Last week, a digital artwork was sold for as little as $69,3 million in an online auction. What most caught the attention of many people is the fact that the work “Everydays – The First 5000 Days”, by designer Beeple, received the NFT seal, from the English non-fungible token.

But what, after all, is this NFT? 

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In translation, the non-fungible token is well known to anyone who explores the world of criptomoedas e block chains - and it has been considered an asset with very promising potential, not only for cryptoland.

Illustration of an NFT chain, with things that the non-fungible-token can authenticate, such as works of art and music
Non-fungible tokens can authenticate rare items, such as works of art and even music. Credit: Shutterstock

In the same way that cryptocurrencies arose and caused such strangeness for those who had no idea what they were, this did not prevent them from becoming known worldwide and, more than that, very valuable.

So are NFTs. Some official explanations about non-fungible tokens, given by Ethereum.org:

  • A way of representing anything unique, like an Ethereum-based asset;
  • NFTs are empowering content creators more than ever; 
  • Developed by smart contracts in the blockchain Ethereum.

Therefore, in a simplified way, NFTs are tokens generated from a blockchain and serve to give a specific item a kind of unique identity, like an official seal of a rare item.

In good Portuguese, it is a guarantee that a certain digital item is something unique. However, be aware that the fact that you have an original digital work does not mean that there will not be replicas on the internet – just as in the physical world there are copies of artwork or branded clothing and eyewear, for example.

Thus, they are usually linked to works of art or other creative and artistic content, such as music, but they can be used for anything you want: (1) to guarantee their authenticity, whether of the owner or its origin; and (2) can be collected, as something scarce and that not everyone in the world can have.

Like bitcoins, NFTs are created virtually and protected by the dynamics of the blockchain's operation and its consensus algorithm. Thus, the record cannot be modified, because this consensus inherent in the blockchain guarantees the integrity of the generated tokens.

This means that, even if the art is digital, it does not mean that anyone can simply copy and paste to claim that they own an original work.

It's like Ethereum.org says: “Does searching Google for an image of Picasso's Guernica make you the proud new owner of a multimillion-dollar piece of art history?”

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The main difference between cryptocurrencies (which are fungible digital assets) and NFT (non-fungible) is that the former are interchangeable and the latter are not.

This means that cryptocurrencies are exchangeable for the equivalent amount in dollars or reais, for example. This is because the term “fungible” means “liable to be replaced by something of the same kind, quality, quantity and value”.

In contrast, NFTs are "non-fungible".

And just to be clearer: when it comes to "rare item", don't just think about things like diamonds or something. NFTs can be tied to anything you want - anything at all.

In February, for example, an NFT video of the classic Nyan Cat meme (yes, that cat in flying pixel art that leaves a rainbow trail wherever it goes) sold for a paltry $500. In April, it was the turn of the meme “Disaster Girl” (a girl smiling in front of a house fire) sold for $480.

Tesla CEO Elon Musk himself announced that he would sell a song he produced on NFTs like an NFT. Then he ended up giving up on the idea, but the fact is that anything digital can really be traded this way.

“NFTs are compatible with anything built using Ethereum. An NFT ticket for an event can be traded on any Ethereum marketplace, for a completely different NFT. You can exchange a work of art for a ticket, ”explains the Ethereum.org website. “The items can be used in surprising ways. For example, you can use digital art as collateral for a decentralized loan. ”

What's the use, anyway?

Imagine that there is only one particular painting in the world, a rare piece indeed. Wouldn't it be great if you could guarantee with 100% security that it is the original? And that it wasn’t stolen, because you know exactly who its owner is? It may seem too good to be true, but that is what the NFT does.

Think of non-fungible tokens as a seal that authenticates this work of art. This seal not only guarantees who the painter behind the creation is - which would already be a milestone that would end a lot of counterfeit work in the world.

It also shows the entire transaction history behind this work, in a way that cannot be deleted or modified. That is, you also know who is the current owner of this art.

This is possible due to the registration of each token on the blockchain. When connecting art to the decentralized network, it is the same as digitally registering a code that will remain immutable.

This is especially interesting not only for painters, but for creatives in general, such as musicians, composers, writers.

Everything that permeates this artistic universe can not only be valued for its authenticity and originality, but also resolves many questions about intellectual property more easily, because the control over a work is really the author's, without question. And if he decides to give up this work, that's fine too, because it will be registered on the blockchain.

Digital artists also start to earn for their work in a fairer way, since it is quite common in the artistic world that large companies keep a large part of the profit - as with books, or music, for example.

But since the NFT work is sold by the artist himself to someone else, he receives it without intermediaries. Thus, it is also possible to receive royalties for creation more easily.

In the same way, the creator of the NFT can sell it as a unique original - that is, there is only one in the entire world, but it can also determine how many replicas of that creation there are.

Thus, there may be the same items of the same art, but they are like vinyl records with limited circulation. And all of them are properly identified and registered on the blockchain.

Currently, NFT is linked to the digital world, but there are already reports of people experimenting with technology for physical objects - although some technical issues are still being corrected.

Illustration of the meme of the cat known as Nyan Cat, made in pixel art, represents a cat with a rainbow trail
A video of the well-known Nyan Cat was recently sold as an NFT for $ 500.
Credit: Shutterstock

Did you get here and not understand anything?

Okay, it's not the end of the world. After all, everything that involves the universe of cryptoland can seem abstract, in fact. In fact, many people really fail to understand how these technologies work, as shown in a survey conducted in 2019 by the security company Kaspersky.

The report ready that only 10% of people in the world fully understand how cryptocurrencies work - let alone the technologies that surround them.

But, if you stop to think coldly, many new technologies sound as if everyone involved in it participates in a great collective hysteria, doesn't it?

Autonomous cars were once a completely strange invention, as was the PIX - that a lot of people took to understand how it worked. THE Snapchat also (and, by the way, it still is for many generations before generation Z).

It remains only to follow up to see the developments of this that promises to be one of the most profitable innovations of recent years.

Street: Ethereum.org, Wall Street Journal, Finematics.

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