buy NFTs?

Just because it is possible to buy NFTs does not mean it is advisable to do so.

NFTs, although accessible to everyone, inherently carry financial risk of future realization, and their future is uncertain. Currently, there is no benchmark or significant track record to evaluate their performance and trends. NFTs are very recent tools, so it may be worth dedicating small amounts of money to learn and get to know this new world firsthand.

In other words, buying NFTs is a largely personal decision. If you have money to spare, it may be worth considering participating in this market, especially if it is a work that you particularly like or are interested in, as you would for a painting, sculpture, or rare book.

It is essential to remember that the value of an NFT is based entirely on what someone else is willing to pay for it, so demand will determine the price, not fundamental, technical, or economic indicators that typically influence prices in traditional financial markets. This means that an NFT can be resold for less than what was paid, or you may not be able to resell it at all if no one is interested.

In conclusion, approach NFTs as you would any other innovative asset. Do your research, understand the risks (including the risk of losing all the money spent), and if you decide to take the “big step” into this new world, proceed with due caution.